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Friday, Feb. 25, 2011 at 10:43 am

Calculate Micro-Conversions; Tie Them to Dollars

By Whitney Wilding
February 25th, 2011

I am sure you have heard the philosophical riddle, “If a tree falls in the forest and no one is around to hear it, does it make a sound?” Likewise, we can say, if an optimization effort improves the performance of your site, and you don’t tie the improvement to dollars, has your site really improved? We can’t emphasize the importance of tying wins to dollars enough. Calculating a dollar value for an improvement is the final step in every one of our OnTarget subscription tests.

It is a relatively simple task to calculate the value of a macro conversion win on your site that results from making a change such as modifying a button on the final page of checkout, thereby increasing your conversion rate to sale by 10%. In order to calculate the monthly value of the change, you…

1) calculate the new number of sales or leads generated post-change: multiply the number of people that enter the funnel by the new conversion rate.

2) calculate the old number of sales or leads generated before the change: multiply the number of people that enter the funnel by the old conversion rate.

3) subtract the old number of sales or leads (see step 2), from the new number of sales or leads (see step 1) to get the increase in number of sales or leads.

4) multiply the increased number of sales or leads (see step 3) by the avg. sale or lead value.

Great. Wouldn’t we all love to be able to have such cut and dry numbers to show to management to justify our time spent on optimization efforts?

However, not all changes we make online are this late in the funnel and so easily tied to the final conversion rate. Consequently, tying these types of changes to revenue can seem a bit more challenging. Still, that doesn’t mean they don’t offer value. Quite the contrary, improvements made to earlier steps in the buying process can have a significant impact on the bottom line, and shouldn’t be overlooked. The trick is pinning down that magic number for increased revenue generated by what we call a micro conversion.

To better illustrate how to do this, let’s take an example from a micro conversion win we achieved with one of our conversion rate optimization clients. We recommended that the client feature logos from companies they have worked with in the past on their “About Us” page. By conducting a month over month comparison, we determined that this change increased the number of prospects that navigate to a page about training options by 203%! The “Training” page is the first page in the sales funnel, and we already know the conversion rate for the sales funnel.

The challenge here is that the change we recommended doesn’t drive prospects directly into the funnel, so it’s not as simple as calculating the difference between a beginning and a final conversion rate. For this calculation it was necessary to break it down into parts. A great way to think about calculating micro conversions is to tell a story, a process which may feel eerily similar to those Quantitative Reasoning math classes from the college days.

1) Calculate a “Before” and “After” for Your Micro Conversion
First, we determined how many more prospects we drove to the “Training” page. We already knew the average number of visitors that typically land on the Training page: 651. And since we knew we increased the micro conversion from the “About Us” page to the “Training” page by 203%, we simply multiplied 651 by 203% to get 1322 prospects entering the funnel each month. This gives us a before and after scenario that we can work from to determine how many more final conversions result from increasing the number of prospects to the “Training” page.

2) Determine the Estimated Increase in Bottom Line Sales/Leads
From these numbers we now want to determine how many more conversions we have achieved each month. So, we took our before and after figures from our original avg. monthly visits to the “Training” page (651) and our new number of monthly visits to the “Training” page (1322) and multiplied each by the purchase conversion rate, 2%. We can then find the difference between the before and after, to find out how many more conversions we have achieved each month, in this case 13 more conversions.

3) Turn the numbers into dollars
Now, the exciting and fun part of our hard work: we are finally ready to relate this figure to dollars! Take your estimated increase in conversions and multiply this by your average order value. This will give you the estimated monthly increase you have received from making just one change to your site.

If you still are struggling to tie your wins to dollars, and demonstrate ROI to your company’s executives, we can help.  Find out how we will help you impress your boss now.

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Comments (7)

  1. The other thing that makes it harder to measure the incremental performance is the external factors that we cannot control such as seasonal effects, SERP changes and so on. We also need a good way to isolate external effects vs the change we made and make sure they do not throw a curve ball to our analysis.

  2. Good point on the money aspect. Who cares how well you rank if you aren’t getting the sales you need. You need a high rank and high sales or else its all worthless.

  3. So are you saying that we need to assign imaginarily a dollar amount to each improvement we make?

  4. I have wondered this very same thing on optimization. Let say you get first place on Google on your keywords. That’s great but if it doesn’t translate into sales what was all the hard work for? Good information! Thanks!

  5. @Divya – A good point. Sometimes year-over-year comparisons of data can help to address that concern.

  6. @Roshan – no. We want you to assign a real dollar value to each improvement. To do this, you need to know the average dollar value for each lead or sale you get, as well as how many additional leads or sales your change generates.

  7. This has helped me focus greatly on why I am constantly making improvements to my website. I have been going up in rankings but not sales so I need to assess what I’ve been doing.

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