Comparison of Methods to Increase Conversions
08/07/2011 | Written by | Categories: Analytics Tools

Hands holding red and green apples

The objective for every business is to improve performance.  For most online businesses, this involves increasing the number of conversions through their website, however conversions/outcomes are defined.  There are a number of strategies that can be used to achieve this with two key alternatives being to invest in additional marketing and to invest in resources to get more conversions from current traffic.

This tool has been developed to provide companies with a way to compare these two strategies.  It is a simplified model of reality but sufficient for this purpose.  A few key business numbers from your web analytics tool are required along with your spend on traffic acquisition in the previous month (none of which are saved or recorded).

[swfobj src=”http://www.l3analytics.com/wp-content/uploads/2011/07/Resource-Comparison.swf” width=”500″ height=”440″ align=”center” allowfullscreen=”true”]Tool to compare methods used to increase conversions[/swfobj]

Required Data

  • Visits from Natural Traffic – traffic where there is no direct connection between spend and traffic levels e.g. Direct Entry, Referring websites, Organic Search, Social Media
  • Visits from Traffic Acquisition – traffic where there are marginal costs e.g. Paid Search, Affiliates, Display
  • Conversion rate for each – however you calculate conversion rate
    • Note it must be entered as a number, not a percentage e.g. 2.55% is entered as 0.0255
  • Spend on Traffic Acquisition – only include spend that has a direct impact on traffic i.e. don’t include set monthly agency fees

The tool will display the total number of conversions achieved during that month.  Additional options need to be selected/entered to produce the comparison.

  • Enter the desired number of incremental conversions for the month
  • Select between Existing or New traffic acquisition rates
    • It is likely incremental traffic will have a higher cost per visit and lower conversion rate
  • If required, enter the new traffic acquisition rates

The table at the bottom displays the comparison between the two strategies for increasing conversions.

  • On the left is the strategy of spending more on marketing
    • It displays the required number of incremental visits and the cost of these visits
  • On the right is the strategy of investing in optimising performance to get more conversions from existing traffic
    • It displays the required uplift in the conversion rate (across all traffic) and the available budget to achieve this
    • The budget is equivalent to 12 months of spend on incremental traffic acquisition costs, not the cost of achieving that increase in conversions

Obviously this is all designed to demonstrate the value of investing in web analytics and performance optimisation.  The budget is available for additional internal headcount or consultancy services.  This is unlikely to require the full available budget, depending on your costs and targets.  As a bonus, improving the conversion rate can turn marginal traffic acquisition sources from negative ROI to position ROI.

IF you do see the sense in these numbers

AND would like to invest for the future of your business rather than just buying traffic

AND would like some expert assistance with increasing the number of conversions you get from your current traffic

THEN please do contact L3 Analytics.

Sample output from the Resource Comparison tool

Update: I had originally gone into more detail at the start of this post but realised that I was just being my typical wordy self (and pushing the tool further down the page).  The initial section was reduced from five paragraphs down to two and while I have no idea what the usual etiquette is around this sort of behaviour, I thought I should include the original five paragraphs at the bottom here.

The objective for every business is to improve performance, however that is defined.  For most online businesses, this involves increasing the number of conversions through the website, whether they are sales, leads, pages viewed or anything else.  Businesses can work to improve the number of conversions gradually over time or they can invest additional resources to achieve this sooner.

The method commonly used to increase conversions is investing in marketing to attract more traffic to the website.  A proportion of this incremental traffic will convert enabling the business to meet their targets.  It is a sound business strategy if there is a positive return on the investment in marketing.  But it relies on the availability of quality incremental traffic at increasing marginal rates.

There is an alternative, to optimise the website so that a higher proportion of the existing traffic converts.  Using approaches including web analytics, testing, usability and surveys, visitor behaviour on the website can be understood and problem areas identified.  Fixing website issues and adjusting websites elements based on customer preferences will lead to that desired increase in the number of conversions.

As with investing in marketing, there are costs involved with optimising website performance and conversion rates.  In the eyes of many, these costs appear prohibitive with incremental marketing spend the wiser and better value option.  I may be biased but I disagree.  Compared to the cost of investing in that incremental marketing spend, performance optimisation can be far cheaper with the potential of a much higher upside.

To support this, I have created this basic tool to allow companies to compare these two methods to increase conversions.   It is a simplified model of reality but sufficient for this purpose.  It requires a minimal amount of information to be entered (none of which is saved or recorded) so can be used within minutes.  You will need a couple of numbers from your web analytics tool and your spend on traffic acquisition for the previous month.

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