01.08.2016

Conversion Rate Optimisation: how does it affects your business?

Why more traffic doesn't always mean more profit...

Conversion, a term that might sound like a jargon to many, is actually a very basic fundamental for any (digital) business.

In the digital world, it can be defined as any meaningful action a visitor takes on a website, mobile app, email or Facebook page. It could be filling a form, buying a shirt on a mobile app, subscribing to a newsletter, liking a Facebook post – all those are conversions!

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The conversion rate is an extension to conversion which brings objectivity into play. In other words, a ratio of visitors that buy on your website to those that don’t buy defines the conversion rate in the e-commerce terms. For instance, if you get one conversion for every 20 users visiting your website – the conversion rate of your website is 5%.

Conversion Rate Optimisation (CRO)

In the digital world, CRO is a continuous process to improve a number of users taking the desired action.

Let’s look at this example. Dave has an online toy store called Davetoystore.ie. 

 


Dave has set up this store 6 months ago and is now getting a traffic of 30,000 visitors per month (from direct, organic, and paid advertising). He has a conversion rate of 1.3% and thus, by doing basics maths, he gets 390 orders a month (i.e. 30,000 X 1.3%). With an average order value of €100, his total revenue is €39,000 (€390 x 100) monthly.

Conversion Rate Funnel

He wants to grow his business and thus, improve his revenue numbers next month. These are some of his options:

  1. Run a marketing campaign & offer discounts to customers,
  2. Increase traffic by running more advertising,
  3. Improve the conversion rate.

Options 1 and 2 look like a quick answer to Dave’s needs. However, when we have a closer look at it, it becomes obvious that he can run into a couple of problems.
Firstly, even though those actions might improve his revenue, he’ll face additional recurring costs – discount and advertising. That, of course, has an impact on the profit.
Secondly, those are short term solutions. Once Dave stops running campaigns or paid ads, the revenue will drop back to its original value.
Improving the conversion rate, on the other hand, introduces no extra recurring cost and is a sustainable long term solution.

Dave chooses to optimise the conversion rate. He decides to use 3 main tools to make the improvements:

Google Analytics

Google analytics is a great tool for conversion rate optimisation

Google Analytics or GA is Digital Analysis 101. This is the most used tool for any kind of analysis of your digital property. GA basically helps with all kinds of data related to your website. Basics such as a number of users coming to the website, where they come from (geographically), how they come (source), the device they use, what path they follow once they land on your website, what pages they view and a lot more. Following this data, Dave extracts a lot of information about his customers. That can be later applied directly to improve the conversion rate or used for A/B testing (explained in point 2).

A/B Testing

A/B testing is a great method too improve your e-commerce conversions

There are numerous tools such as Optimizely, VWO that can help Dave to test different versions of his website. By doing an A/B testing, he can create variations of pages with different text, taglines, button colors, sizes, titles to start with. Users visiting those pages will behave differently depending on the variation of the page they see. These tools can measure the outcome of that behavior and help Dave to choose the best version of each page. Once the test is over Dave will apply those improvements on the actual website for all the visitors.

Heat maps

Heat maps are very helpful in optimising conversion rate

A heat map is a tool that helps to visualise which parts of the website are most interesting to visitors. It gives a complete picture of what exactly users are doing once they land on your web page, which elements are being clicked and how far into the website do they scroll.
Let’s take an example, this is the home page of one of our clients. Looking at the above heat map, it is very clear that visitors click on some of the sections while there are a few that have almost no traction. Additionally, tools such as Crazy egg also can fragment the heat map in terms of traffic source, user location, device type, browser version etc.

Conclusion

For Dave, this data is very valuable simply because he can understand what part of the property has no interest from his customers and what other ways can be employed to use that space.

Google analytics, split tests, and heat-maps teach Dave a lot about his customers. He applied some of the improvements and managed to raise his conversion rate by 40% taking it to 1.82%. 

Simply by improving this number, his revenue for the next month looks like this:
Conversion rate: 1.82%

Traffic: 30,000
 visitors
Total Orders: 546 (30,000 X 1.82%)

Average Basket value: €100

Total revenue: €54,600 (€100 X 546)

Thus, by applying CRO techniques & improving his conversion rate, Dave was able to rake in extra €15,600. And on top of it, he bore no recurring cost.
That’s the essence of Conversion Rate Optimization. Start employing these techniques in your businesses and look forward to a sustainable growth.