The Secret Sauce to E-commerce Success: AI Conversion Rate Optimization Explained

The Secret Sauce to E-commerce Success: AI Conversion Rate Optimization Explained

Elena Doynova

Jan 17, 2024 • 7 min read

AI Conversion Rate Optimization Explained

Faced with tough decisions that need swift action we often make stupid choices. And one might argue that there’s nothing tougher for an e-commerce business owner than times of slow (or no) growth. Especially if you’re hard-pressed to find a cure for rapidly decreasing conversions with fewer resources due to a budget crunch… But bright ideas are born in dark times. Optimization is always on the table, but what better time to bring this discussion up than amidst an artificial intelligence boom? Enter AI-driven conversion rate optimization!

But first, what is Conversion Rate Optimization (CRO)?

CRO can be considered a sales/marketing activity, but UX designers and researchers also make valuable contributions to the equation. Both teams use a variety of tactics: from audience and creative testing in advertising to A/B testing of visual and text elements. We’ll focus on the latter – website optimization (or UX optimization).

Picture this: you have a bustling online store, and hundreds of people are visiting every day. They’re browsing your products but for some reason, not many of them are making a purchase. It’s like watching potential customers stroll right past your cash register without buying anything. Which is frustrating to watch, but even more frustrating when you consider how it impacts your bottom line. 

This is where Conversion Rate Optimization (CRO) comes into play.

CRO is a set of tactics that can fix this customer ‘leak’. It helps keep those visitors on your website or app and turn them into paying customers. It’s not always about increasing the number of visitors, but rather making sure more of the people who visit your digital space actually take action – whether that’s making a purchase, signing up for your newsletter, or another desired action.

Here are a few things to consider when thinking about CRO:

1. It boosts your return on advertising spend (ROAS): When more visitors convert into customers, you’re getting more bang for your marketing/sales buck. You’re not just getting people in the door; you’re making sales.

2. It creates better user experiences: Happy customers are more likely to return, spread the word, and become loyal brand advocates. Better customer experiences translate to better conversion rates – and beyond.

3. It’s a data-driven process: CRO isn’t guesswork, it’s based on data and insights. It’s also not a ‘one and done’ activity, but a continuous process that takes time and strategic effort.

4. CRO can be a competitive advantage: In today’s digital landscape, everyone’s vying for attention. Having a well-optimized website or app gives you a competitive edge, just like outstanding customer service and a high level of personalization.

5. It helps you adapt to changing consumer needs: CRO keeps you flexible. You can quickly adapt to shifts in user behavior, market trends, or even economic conditions, like the overhanging recession.

6. Finally, we find it extremely outdated to think of CRO as isolated optimizations. We rather think of it as a holistic activity that involves the entire customer journey – when improving as many valuable touchpoints it improves the entire journey’s conversion rate.

To make it easier to digest, here’s an example:

You’re investing $100 a day to bring in 1,000 people to your website. Out of those 1,000 visitors, 50 of them decide to buy something from your store. That gives you a conversion rate of 5% (50 out of 1,000).

Now, here’s where the magic happens. When you make improvements to your website that encourage more of those 1,000 visitors to make a purchase (such as better navigation or more delivery options at checkout), you’re increasing your revenue without needing to attract more visitors.

By making the suggested improvements, you manage to bump up the conversion rate from 5% to 5.25% – that’s just a 5% improvement, which may sound modest. But here’s the exciting part: even this slight increase can work wonders. A 5% boost means you’re getting two more customers every day. That’s potentially 14 more sales each week, 56 extra sales in a month, and nearly 700 more sales in a year.

Now imagine doing this at scale across the entire customer journey.

What are the constraints of CRO today?

To get to the assumptions that are viable to be tested, you need data. And here, the process often becomes a convoluted mess…

  • You can use quantitative analytics to capture customer data and analyze it in terms of segments. Great, but does this give you an idea of how these segments translate into specific user journeys? No.
  • You can use funnels to get insights about the places in the user journey that pose some obstacles and find out the drop-off rates. But you need to do this for each specific journey or use difficult-to-read journey mapping diagrams. 

At the end of the day, you are left with lots of data but no clue what to do with it. And here AI comes into play. 

AI enables machines to learn from your data and perform tasks that typically require human intelligence. It’s similar to having a whole team of analysts who can sift through tons of information, detect patterns, and even predict what your visitors might do next.

Machine learning models nowadays can use Generative AI to give you the same results as a team of analysts – and far beyond. But how exactly?

AI & quantitative analytics: Find the customers who need your attention

The first stage of AI’s involvement in all types of CRO is number crunching:

  • Conversion funnel analysis: AI processes vast amounts of numerical data. It tracks users as they move through the conversion funnels, pinpointing drop-off points and bottlenecks and quantifying them so you know which ones can potentially deliver the most value. 
  • A/B testing and multivariate testing: AI can rapidly execute A/B tests or more complex multivariate tests – from devising the tests and executing them to analyzing them. It processes the results to determine statistically significant winners. In a machine learning model, the results from one test can serve as a learning point for another one. Just like it used to be – but automated and with greater precision.
  • Predictive analytics: AI’s quantitative prowess extends to even predicting user behavior. It takes historical data and uses it to forecast future actions, such as the likelihood of a visitor purchasing a specific product or dropping off at a specific step. 

AI & qualitative analytics: Find the best ways to understand those customers

The next step is something that many businesses neglect – and those who don’t already have a competitive advantage. It’s the ongoing monitoring of specific user journeys and surveying customers to see and hear their problems in their own actions and words. Here’s how AI taps into these types of analytics tools:

  • User feedback analysis: AI tools can scan through customer reviews, support tickets, and social media comments. They extract sentiments and themes, helping you understand what’s working and what’s not, which new features and products are consistently demanded – and which need an overhaul because they cause the most frustration.
  • Heatmaps and session recordings: AI-driven heatmaps and session recordings offer insights into how users interact with your website or app. This is similar to watching a video of every customer’s in-store visit, helping you see where they’re drawn and what they ignore. 

But with a thousand session recordings and heatmaps available, stretched product and analytics teams miss many opportunities. When AI takes the lead, it inspects user behaviors at scale and summarizes the exact points in the journeys that need attention the most – along with the specific statistical impact the optimizations will have on conversion rates.

AI can be the meeting point for quantitative and qualitative data, here’s how

Now, here’s the magic part – AI-enhanced digital experience analytics platforms excel at merging these two types of data to give you actionable insights without the hard analytical work. It takes qualitative insights, like user feedback, and combines them with quantitative data, such as funnel conversion rates. This synthesis uncovers trends and correlations that otherwise remain hidden.

Qualitative vs Quantitative Data

But that’s not all. As machine learning models evolve, they are not only capable of pinpointing the exact e-store optimizations needed – they also predict the specific impact these will have on your conversion rates so you can translate the insights into revenue and make strategic decisions more easily.

For example, AI might notice the slow loading times of a specific page (qualitative insight). It then correlates this with the fact that the bounce rate on that page is significantly higher (quantitative data). This correlation suggests that improving the page’s loading speed could improve the user journey and thus – the conversion rate of the specific page’s desired action.

Now, multiply this by the number of touchpoints and pages of an entire customer journey, and you will grasp the value that AI can bring to the table.

The best part? AI conversion rate optimization will become the cheaper and more effective option

We know that this might sound scary. And we don’t believe that AI will magically substitute an entire team of analysts, marketers, and UX designers. It’s the type of automation that has been around for the past 20 years and these people are still around. 

The crucial part is that this technology will make holistic AI conversion rate optimization an option for businesses of different means, sizes, and needs. A way to meet the exceeding expectations of billions of users. A way to decrease staffing and user testing costs – and to increase the ROI of your efforts and your business’ revenue. A tool that can finally make the world a better place, one might say. At least the digital one. 

We at SessionStack are already working on it. SessionStackAI, our proprietary solution, uses data from the treasure trove that we collect from our customers – both qualitative and quantitative, and summarizes the valuable findings into short and sweet insights. A true competitive edge we can’t wait to share with the world. 

To put it in a nutshell…

Whether it’s through understanding the nuances of customer behavior or crunching the numbers to discover patterns, AI is the force that turns insights into actionable CRO strategies. It’s the robot arm that pieces together the puzzle, helping you make data-informed decisions that maximize your conversions and create an ever-improving online experience for your customers. The bottom line is that your bottom line needs it, especially when other resources are scarce.

See what SessionStackAI can do for your business