Why invest into Conversion Rate Optimisation? What are the benefits of it?
There are plenty of reasons why CRO should be invested into and, even, accelerated as it is arguably the most efficient form of marketing spend. Let us explain why.
Knowledge is power
The process of optimisation is one that helps us and you understand your users; both in theory and in practice (through AB testing).
94% agree that conversion rate optimisation improves their understanding of their customers, according to the Optimizely benchmark report.
The more we understand and learn from our testing efforts, the quicker we will start to see win after win and even larger, more significant wins. This is the reason we set a 12-month minimum engagement period. We believe that is how long it will take until you are genuine, consistently benefiting from optimisation and it becomes both perpetual and habitual.
Don’t get us wrong – you’ll likely see those gains early on. They just might be more intangible or piecemeal. Alternatively, the first test we run might see a 150% increase in conversion rate (it’s happened before).
Not to mention all the intangibles that come with it such as a better understanding of your users which, in turn, lead to better marketing and even business decisions. Knowledge is power. We often test to learn either because we don’t know or we want to know more; usually about a specific behaviour, anxiety or segment of users. The benefit that testing and optimisation brings is, therefore, invaluable.
However, that knowledge and data need to be turned to action. According to the Optimizely optimisation benchmark report, companies are unsure of their ability to understand and take action on their company data, with only 66% and 61% of respondents stating they do so well or very well, respectively (and that’s amongst those who are testing!)
As a process, it will yield your highest ROI because it is nothing but efficient
As a process, it will yield your highest ROI because it is nothing but efficient.
84% of companies with a structured approach have seen improvements in conversion rates, while that same figure for those without a structured approach is just 64%, according to according to the eConsultancy 2016 white paper.
Companies are used to a way of thinking. More traffic = more sales. This is true; but inefficient. If your conversion rate is 2% that means to get just one sale you need another 50 people through the door. How does it feel that 98% of people that come to your site won’t convert? Your cost per acquisition remains exactly the same as you continue to improve rankings in a more and more competitive field.
So as you pay for more traffic to come through to your site, you’re not addressing that core issue – 98% of users still won’t convert and, thus, you’re still paying for those that don’t convert.
Turning that process to a conversion-first approach, ultimately means that you’re paying the same amount for more users to convert, thus reducing your CPA. This can be classified as profit (as you’re not paying any more for these customers) which, in turn, can be reinvested back into acquisition activities like PPC, SEO or affiliate.
It’s not just about acquisition, but retention
Acquisition is said to be four to six times more expensive than retention.
And with the average UK e-commerce conversion rate standing between 2.6% and 4%, knowing that 97% of your users that come to your site won’t convert, you have to spend a lot of money just to acquire a customer! How do you acquire them?
Did you know that the cost of PPC ads is said to increase by 5% to 12% a year due to increased competition? [Source]
Or that marketers are spending a lot on paid search: more than $55 billion was spent on paid search in 2014 and that number is expected to rise to more than $71 billion by 2016 (TechCrunch). Even then, we have to consider our return on investment. If we convert at 3% and each click costs us £1, we have to spend £33 just to get one sale. PPC is also only effective for as long as you’re running the ad.
You could also increase traffic by SEO. But let’s take a look at how many Google Algorithm changes – there were in 2014 and 2015. In 2010, Google’s Matt Cutts said that Google made one change per day to their core search algorithm. Between 2013 and 2014 in the space of 12 months, that figure stood at 890 improvements. The world of SEO is continually changing and is arguably only effective until Google release a new algorithm change. You are at the behest of a behemoth 3rd party.
Conversion rate optimisation arguably lasts long than the effects of PPC or SEO because they are not beholden to a third-party conglomerate such as Google. It focuses on your users’ experiences and, thus, by doing so is the only marketing activity that increases your user’s propensity to return.
Reduces your risk
There’s a famous story of the CFO asking the CEO about training. Have you heard it?
The CEO asks the CFO…
“What happens if we invest in developing our people and they leave us?”
The CEO responds…
“What happens if we don’t, and they stay?”
Optimisation works the same way.
As much as conversion rate optimisation increases the gains (or potential gains) of your website, it also advocates loss aversion. Arguably this is more important than making gains. Take the scenario of wanting to implement a feature on a website – either because a competitor has it or because a senior manager has requested it. What happens if that feature fails? Not only have you spent £x thousand pound developing it, over long months, but you’ve also decreased your conversions.
- Failing fast – speeding up that loss aversion with the ability to ‘switch back’ at the flick of a button
- Test and prove the concept before making dramatic changes
- Spend much less money developing the concept
- Understanding why it lost, and taking those learnings to develop something that will actually win
73% of those that increased their CRO budget saw improved conversion rates, a clear correlation between investment and results, according to the eConsultancy 2016 white paper.
Unlike nothing else, an improvement of 10% conversion rate lasts (at least in the sense of a non-linear data set). It is still beholden to competitor, economic and price movement but remember that a 10% increase in conversion rate in month 3, for example, will likely last in month 4, 5, 6 and beyond.
Therefore, when analysing “return on investment”, because of the longevity of conversion rate improvements, the question is certainly more “when” than “if”.
The best are doing it
How many companies say that they are ‘customer-centric’? Most (or at least they state it is a unique selling proposition or desire).
As such they look to the likes of Amazon, Disney, Uber, Apple etc. These companies all have one thing in common. They optimise. They continually improve the online (and offline) user experience through conversion rate optimisation. And whilst most will ‘copy’ Amazon, we would recommend copying their practices and processes.
Every great inventor and innovator in history have had a process of experimentation that led to massive breakthroughs. If you want to be one of the best, this isn’t something that’s just nice to have. It’s essential.
More than half (53%) of companies plan to increase their budget for optimisation in the next 12 months. Are you?
- Google ran more than seven thousand A/B tests in 2011 alone. [<Source]
- Now TV ran nearly 3000 A/B tests in 2015
- In 2013, Amazon spent $6.5 bn on optimisation and testing capacity, and they convert at about 18% [Source, Source]
- AirBnb created their own A/B testing tool, as did Facebook and Etsy
- Shop Direct is currently running around 160 tests a month [Source]
What happens if you don’t optimise?
Finally, question the lost opportunity cost of not optimising.
The best companies are constantly reinventing and finding better ways to do things. If they aren’t moving forward, they are going backwards.
Sure, something may seem to work fine now, but what if there’s something that could sell four or five times better you don’t know about? The opportunity cost is massive. Optimisation is the best way to do this.
Remember what the CFO and the CEO spoke about?
With the benefits of conversion optimisation becoming more and more evident, companies are not just adopting it but accelerating their efforts. It is for this reason that without optimising, you will remain still and stagnate. We don’t want that for you.
It is likely that your competitors are optimising too as CRO becomes more and more popular. According to the eConsultancy 2016 white paper, there’s increasing evidence that conversion rate optimisation (CRO) is seen as an essential practice within marketers’ toolkit, with over half (55%, up from 53% in 2015) of companies surveyed deeming it as ‘crucial’ to their overall digital marketing strategies and a further third ranking it as ‘important’.