How much are you spending on Conversion Optimisation?

by David Mannheim

posted on: December 28th 2015

Top-converting companies spend more than 5% of their budgets on optimisation [Source] but most companies (53%) do spend less than 5% of their budget on conversion rate optimisation. [Source] In 2013, according to a study by Millward Brown, Optimization has not grabbed a strong share of budget, however. 20% of respondents allocate less than 1% of their marketing budget to optimization, while 61% invest less than 5%. Like the time investment correlation, those that are spending more on optimization are getting results. 62% of high investors (more than 5% of budget) have conversion rates over 2% vs. 48% of low investors (less than 5% of budget).

This is odd since 90% of marketers rate conversion rate optimisation as ‘important’ or ‘crucial’ [Source]. And as we've already established, conversion rate optimisation generally brings with it the highest and quickest return on investment.

Good reference: https://econsultancy.com/blog/62621-most-companies-spend-less-than-5-of-marketing-budgets-on-conversion-optimization/

Tools and software

48% of companies surveyed by Trust Radius plan to spend more on A/B testing tools this coming year. Looking at the two most popular options; Optimizely and VWO, they cost around £15,000 and £6,000 per year respectively. The same survey also found that:

  • 58 percent of companies surveyed spend more than $10,000 on digital analytics tools per year with 27 percent spending between $50,000 and $500,000, and 6 percent over $500,000
  • The survey also found that 44 percent of the companies surveyed spend more than $10,000 annually for A/B Testing software with 19 percent spending more than $50,000
  • Page views for A/B testing tools grew 30% between Q2 and Q3 of 2014 [Source]

According to Forbes, on average, companies are spending as much as $2,000 a month on CRO tools.

Optimisation program

Your budget for a conversion rate optimisation program should be reflective of your current state.

There are websites that might suggest, arbitrarily, what you should be spending. Positronic Design suggests that you should spend 30% of your marketing budget on CRO although there is nothing that fortifies or confirms why this is so. They continue to state that "...for professional CRO services you should therefore expect to pay anything from $500 up to $10,000 per month depending on factors like your target industry, website size, nature of competition, etc. You can choose to pay for CRO as a stand-alone service or in combination with SEO."

[blockquote color="#a5d2d0" bordercolor="#a5d2d0" author="Positronic Design"]It is wise to set aside 30% of your marketing budget on conversion rate optimization. This is considered the sweet spot. Businesses need not spend more for optimal results in their CRO strategies.[/blockquote]

Then again another company, Ideally Marketing, suggests that "Good CRO campaigns regularly lift conversions 50%-300%". So surely allocating a significant proportion of your budget for such hefty returns is warranted? This figure is somewhat arbitrary and has no proof within the claim, however.

These figures are somewhat arbitrary and instead we should be looking at how much you should spend based on your Basic Upside Unit (BUU). In order to calculate this you need to know your revenue from the website, number of sessions, average order value and conversion rate. The Basic Unit of Upside is the yearly revenue generated by adding 0.1% to your conversion rate. As a result this would be:

 (0.1 / CR) x Monthly Web Revenue x 12 months

Here's an example from Conversion Scientists showing an increase in conversion rate between 0.5% and 0.8%.

low-conversion-rates-600x603

Reallocating budget

Have you ever thought about reallocating your marketing spend more towards a process of conversion rate optimisation? If we consider that CRO has the highest ROI of any marketing activity, why not reallocate budget towards it instead of creating 'new budget' to fit a 'new service'?

[blockquote color="#a5d2d0" bordercolor="#a5d2d0" author="Hayden Miyamoto, NoHatDigital"]CRO is the highest ROI activity you can engage in. It is the base of your success in online business[/blockquote]

How is it charged?

Generally, optimisation programs are charged on monthly retainers. There are some who charge on hourly rates much more akin to traditional agency models. However, our thought process here at User Conversion is that charging on an hourly model renders the program devoid of any kind of value. We're not lawyers.

The charge is also dependant on the amount of traffic you have. The more traffic you have, the more data we have to interpret, the more experiments we can run, the more analysis we have to do. As a result of a fast moving site, we naturally spend more time and therefore the cost is proportionate to the amount of time we spend on it, which is proportionate to the amount of traffic you have.

But, instead of asking "how much will it cost" have you ever considered how much not hiring a conversion rate optimisation company could cost you? How much are you wasting on paid traffic that simply isn’t converting? How much money are you wasting developing features or improvements that are not conversion affecting? Worse still, how much money are you wasting implementing these features or improvements that negatively affect conversions?

When budgeting, just think for a moment, what would happen if your closest competitor engaged with conversion rate specialists?

 

avatar for author

David Mannheim

David is an experienced conversion optimiser and has worked across a series of core optimisation disciplines including web analytics, user experience and AB & MVT testing.

How much are you spending on Conversion Optimisati…

by David Mannheim Time to read: 3 min