Conversion Rate Problem of SMEs in Internet Marketing : a Developing Country Perspective

Abstract: In the recent years, electronic commerce has become an important alternative or additional sales and marketing channel. Many companies are only selling through this channel while many others are using it as an additional channel for boosting their sales. Business-to-consumer (B2C) e-commerce represents an important research area because retail consumer expectations, attitudes, and behavior are studied. Companies can design their marketing models around desires and preferences of the customers. Because of inherent nature of e-commerce retail websites, customers can log on to the sites, perform research and product / price comparisons, fill in their shopping carts, and may log off without making any purchases. Main reasons on the part of website visitors for not converting into paying customers are low level of trust on this medium of purchases because customers are required to give out financial and personal data, customers can do comparison shopping or window shopping, high shipping costs, unclear pricing and return, and refund policies of the websites, etc. From the point of view of sellers, abandoned shopping carts represent potential sales that could not be realized. Companies are, for obvious reasons, interested in converting these lost customers into sales. Retail websites, of large as well as small-to-medium sized (SME) categories, experience this low conversion rate problem for customers including those from developing countries. Specifically, purpose of this research was formulated as four research questions: 1. Categories of products and services e-commerce consumers from Pakistan prefer to buy from internet. 2. Reasons for low conversion rates. 3. Extent to which Pakistani online customers are price-sensitive. 4. Choice between product / service differentiation and low price Pakistani customers would make. This thesis aimed to look at what goes on in the minds of customers from developing countries when they do not make purchases at retail e-commerce websites. A questionnaire asking customers from Pakistan as to what are their preferences about e-sellers and their main turn-offs at vendor websites was developed and circulated among the sample population. Analysis of data collected via the survey indicates the following with respect to the research questions: 1. In terms of preferences and features concerning products purchased over internet, Pakistani consumers are not basically different from their international counterparts as Pakistani consumers generally purchase the same kind of products and services as international consumers do according to what is reported in the relevant literature. However, some concerns revealed by subjects of the survey were related to reluctance of merchants to ship to Pakistani destinations, potential credit card problems, unavailability of services like Pay Pal in Pakistan, etc. 2. Main reasons for low conversion rates for Pakistani consumers are also similar to those reported for international consumers from a number of countries. Major reason of low conversion rates is low trust in websites because of concerns related to sharing personal and financial information on the internet. 3. Pakistani consumers are found to be relatively low users of e-shopping and strongly price sensitive. 4. Paksitani consumers are also found to not very much interested in availing differentiated products/services over the internet. This thesis also presents a review of relevant literature and offers some recommendations for future research into the relevant area.