The Unknown Side of Conversion Rate Optimization

The Unknown Side of Conversion Rate Optimization

Always be up to Date subscribe to updates - November 5, 2012

[Originally presented by Richard Farr at Convert Academy. Watch the webinar here]

Trading Bad Traffic for Good

Think you know all there is about Conversion Rate Optimization (CRO)? Think again!

This blog post will show you the unknown side of CRO, a different way to look at and analyze conversion that will help you trade bad traffic for good and boost your online conversions.

Which Traffic Brings the Most Conversions?

Convert Academy participants were polled about what traffic source is responsible for the majority of their conversions and revenue?

  • Off-line advertising
  • Paid search
  • Banners
  • SEO
  • Social Media
  • Other

A quick vote revealed that two-thirds of their conversion traffic came from SEO, around one-third from Social Media and a very small portion from Paid Search.

 

Optimizing Good Sites, Bad Sites or Both?

Conversion Rate Optimization shouldn’t only be done for poor or under performing websites. Sometimes, it’s about taking already profitable websites and making them even more profitable. What it all boils down to is not only getting traffic, but getting the right kind of traffic and converting it.

A good framework can be set up by answering the following two questions:

  1. What are you doing to get more traffic?
  2. What are you doing to increase your conversion rate?

To put things in perspective, it’s helpful to translate them into the percentage of effort put into this by what we call newbies, intermediates and seasoned pros.

  • Newbies spend 99% getting traffic and 1% in converting traffic. Their idea is “I have a site. Can you make it rank #1 in Google?”
  • Intermediates spend 70% getting traffic and 30% converting traffic. Their idea is “To deserve a #1 rankings, the content must be great, or in other words, content is king.”
  • Seasoned Pros spend 10% on getting traffic and 90% converting traffic. Their idea is “the site gets better every time a test comes through. This site DESERVES to rank #1”

 

Is your Website a Traffic Magnet?

A site that is continually improving is a traffic magnet and deserves to rank #1. Here’s a comparison of two sites that illustrates why-

Site A gets 10,000 visitors and a conversion rate of 1%, which generates 100 leads that they try to convert into sales. 1% of those leads convert into sales, meaning that for every 10,000 visitors, 1 sale is made. Let’s assume this sale is worth $10,000.

Site B gets the same traffic, but does an exceptional job of constantly testing and optimizing, so their conversion rate is 10%. This means that for every 1,000 leads, 100 sales are made at $10,000 each. This translates to a whopping $1M.

The key aspect to keep in mind is that on site A, 10,000 visitors = $10,000 and on site B 10,000  visitors =  $1M dollars. This means that on site A, each visitor is worth $1 and on site B, $100. Given that traffic and sales values are constant, the value per visitor number is what really matters in this case.

 

More Traffic vs More Conversions

Let’s look at this in a slightly different way. To boost their sales, Site A decides to invest $10,000 in traffic acquisition. If it costs $10/click, generates 1,000 visitors and the dollar value of each visitor is $1, then they invest $10,000 in traffic and get $1,000 back. The ROI, in this case, is terrible and they are more likely to decide to switch to SEO.

Site B spends the same amount to buy traffic. They generate the same 1,000 visitors, but each is worth $100, so they invest $10,000 in traffic and they only get $1,000 back. They might decide they want to spend more on PPC. Seeing the apparent ROI problem in this situation, it’s safe to assume that this boils down to a conversion problem.

The key difference is that Site B converts while A doesn’t. Companies that convert traffic into leads and sales rarely have a traffic problem because they can hire the best PPC and SEO talent available. In other words, High conversion rates = no traffic problems + constant growth.

Let’s start with the basic formula, Get Traffic x Convert Traffic = Money where T is Traffic, CR is Conversion Rate and VC is Value of each Conversion.
To put things in perspective, let’s assign numbers to these values:

Assuming a site gets 1,000 visitors per day, converts 2 out of 100 visitors at a $1,000 per sale. This translates to $20,000 a day in revenue. This may sound great for a lot of people, but what we are really trying to dig into is the 2 conversion per 100 visitors and how to make that conversion rate higher.

There are two ways make the top number bigger. First, by increasing the conversion rate from 2% to 3%, which would translate not to a 1% increase, but rather a 50%.

Another interesting way to look at this number is not by increasing the conversion rate, but by decreasing the number of non-converting visitors. If you could go from 98 out of 100 people who come to your site and left without converting to 97 out of 100, you also get a 50% increase in revenue.

 

Traditional and Less Traditional CRO

This traditional way of doing Conversion Rate Optimization deals with taking traffic as a given and doing a better job at convincing people to do business with you.

The other, less traditional way, is to make the bottom number smaller. Theoretically, 100 visitors are needed to get 3 conversions but the truth of the matter is, some of them will never convert. In this case, maybe only 90 visitors are needed. The idea here is to determine who will not convert, eliminate them and still get 3 conversions out of 90 visitors.

Here is a two-step process to go about executing this less traditional method of Conversion Rate Optimization:

 

1. Identifying the Right Kind of People to Target

 Let’s take this concept offline for a moment. If you own Ferrari dealership, it’s very unlikely that an 8 year old will convert as they would, let’s say, at an ice-cream store. The same applies online, thought it’s significantly more challenging to identify these non-converters through web analytics. But that’s not to say there isn’t a workaround. What you want to do is:

Identify the kind of people who practically never convert,

    Then, either

A. Personalize their offer so they become profitable

or

    B. Stop advertising to them

Regardless of which method you are using, don’t advertise to them and stop putting resources into going after that keyword that might bring in visitors but no conversions at all. Move your efforts from the low ROI activities into optimizing keywords that do convert. Experience shows the fastest way to figure out whether a keyword does in fact convert is through paid search. Use the information you have to make better decisions and do better targeting!

2. Creating a Personalized Offer

If you’re a fan of Avinash Kaushik, you’ve surely heard the phrase “segment or die!” Do not take it lightly.

If you don’t have the analytics resources to segment and differentiate, start by using common sense. Go back to your site, run through the entire click-to-conversion process as different segments and make sure you’re not offering Alaskans an deal on a ski vacation in Denver.

Conclusion

To sum up, the key takeaways are:

  1. High conversion rate = no traffic problem.
  2. You can actually grow profits by decreasing traffic.

High traffic volume and traffic acquisition efforts are not always the paths to more revenue. Conversion optimization, and especially a less traditional way of doing it, can lead to much higher revenue with the same traffic volume.

Not all traffic is created equal. More traffic is good, but the right traffic is even better. Filter out non-converters from your site by either personalizing offers to that particular segment, or refraining from advertising to them at all.

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  • 5 Nov, 2012
  • Posted by Dennis van der Heijden
  • 1 Tags
  • 1 Comments

Written by Dennis van der Heijden

Co-founder and CEO of Convert.com passionate in building communities that care. Trying to make that happen inside and outside Convert. I love working with my team to make our A/B testing software better for agencies and e-commerce clients.

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