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What is a trust seal actually worth?

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I was asked the question this week of what trust seals I would recommend a website use? Trust seals would include services like Mcafee, Truste, the BBB, Verisign SSL, etc. Putting aside any potential real benefits in security, I think that these seals can help a business increase their conversion rate. However, I think the statistics touted by the seal providers themselves are greatly exaggerated, even to the point of them being statistically impossible. I’ve seen statistics like “over 70% increase in conversions”. While this may be theoretically possible, it’s just not plausible that the site seal somehow convinced double or more the amount of visitors to make a purchase, unless there were serious problems with the site before the seal was installed, or there wasn’t enough data for statistical significance.

So, the real question is, what makes these seals justifiable?

Realistically, if a site seal provides any increase in conversions, there is a point where the benefit surpasses the cost to obtain a site seal. But, where is that point?

My typical answer is that for a new website they will not provide a positive ROI until the business has a substantial amount of sales. Basically, don’t get one until you are already well established. Substantial is a very ambiguous answer, let’s look at what substantial sales actually mean.

Let’s say a site can benefit by a 5% increase in raw conversion by installing a trust seal, far below the 75% that some claim, but still high as far as I’m concerned. Let’s also say they are using a seal that costs $1000 per year, and are currently operating with a 20% profit margin.

Plugging this into an equation to calculate the sales required for a positive ROI:

(profit margin)(sales + increase in sales) = (cost of seal)
.20(1x + .05x) = $1000
.20(1.05x) = $1000
1.05x = $1000/.2
x = $1000/.2/1.05
Sales = $4761.90

This business would need an additional $4761.90 in sales in the next year, or $396.86 per month, to get a positive ROI on their site seal investment. If the business operates on a very tight profit margin (say 5%-10%), which is increasingly common with online businesses, this number goes up quickly.

As far as sales go, still assuming the 5% increase in sales, this business would need to currently be doing this much to break even in exactly 1 year:

(increase in sales)(required sales) = (monthly cost of seal)
.05x = $396.86
x = $396.86/.05
Required sales = $7937.80

So, you can see how much in current sales this business needs to break even on their purchase of the trust seal: $7,937.80 per month, or $95,253.36 per year.

This isn’t an astronomical number for an established website, however for a brand new website it’s probably a lot. Additionally, it’s not uncommon for a business to purchase multiple site seals. I can say that as the number of seals goes up, the conversion rate per seal goes down, making more sales required for the seals to generate a positive ROI.

If a business has 3 seals installed all for $1000, and the end conversion increase for each seal is 3.3% (we’ll assume an extremely generous 10% total for all 3 seals). This would require an existing monthly sales volume of $36,291.06 ($435,492.72 per year) just to break even on the trust seals.

These are all just made up numbers, but they’re in the realm of possibility as far as costs, increases, and profit goes.

The sneaky-tricky stuff!

The tricky stuff: There are many variables in measuring an increase in sales. It’s almost impossible to attribute an increase 100% to the installed site seal, even if a single variable A-B test is performed. There are factors outside the checkout process that have a lot to do in determining the type of visitors that are coming to a site, and the sales of that site. Even so, a single-variable A-B test would be the most appropriate way to test the conversion rate increase in adding a site seal.

The sneaky stuff: One caveat is that if a seal instantly increases conversions, you could be losing money by performing the A-B test at all. This creates psychological motivation not to test, and is one of the strongest retention methods of site seals in general. The majority of website owners have bought into the seal before they even install it and no test is ever performed.

As site owners we almost always get grossly skewed statistics on the effectiveness of site seals, especially if those statistics are coming from the person trying to sell it. I can honest tell you that you should not expect a 70% increase in conversions by installing a site seal, and I don’t think I would expect a 10% in most cases.

If you are going to install a site seal, I strongly recommend performing an A-B test for a few months, or at least until some statistical significance is reached, to see if it will be worth spending the money on the seal again. Also make sure you are getting outside opinions as to the seal’s effectiveness (although this may be impossible). It is extremely difficult to find objective and statistically accurate comparisons of site seals or any single site seal for that matter. There is simply so much hype as to their effectiveness, there’s no honest information about them anywhere. Proceed with caution…

The site seals I recommend that could possibly work

These are the only site seals that I could possibly recommend looking into. There are probably a million out there, but there are very few that anyone cares or knows about. Most seals just add clutter to a page, potentially decreasing the sales potential the page would otherwise have.

Verisign SSL
Mcafee
Truste
BBB
and finally, any EV SSL (I recommend Comodo EV SSL)

Source http://www.ecommerce-blog.org/?p=638
Thu, 28 Oct 2010 15:36:01 GMT
Tags: General, Marketing,

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