Why do managers ask for justification of CRO?
I may be a conversion rate optimisation consultant, but don’t ask me to justify CRO to your boss or colleagues? I don’t mind explaining what CRO is or the process of CRO, that’s fair enough. What I object to is justifying the aim of CRO to people who understand that CRO about improving the return on investment of the money you spend generating traffic for your website or app.
No traffic is free as even SEO requires time and money to implement a strategy. So, why should you have to justify the objective of increasing your conversion rate? There’s more to CRO than this, but at the simplest level that’s what’s it’s about. Whether its aim is to increase the number of leads, sales, revenues or any other performance indicator the aim of your CRO strategy should be easily defined and understood.
If management don’t appreciate the benefit of spending less of their budgets on acquiring traffic and improving the revenue generating capability of visitors, why should I spend my time on trying to convince them to implement a CRO strategy? They are either complacent or they don’t want to use an evidence based approach to digital marketing.
How Important Is Your Conversion Rate?
Recently a potential client contacted me about how to generate more leads from their digital marketing budget. They suggested using pay-per-click marketing campaigns to generate an additional 30,000 new visitors a month to their website. They estimated this would achieve their target of 100 new sales a month based upon their current conversion rate of just over a third of one per cent (0.36%).
The flaw in their approach though was that they were assuming no change in their conversion rate and they were ignoring other sources of traffic (e.g. SEO and email marketing). As I pointed out a well-planned and implemented PPC campaign strategy should achieve a much higher overall conversion rate and so they would not need to spend so much of their budget on traffic acquisition.
In addition, as you can see from table 1 below, the cost of buying 30,000 unique visitors would be prohibitively expensive. If their conversion rate was only 0.36% they would actually lose £20,400 a month. However, for well implemented and targeted PPC campaigns we would expect a conversion rate of around 1% or higher. For example a conversion rate of 0.9% would require just 11,500 clicks and would generate a monthly profit after subtracting the cost of the PPC campaigns of around £5,100.
f we achieve a conversion rate of 1.8%, which is probably conservative for the sector concerned, the monthly profit rises to £14,400 and we would only need 6,000 clicks. So what this tells us is that the conversion rate can make or break a campaign and ultimately a business.
Maximum Cost-Per-Click (CPC):
To avoid making a loss on PPC campaigns we would of course calculate our maximum cost-per-click (CPC). This is calculated using the formulae:
Max CPC = [Profit per customer] * [1- Profit margin] * [Website conversion rate]
Table 2 below shows how the conversion rate has a massive impact on CPC. A conversion rate of 0.3% given the profit per customer and profit margin would only allow a maximum CPC of £1.08. This would prevent us bidding on any of the most high volume and competitive keyword phrases.
However, a conversion rate of 0.9% would allow us to bid up to £2.70 and would enable us to compete on the more high volume keyword phrases. So your conversion rate also determines how competitive you can be with your PPC campaign and so anyone who ignores CRO for PPC campaigns is likely to burn money unnecessarily.
Nothing Works in Isolation:
Improving your conversion rate for your PPC user journeys is a good idea, but it is only part of the picture for CRO. When you want to improve your conversion rate you can’t afford to look at each source of traffic in isolation. For example according to research by SEMrush the most important driver of SEO ranking is the amount of direct traffic your site receives. This of course is mainly determined by brand awareness, but advertising campaigns can also have a significant impact on awareness levels. This means PPC spend can directly influence SEO ranking by generating direct visits.
Engagement metrics such as time on site, pages per session and bounce rate are also important drivers of your site’s ranking. To improve engagement this means optimising the user experience and ensuring your content is relevant and meets user needs. Consequently poorly targeted PPC campaigns or low converting PPC landing pages could have a detrimental influence on your SEO ranking if they result in a high bounce rate and little time on your site.
Every traffic source for your site is interrelated and so you need to optimise your conversion rate for each source to avoid harming the other ways of getting visitors to your site. Often CRO is only considered for the most expensive traffic sources (e.g. PPC), but in reality this is counterproductive and short-sighted. Only an integrated approach to digital marketing and optimisation will allow you to minimise acquisition costs and maximise conversions.
Given that your conversion rate is such an important of driver of profitability and a source of potential growth for digital businesses, it’s hard to understand why the benefits of CRO are questioned in some organisations. I can only assume that it is due to a resistance to change and a lack of an experimentation culture. Some managers also find it difficult to allow decisions to be informed by evidence rather than their personal preferences.
What you need to consider in these situations is whether you really want to be part of an organisation that has such a backward approach to CRO and lacks a culture of experimentation. It can be very frustrating and may hold back your career. Further, such organisations are unlikely to prosper in the long-run as more CRO and customer centric organisations will squeeze these types of companies out of the market.
About: Neal Cole is the founder of Conversion Uplift, a marketing consultancy which specialises in marketing strategy and conversion optimisation. Neal previously worked for large blue-chip companies such as Aviva and Shop Direct before going freelance.