With the improvement of the economy over the past year, it is not necessarily a surprise that marketing spends for online paid search have increased. According to the Covario’s 2010 Global Paid Search Spend Analysis report, in America, spending on paid search increased 23% in 2010 from 2009, and is predicted to continue to rise throughout 2011. There may be many factors involved with this continual increase, but one thing to consider is the possibility of traffic cost inflation. Basically, these days it may be costing more to get good placement as more and more businesses are jumping on the CPC bandwagon and competing for placement. Individual companies may also be investing in more campaigns than before, with increased CPC budgets also hiking paid search costs.
While we understand the value of driving more qualified traffic to your site with the intent of increasing sales, we also encourage you to consider the health of your conversion rate. Your online marketing budget will likely be better spent by first focusing on improving your current conversion rate to do a better job at converting the traffic you are already getting.
The analogy of a leaky bucket to describe your conversion process, introduced in Waiting for Your Cat to Bark, has been utilized by FutureNow many times, but it’s worth mentioning again: you can keep adding more water to your conversion bucket, but we think it makes more sense first to patch up the holes. Haven’t read Waiting for Your Cat to Bark yet? You can learn more about the book and download a few chapters on our publications page. You also can think of your conversion process in terms of numbers if you like. We’ll paraphrase an example from the book to demonstrate what we mean:
Let’s say ten thousand new visitors come to your site each month. Two hundred of those new visitors complete transactions. This means you have a monthly conversion rate of 2%. You can double the number of people who come to your site each month by spending money on increasingly more expensive CPC ads. At the same 2% conversion rate you’ll have approximately four hundred sales each month. Now, suppose you begin by first focusing on increasing your conversion rate from 2% to 4%? Without spending a penny of your marketing budget on traffic, those original ten thousand customers get you the 400 sales a month, netting you more money that can be fed back into optimization and increasing traffic.
Are you interested in learning more about assessing and improving your conversion rate? Contact us today to see how we can help you with your CRO efforts.