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Part II in this series covered the importance of the roles of testing and modification in the development of successful conversion optimization. Now we will attempt to make sense of what we convert.

Step 7: Measure

SEO Moves - Max Return on InvestmentI remember a very energetic web guy back in the dot.com glory days who pitched us on his money-making system with the declaration, “He who has the most data wins!”

I must admit, I thought that was pretty cool and used it myself a time or two to impress people. But experience has shown me that quality data is really the key, because today we can measure things to the point of becoming overwhelmed.

Metrics are everywhere. Just watch a sports show on TV and you’ll see how every aspect of player performance has some sort of statistic. And if you have ever witnessed a presentation of data in a meeting you have probably also witnessed eyes glazing over and slow little pools of dribble accumulating out of the mouths of those present. Try and avoid that.

Quality data starts with the basics first:

  • Who – as much as we can easily collect by name and contact info
  • What – was it a red squeegee or an SEO scorecard request?
  • When – because at some point, we’ll need to know if the weekends are an active time period for us or not.
  • Where – Why in the heck are we getting so many sales out of Kentucky?
  • How Much – our average sales are below $2.00 – the merchant fees alone are killing us!
  • How Many – we took in 10 case forms yesterday, more than we did during all of last week. Why?

Once you have these core metrics you can compare them based on historical data over time and then you’ve got half the battle won already. But there is more to know. And the more you immerse yourself in simple data, the easier it becomes to start to peel out more granular information that turns into actionable data, such as:

  • The day of the week to send emails based upon highest open rates
  • Testing a new form with modified fields, resulting in a 40% increase in forms received, when previously two out of every three forms were abandoned
  • Determining sticky (or confusing) landing pages to increase average minutes per visit

And there are many, many tools of the trade to help you measure such data. Google Analytics is the free giant, but Webtrends, Unbounce and Hubspot also offer tracking metrics and lead measurement within their own subscription platforms.

Step 8:Wash, Rinse, Repeat.

Sorry. Go back to Step 5, modify, and try it again.

Step 9: Understanding Results, or What the Heck is my ROI?

The ongoing name of the game is to increase that conversion rate, whatever you, your business, your agency or your internet marketer have agreed upon is an actual conversion is (see Step 1).

But the holy grail of conversion rate optimization is the Return On Investment.

Because the more you improve that conversion rate, the more you improve your chances to make more money. And the best part about the internet is that it’s so highly measurable. Of course, the worst part about the internet is it’s so highly measurable. So let’s turn this into an SAT-worthy word problem with a common illustration of the ROI formula:

  • It takes 50,000 impressions a month to get us 500 clicks which get us 25 appointment requests of which we close 5 deals.  The average value of those deals is $1,500. Thus we take in $7,500 (5 x $1,500 = $7,500).
  • Not so fast. We spent $5,000 a month to buy those impressions (or those “clicks” if you prefer, or those email addresses, etc.).
  • Thus you get 25 leads for $5,000. Using some applied physics with calculus we come up with $5,000 divided by 25 = $200. That is your Cost Per Lead.
  • You closed five deals. So your Closing Ratio of 5 out of 25 is 20%

So what we are left with is $7,500 – $5,000 = $2,500 And that’s your ROI.

Right? Yes. In a perfect world. Except that $5K you spent isn’t the only cost you’ll have in it. Please also consider manpower, resources, time and effort, and expertise.

How do these things, often intangible, get calculated in? And remember, not every calculation on cost is as clean. To make it even more challenging, conversion rates get muddled and even outright miscalculated if your funnel is set up incorrectly or your goals aren’t measured properly.

Worst of all, it’s impossible to do a break-even analysis beforehand because you may not know what your actual leads or clicks or impressions are going to cost before you start running.

What we’re talking about here is the total Cost Per Acquisition which is always, ALWAYS greater than your Cost Per Lead.

Still you have to start somewhere. My recommendation is to begin with three manageable and reasonable questions:

  • What is a lead worth to you?
    This can be the most difficult question of the whole process since the natural inclination is to say, “Well it depends upon what they buy!” But you must make a guess as to what an average sale is for you, or set a realistic target sale price.
  • What are you willing to spend for a lead?
    And we get back to the reflexive answer, “Well, how much will it cost?” But you have to start with what your comfort level is and some kind of framework for reality. If you sell a .99 item, you should not spend $3 for a lead. Even if you believe that over the lifetime of that customer he or she could potentially spend $10. It’s never a sure thing.
  • What do you need to add onto the lead cost to get a sense of what your Cost Per Acquisition is?

Again, try to be realistic. There are always outside costs. And even if you are doing the work in-house, someone still has to spend man hours on it.

Okay, so putting it all together, what does it all mean?

Here’s a guideline, but keep in mind, it’s just a general rule (because as we learned from the wise and great Obi Wan Kenobi, only a Sith speaks in absolutes):

Once you have your Cost Per Acquisition down, it should not be more than 20% of your final sale. Why? Because you could eat up your profit margins quickly and you will always have some sort level of waste in the constant battle for conversion optimization.

Guest Post Author: http://www.discovertec.com


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