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Home / Marketing & Retail / Digital marketing / Intro to Conversion Rate Optimization

Intro to Conversion Rate Optimization

This article is the first of a series about the topic of conversion rate optimization (CRO). I will be writing about both the theoretical and practical aspect of CRO, industry best practices and tips from my personal experience.

What is CRO?

CRO is a technique consisting of improving the overall online customer experience in order to achieve a better conversion rate. This broad topic encompasses multiple ones, mainly: landing page optimization, A/B testing, usability studies and onsite analytics.

Conversion rate is the main metric that will indicate the healthiness and effectiveness of your CRO efforts. It is defined as the total number of successful outcomes of a particular event over the number of possible occurrences of that particular event:

ilk resim

For instance, an e-commerce venture would calculate its macro CR as the number of transactions divided by the number of visits; a lead generation campaign’s CR would be calculated as the number of visitors who sign up divided by the number of visitors to that page.

I am not sure whether 2013 was the year of mobile or tablet, but I strongly believe that 2013 was the year during which the new tech and online industry gave a particular attention to CRO and all the tools affecting it. We have seen the rapid growth of low cost testing solutions as Visual Website Optimizer and Optimizely (which secured $28M in April 2013). Retail companies are focusing more and more on cost efficiencies and, hence, on improving their CR. Online companies are investing more in cross platform analytics in order to optimize their customer conversions.

Why is CRO so important?

Here’s the easy way of explaining that: let’s say you get 100 visitors from Google ads and your website’s CR is 1%: this will lead to 1 transaction. However, if your website CR was 2%, you would have gotten 2 transactions for the same Google ads price. Now, scale 100 visitors to 100,000 visitors and calculate the huge jump in order you are achieving!

I believe CRO is very important for the following reasons:

1-      Makes financial sense and puts you on the road to profitability:

With exactly the same ad spending, all the improvement you achieve on the CR will directly be translated to larger profits.

resim 2

Fig.1: Effect of improved CR on bottom line (www.conversion-rate-experts.com)

In addition, the whole cost structure, as cost per order (CPO) and cost of acquisition of customers (CAC), will decrease.

2-      Allows you to really understand your customer:

Throughout your optimization efforts, you will be able to understand who are your different customer clusters overall, per traffic source and per device. Based on this analysis, you will be able to establish stronger processes with other departments. For instance, the buying department will be able to customize their purchases according to your onsite analysis and will be able to forecast and replenish in advance.

3-      Gives you more freedom to come up with necessary and tactical initiatives that might lower the CR:

Let’s say that a part of your inventory has been online for a long period, but did not get enough visibility due to your very large online inventory. Is this inventory not attractive to customers? Should you move it to sales/clearance or expose it more explicitly to your visitors? Would that decrease the website CR? A sound CRO will give you more freedom and comfort to deal with such questions.

4-      Empowers you to better plan ahead:

An effective CRO strategy will allow you to not only improve the macro CR metric, but also all other website metrics. Hence, you will have more visibility around how your financial metrics, affected by the onsite ones, will or might evolve in your plan.

A lot of companies might think they have a traffic issue, but I would rather say they have a CR issue. Invest in CRO in order to reach sound online metrics and, hence, profitability.

Sources:  http://businessreviewcenter.com/conversion-optimization-improvement/

Image source: http://www.marketingmattersinbound.com/wp-content/uploads/2014/05/shutterstock_146395343.jpg

Paul Debahy

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