Regardless of what type of digital content you are selling online, analyzing revenue is a critical part of growing your business. To get a complete picture of performance, there are three different aspects to consider:
- Consumer behavior: user segmentation, purchasing behavior etc.
- Inventory performance: top-selling items, largest margins etc.
- Payment method performance
In this post, we take a look at the analysis of the last aspect, payment methods. While in the past merchants could use just one payment method and a standard payment flow (credit cards), the world has changed. As we recently pointed out, a majority of the digital audience no longer has access to this type of payment. So what metrics should you be tracking when integrating different payment methods to your digital business?
Successful to unsuccessful transactions ratio. Measuring the percentage of successful transactions (and the failure reason of unsuccessful transactions) gives two key pieces of information. First, whether the payment service provider’s platform is functioning normally or whether technical issues are causing payments to fail. Second, whether users who select the payment method have enough money on their account to purchase through it. Based on this information, pricing can for example be changed to take into account the users’ purchasing capability.
Overall conversion rate. By dividing the number of all users of your service with the paying users, you get the conversion rate of your payment solutions. This should be tracked at an overall level across all payment methods as well as for each individual payment method. Special attention should be put on the overall conversion level after a new payment method has been introduced in order to avoid cannibalization.
Detailed conversion rate. In addition to looking at the overall conversion rate, tracking each step of the checkout flow separately and looking at conversion rates by device type (desktop, tablet, smartphone) helps eliminate payment abandonment. For example, carrier billing outperforms card-based payments on mobile devices due to the small screen size, as there is no need to enter any personal details or fill out long forms.
Traffic characteristics. Mapping out traffic volume by time of the day and day of the week helps understand when to plan promotional campaigns: users are more receptive to make more payments when they are already actively using your service. In addition, knowing when the most popular periods for purchasing are allows to combat fraud. If there’s a large amount of purchases coming in during a very quiet time (e.g. 4AM) then something is most likely wrong.
Chargebacks and bad debt. Refunds are an inevitable part of processing payments. As it usually costs a significant amount of money to process refunds, tracking the chargeback and bad debt ratios for each payment method lets you evaluate which payment providers are more profitable and which cause the most support issues and loss of revenue.
Heavy users. The amount of expandable income differs significantly across the globe and across demographic groups. While some users simply like to spend a lot of money on digital content, with others a significant jump in spending might indicate unintended usage of the payment solution (e.g. an underaged person making payments or a stolen credit card). Identifying a spending level for “heavy users” and setting up alerting to monitor heavy payment usage for each payment method helps avoid potential issues, such as those listed in the previous paragraph. We’re also happy to announce that later this week, we will be publishing a report on risk management with carrier billing - stay tuned.
Average revenue per (paying) user and average transaction size. These are one of the most simple payment metrics to track and to understand how your business is doing. While looking at these metrics on a global level across all payment methods gives a basic overview, measuring it by country, platform and device helps understand which users are worth more and where to focus with user acquisition campaigns. Looking at the data on a country level also helps account for differences in payment method preference: for example users in North America might prefer to use credit cards while those in Eastern Europe opt for carrier billing.
Churn rate. This metric is mainly relevant to merchants using a subscription-based business model, but can be also used for one-time payments approach. Measuring how many users decide to continue paying for a subscription, what is the average length of a subscription and the lifetime value of a subscriber allows to evaluate the performance of each payment method but also to get an understanding of whether your value proposition should be changed to increase results.
For merchants using Fortumo and carrier billing, these metrics can easily be accessed in real time from the Fortumo Dashboard. If you are using several payment methods and comparing them through your own business intelligence tool, check out our Reporting API.