Why Should You Invest In Conversion Rate Optimization?
When you think about Conversion Rate Optimization you probably think in terms of increases in your sales or the number of leads you get. That’s perfectly right, and it’s pretty simple math: if you have 10,000 visitors and a 1% conversion rate, you get 100 conversions. If every conversion is worth $1,000, you will generate $100,000. If you increase the conversion rate by 50% and get a 1.5% conversion rate – you get 150 conversions / clients / leads. With 50 conversions more you earn an additional $50,000.
So you get 50% more conversions, and at the same time – a 50% increase in revenue from your website. Darn simple.
But in fact there is much more to it than that. I’ll show why the conversion rate is much more important and why it has the power to transform your online business.
Why conversion rate optimization is the best choice to increase your profits
To give you a better picture, let’s assume that you have a clear conversion goal. You would like to gain more profit from your website (of course, you would).
Every website generates revenue in the same way: the user count multiplied by the conversion rate and the customer lifetime value.
So if you want to achieve your goal and boost your revenue you can focus on one of these metrics:
• Get more users
• Get a conversion rate lift
• Increase the Customer Lifetime Value
You can improve every one of these 3 elements to get more revenue. Most people choose a strategy of getting more users (invest in traffic acquisition). In fact, this is not always the best way: usually websites are like leaky buckets. You can pour twice as much water into it but it will still be leaking.
If you are not made of money (you have a limited budget for your website), it’s better to focus strongly on conversion rate optimization. Now I will show you why.
Conversion rate optimization gives you ongoing results
Let’s go back to our example: we have got 10,000 visitors a month, a 1% conversion rate, and every conversion is worth $1,000. You generate $100,000 every month.
Now you want to grow by $50,000. So, you need 50 more conversions to achieve your goal.
If you pay $2,000 for 5,000 visitors more, to get 50 conversions more every month, you will have to spend 12 x $2,000, so $24,000 annually. You have to spend money on traffic every single month to get traffic. And what if you run out of money? You will be back to 100 conversions a month, so you won’t achieve your goal.
But if you invest “3 months” worth of money ($6,000) into conversion rate optimization and increase your conversion rate from 1% to 1.5% just once, the results will be ongoing. The conversion rate won’t change for the next 12 and you will receive “earned” profit every single month (50 conversions more every month). So, once invested, you get your revenue rise up to $50,000 a month consistently.
That means you have saved ¾ of your money for the same results! And that is money you can spend on other things, like promotion and boosting your company profits.
Conversion rate optimization pumps up your profit margins
When increasing the conversion rate you bear almost no additional monthly costs (apart from a one-time investment in lifting the conversion rate).
When you grow your revenues with conversion rate optimization, many of the costs will stay the same, such as sales and other general costs like electricity or telephones. The only costs that are going to go up are the costs of goods sold, as you won’t spend even one additional dime on advertising.
Thanks to this, more of your additional revenue can go straight to profit, lifting your profit margins.
Gain a competitive advantage
Of course, you could always keep on increasing traffic at all costs in a race with your competitors. But that will definitely end up costing you an arm and a leg.
Optimizing your conversion rates, however, can gain you a competitive advantage because you don’t need that much traffic to beat your competitors. If you have substantial conversion rates, your competition may get twice as many users, but you will still get more sales or leads.
Another competitive advantage is the “process of constant growth” you can make by combining conversion rate optimization with traffic acquisition.
1. Higher conversion rates give you higher profit margins
2. Which means you can spend more on getting individual users (for example on promotions such as SEO or PPC campaigns)
3. Which means you can beat your competitors by spending more on traffic
Then you can increase your conversion rates, and the whole process repeats itself.
Companies that are aware of the opportunities offered by conversion rate optimization beat all of their competitors on selected keywords (SEO and PPC).
But there is more. Is your marketing partly based on affiliation? If so, then conversion rate optimization is a great opportunity to get your partners to be more willing to put your link on their website.
If you pay your partners per conversion they will definitely get a better deal with you, than with someone who has a lower conversion rate. It’s simple: they can count on bigger profits with the same number of users they send to your website.
No redesign threat
Last but not least: if you are considering a redesign, conversion rate optimization can come to the rescue.
“Oh, we completely redesigned our website, and we’re so happy: the project was such an easy ride, we finished before the deadline, we were under budget, and from the first day we had conversion rate lifts”. Let’s guess. Is that how a redesign really goes?
No, of course not. It’s a fairytale.
Because if you’ve ever been through a website redesign, you know it almost always turns into a nightmare. Redesigns are usually over-budget, late, and end up costing you even more because they invariably lead to big conversion rate drops. But this will not happen, as long as you choose conversion rate optimization over redesign.
Conversion rate optimization is a process that involves implementing small changes to your site, which will systematically increase your conversion rates. It’s not about taking a gamble, for example, on whether a red button is better than one that is green. It’s based on statistics: because thanks to A/B testing you know whether your users will convert more after a change, or not. It’s pure science.
If you do A/B tests step by step you could notice that 3 changes gave you a lift in conversion rates and the next 4 – a drop. But if you just do a classic redesign you won’t spot these details, because what you get is only the final result: a drop. You could lose the opportunity to make 3 great changes. Source: http://www.widerfunnel.com/conversion-rate-optimization/evolutionary-site-redesign
So you don’t need to worry about losing money on a potentially hapless redesign – you can change your website as much as you want, but in ways which will produce more and more profit.
Ready to profit by boosting your conversion rate?
There you have it. Conversion Rate Optimization will not only grow your revenues, but will impact your online business in more dramatic ways. Firstly, you will get constant revenue growth but even more than that: a much bigger part of the money you make will become genuine profit. You will beat your competitors by spending more dollars on individual users. And last but not least – you don’t have to risk bad redesigns, which can result in conversion drops.
There is simply no other way to improve your website and get more sales, transactions or leads without spending a dime on traffic acquisition. It’s not like you shouldn’t invest in increasing traffic on your website or lift customer lifetime value. But the conversion rate is crucial for your website’s effectiveness. That’s why there is no time to waste: start optimizing immediately, and get more profit!
If you want to gain a competitive advantage by increasing your conversion rates and grow your revenues and profits without spending an additional dime on advertising, contact Mavenec today to learn more about our approach to conversion rate optimization.
Psst… if you need any help, check our Free Ultimate Conversion Rate Optimization Toolkit. We’ll show you step by step how to improve your website using best practices and tools. We have been working on conversion rates for our biggest clients for over 5 years and we love to share our knowledge. So why not make good use of it? And take the first steps to making your website insanely effective :). Check it out!
Author: Elżbieta Brzóz
At Mavenec I am responsible for PR and Marketing. I am in charge of our content strategy, blog, social media channels, external partnerships and events. Being so close to digital analytics and conversion rate optimization enables me to make data-driven decisions and single out the most effective marketing efforts.
Follow me on Twitter @elabrz