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How Online Retailers Work to Drain Your Wallet

Whether they are selling clothes or computers, retailers need to convince customers to buy their products. “The challenge is there is no single approach that works for every customer or brand,” says Kim Saxton, clinical associate professor of marketing at the Indiana University Kelley School of Business. “You have to know your customer base and what motivates them.”

Fortunately for businesses, the internet is making that simple. “Online, it’s really easy to know who [customers] are,” says Michael Osborne, CEO of behavioral marketing platform SmarterHQ. His company is among the tech firms that are perfecting how to predict when a customer will close a sale and when he will walk away. From how long a customer looks at a particular product to when he or she abandons a shopping cart, the data is analyzed to help online retailers create a shopping experience that leads more people to click the buy button.

Thanks to those insights and other data gleaned by businesses, online stores are using the following strategies to boost sales from both new and returning customers.

The persistent shopping cart. There are plenty of factors within the online shopping experience that weigh heavily in favor of retailers. “One of the major benefits of e-commerce is that it helps online retailers in their ability to increase a customer’s basket size,” says Evan Tarver, investments analyst with FitSmallBusiness.com.

Not only can customers store a virtually unlimited number of items in their cart, those items will often be waiting for them if they leave the site and come back later. Known as a persistent shopping cart, it makes it simple for customers to complete a sale they may have otherwise forgotten.

[Read: 6 Potential Downsides of Online Shopping.]

Discounts for subscriptions. Auto-ship programs have become a staple on many sites. Consumers sign up for shipments at regular intervals, often in exchange for a small discount. “That becomes a pretty predictable source of revenue,” Osborne says. “That’s why they’re willing to [offer a discount].”

Automatic additions to carts. Consumers on some sites may get more than they bargained for when adding items to their cart. That’s because some stores will automatically add multiple items or include add-on purchases automatically.

Tarver says he sees this tactic most frequently deployed with supplements and similar health products. “Some retailers will give you a year’s supply, claiming that their program is most effective if done for a year,” he says. Customers who want a smaller quantity have to manually remove items from their shopping cart before checking out.

Targeted campaigns. With so much customer data available to retailers, online businesses can easily tailor their marketing to an individual’s preferences. “If you’re not personalizing, you’re doing it wrong,” Osborne says. That means emails should speak directly to a customer’s interests and a website should be designed to quickly bring a visitor to relevant items.

Osborne says people expect this level of customization nowadays. Sending generic email blasts to an entire mailing list are not only ineffective, but can also alienate potential customers.

Reminder emails. One way retailers customize emails is to send reminders about items left behind in a cart. Other emails could let customers know whether a price has dropped or if a sale is about to end.

Reminder emails can also boost sales by making it easy for people to make purchase decisions. “One e-tailer sent me a list of Christmas purchases last year and asked me which ones I wanted to repeat,” Saxton says. That makes for an easy shopping experience that can garner sales from time-strapped customers.

[Read: These Tools Let You Shop Online Without a Credit or Debit Card.]

Easy checkout. By all accounts, Amazon revolutionized online commerce with its 1-click shopping model. Every step of the purchase process, from reviewing the cart to entering payment details, provides an opportunity for a customer to decide not to buy. However, the one-click method creates a frictionless transaction in which customers bypass all those additional steps.

The patent for Amazon’s 1-click payment system expires this year, meaning other retailers may soon begin adopting similar systems. In the meantime, they have used a variety of methods, such as storing payment info and auto-populating shipping fields, to make the checkout process easier and customers less likely to leave without completing the sale.

Suggested add-ons. “Another [thing] we see a lot is the ‘complete the look’ or ‘accessorize the purchase’ type of promotion,” Osborne says. It’s a particularly useful tactic for apparel sales when someone might naturally be looking for other clothes, shoes or accessories to complement their new purchase. However, it can also be used for all types of products.

Promotional thresholds. A promotional threshold encourages people to spend a certain amount in order to get free shipping, a discount or other bonus with their purchase. To maximize their effectiveness, retailers will place banners on their website and reminders during checkout to let customers know if they spend only a little more, they’ll be eligible for the promotion.

Companies like SmartHQ analyze data to determine how likely a customer is to become a repeat buyer. If someone is identified as a potentially high-value customer, the system may automatically lower the promotional threshold for that person, Osborne says.

[Read: 5 Tools to Turbocharge Your Online Shopping.]

Loyalty programs. These have long been used as a marketing tactic in offline businesses, and they are just as popular online. With online tracking, loyalty programs can be personalized with targeted rewards and promotions. “Everyone likes something that makes them feel special,” Saxton says.

That makes loyalty programs attractive to customers. Plus, they require people to sign up for an account, which makes it easier for businesses to collect shopping behavior data that can be used for further marketing.

Creating scarcity. Creating scarcity is another tried and true method of driving sales. In many cases, simply stating the number of items still in stock can drive people to make a purchase before they otherwise would. Sending out an email when an item comes back in stock can also have the same effect.

These marketing tactics have their benefits for customers. They can make online shopping a pleasant and convenient experience. However, make no mistake. Retailers aren’t implementing them for the customer’s benefit alone. Instead, they rely on these tactics to convince a customer to part with his or her money and part with it today.

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How Online Retailers Work to Drain Your Wallet originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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