Regardless of what type of digital goods you are selling, analyzing revenue is a critical part of growing your business. To get a complete picture of performance, there are 3 aspects to consider:
- Consumer behavior: user segmentation, purchasing behavior etc.
- Inventory performance: top-selling items, largest margins etc.
- Payment methods: how the payment methods that you use perform in comparison
In this post, we list out ways for comparing the performance of different payment methods that you use. When selling digital goods, it’s no longer sufficient to provide users only with an option to pay with credit card at checkout.
So once you’ve added alternative payment methods to checkout, what metrics should you track to see which ones are perfomring the best?
#1 Successful to unsuccessful transactions ratio
Measuring the percentage of successful 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.
#2 Overall conversion rate
By dividing the number of all users of your service with users who pay for your digital goods, you get the conversion rate of your payment solutions. This should be tracked in aggregate 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.
#3 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.
#4 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.
#5 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 goods, 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.
#6 Average revenue per user (ARPU) and average transaction value
ARPU and average transaction value help you 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.
If you’re interested in what the ARPU and transaction values for digital goods are with carrier billing, check out our market reports: Middle East & North Africa, Asia, Central & Eastern Europe, Western Europe, Latin America and Nordics.
#7 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.
Need more ideas on how to analyze payments data for digital goods?
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. We’ve also put together a more detailed guide on how to analyze your payments revenue below.
Leave your contact details below to download a detailed guide on how to analyze your payments data.