Author Archive
Using Funnel Reports to Boost Conversion
Funnel Reports are a good way to gain traction while competitors spin their wheels in muddy data.
Most web analytics programs give you the option to run a funnel report; a powerful tool, particularly for e-commerce sites, that shows where people are exiting the site’s sales process.
By analyzing the exit rate data in a funnel report, you can focus on optimizing the pages that need it most. First, look for areas with high exit rates. Then, once you have test pages selected, target specific elements to find improvements.
Ideally, your tests will boost conversion. But what if they fail?
If at first you don’t succeed, test, test again…
Here’s an analogy: If a visitor moves through your house (page-to-page) and reaches a locked door (a conversion barrier) for which they don’t have a key, they have no choice but to exit. You can test making changes to the door, but if you haven’t given them the key, your exit rate will remain high.
What’s the key? Confidence. If you haven’t given the visitor the information they need, you haven’t given them the confidence to move forward with the transaction. When the exit rate is high for a given page or step, chances are that you haven’t told the visitor something they were hoping to find out earlier in the buying process. So, it looks like they’re taking a step forward only to take a step back, when really they just didn’t have enough information to feel comfortable moving forward.
Elastic Path Software shows some examples of how funnel reports can be used effectively. Here are two more:
- The funnel report shows that the payment page, which follows a “Shipping Information” step in the checkout process, has a high exit rate. We test showing the visitor when they’ll receive the product before they hit the payment page. This lowers the exit rate for the payment page and boosts conversion.
- A funnel report shows that the shopping cart page has a high exit rate. We look at the previous step and find the product page isn’t telling customers whether their item is out of stock. Since visitors have to “add to cart” to get this information, we now have reason to believe that showing items as “in stock” or “out of stock” on the product page will lower exit rate, so we test it.
Since each site has its own unique characteristics, it’s best to think of our web analytics reports in terms of how they can help us empathize with visitors. What’s holding them back from converting? A funnel report can help you create a hypothesis and test to see what your visitors prefer. That’s how to optimize.Remember, it’s important to look beyond the page with the high exit rate. See what’s happening in previous steps. And if you’re still stumped, get an outside-the-funnel perspective.
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Written by:Ronald Patiro
Website Optimization Starts With a Hypothesis
NINE OUT OF TEN PEOPLE WOULD RATHER NOT READ THIS SENTENCE IN ALL CAPS.
That may or may not be true. At the moment, this statement is merely a guess, an assumption — but it’s testable. It’s a hypothesis.
People love to insist that your website is made of magical ones and zeros. “It’s HTML,” they’ll say. “It lives on triple-redundant co-located servers,” they’ll argue. Yet the truth is much simpler, and scarier, than that.
Your website is a tower of assumptions. Everyone’s is. Perhaps yours was built according to a specific blueprint. Maybe it was built from a template. Either way, if it’s not properly maintained, the structure will collapse. But before you demolish the current structure and start over from the ground up, you should test the existing site.
If you want to improve your website, testing provides the scaffolding to fix it. And just as you wouldn’t hire a renovation crew that uses scaffolding made of toothpicks, your optimization tests require strong hypotheses. Of course, you can always test a bunch of random variables and see which configuration works best with your visitors, but that generally takes too long, adds noise to the data, and makes it difficult to gain any real insight.
The better thing to do is to start with a hypothesis.
Dropping Science
In my last post, I showed how testing allows you to optimize by letting visitors design your site for you. By giving them new versions of navigation and content elements and closely monitoring to see which ones work best, your visitors can vote with their clicks, and you can more easily adjust your site to fit their needs.
Be careful, though. If you don’t have a solid hypothesis, improvements can take longer — and be more incremental — than they should be. Recycling random variations of a page just to see what works often yields a much smaller return on investment than hiring a website optimization firm.
It’s the most common problem we see among companies that don’t outsource their testing: They don’t really know what to test.
Regardless of who tests your website, the scientific method [define] must drive the process. Your venture into testing must begin with curiosity. Curiosity is fundamental to humanity, and the basis for our achievements. To have success online, you must be curious as to why things happen and what is influencing them.
• Observation: “Why do so few people add an item to their cart from the product page?”
• Observation: “Why do my blog posts with short titles seem to get more comments?”
Curiosity is the initial spark to start a learning experience, but ideas and explanations must be conjured to satisfy that curiosity. This is where the hypothesis comes from.
Don’t Believe the Hypothesis
Again, a hypothesis is just an assumption. The ideas and explanations you base this assumption on can come from real world examples or basic intuition. To write a hypothesis, simply take the action you’re considering and state the result — a benefit, we hope — that you expect it to have.
• Hypothesis: “Making the ‘add to cart’ button larger will increase our conversion rate.”
• Hypothesis: “Using blog post titles with six words or less will increase the amount of comments.”
The one and only purpose of running a website optimization test is to prove (or disprove) your hypothesis by exposing it to real world conditions. As such, you’ll need to create variations of the elements you wish to test in a way that properly reflects your hypothesis, so you can test them against the original version to see which one works best.
Let’s start with “Making the add to cart buttons larger will increase our conversion rate.” To test this hypothesis, you’ll need to create a version of the page with a larger add to cart button. To be sure, you may also want to test more than one size. If a large button isn’t ideal, maybe a medium-sized one is.
Wash, Rinse, Repeat… TEST
Lets say the test proves our hypothesis to be valid and you decide to make the “add to cart” button larger. Wonderful, but you might want to hold off on the champagne.
Now it’s time to create another hypothesis about the best color for the “add to cart” button. For instance, “A green ‘add to cart’ button will yield a higher conversion rate than similar red or blue buttons.”
The point is to learn something — anything — about what is and isn’t working on your site. Approach testing in a systematic way and record what you learn to guide you through future tests. You may also want to revisit certain tests to see if they still hold true, especially if you’ve changed other elements on the page.
It’s very important not to get discouraged. Even if your hypothesis is disproved, you’ve learned something valuable; that what you have is working well enough for you to focus on another area of your site that needs attention.
On the other hand, if your hypothesis is strong — and the test results prove it — you’ve begun remodeling your “tower built on assumptions” into a high-rise casino, where the odds are stacked neatly in your favor.
. . .
[Editor’s Note: Blinded by science? Need a renovation? Future Now can help you test it.]
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Written by:Ronald Patiro
Let Visitors Design Your Site for You
You’ll never build a site that’s as good as the one your visitors can build for themselves.
Even people with no sense of aesthetics are brilliant designers. It’s true.
How do you turn every visitor into a Web designer without training them, paying them, or even letting them know what you’re up to? (It’s not as bad as it sounds. Really.)
By conducting A/B and multivariate tests, you empower customers to collectively decide what works best for them. Supply them with different variations on your site and run the tests and they will tell you how they want your site to look and behave through their actions — which, as the cliché goes, speak louder than words.
Should you just test random changes in headlines, calls to action, and navigation? No way. Start fresh with a new hypothesis.
Test it.
Now that the Web is truly interactive, it’s all about the customer’s voice. That’s why it’s an absolute must to test your site; because without doing so, you’re forcing an environment upon your visitors without bothering to adjust to their needs. And that attitude is truly a thing of the past.
Are professional web designers still important? Of course! But design choices are merely assumptions, and they’re often no better than your own. A web design exists to enable and entice visitor actions — and that’s worth optimizing for.
What works best for your customers works best for you. When you test, everyone wins. Even if you get a bad result, you still win; you’ve confirmed that what you have is working better than the new assumptions you’ve made in the alternate variation. So, not only is testing far cheaper than doing an entire redesign, it’s often more effective to roll out a redesign by testing new sections and bits of content individually, rather than just dropping it on customers all at once. (Amozon just launched a redesign this way. Did you notice?)
Wrong assumptions will be made. No big deal. Get a new hypothesis. Test it.
Your visitors are trying to give you valuable information, but unless you’re testing, they have no voice.
In a recent study, 76.7% of online retailers said they don’t test. Are you?
..
[Image credit: T.H.E. Journal.]
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Written by:Ronald Patiro
Ecommerce Marketers and Designers: Read This Book
If every designer (and the marketers who hire them) read Web Design for ROI, the new book by Lance Loveday & Sandra Niehaus, the Web would be a better and more profitable place.
Sure, the book will show you design techniques that help generate positive ROI, but the best of all is that it’s easy to follow. The authors dissect a website into six common sections — homepage, detail or landing pages, category pages, product pages, forms, and checkout — found on commerce sites, and they walk the reader through various optimization tactics for each. The book is a pragmatist’s dream, full of examples and “best practices” (or is that “best principles”?) that make it easy to take leaps and bounds in understanding how to use your website to make more money by reducing friction in the customer experience.
If you manage an e-commerce site, or design them, and haven’t read this book or Call to Action by Bryan & Jeffrey Eisenberg and Lisa T. Davis, there’s probably a lot of low-hanging fruit left to grab on your site by modifying simple design changes and testing the results. These types of fixes don’t take a lot of effort but they yeild nice results in terms of boosting conversion rates and average order value.
While Web Design for ROI doesn’t venture as deep into the principles of conversion as Call to Action, its solid approach, combined with the authors’ personality, make it a worthwhile read for anyone fixing the money-leaking holes on their website. This book is about making your e-commerce site a strategic extension of the company’s business model while building it around the customer experience.
This is definitely not your typical design book, and thats why we’re giving it the thumbs-up here at Future Now.
For more info, check out WD4ROI.com before you checkout at Amazon.
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Written by:Ronald Patiro
Cause Marketing: Making Money by Giving it Away
The concept isn’t new, but it’s one of the hottest buzzwords in online retail for a reason.
“Cause marketing” is the term being used to describe all manner of cross-promotional efforts between for-profit businesses and non-governmental/non-profit organizations. Typically, it involves a portion of for-profit sales going toward a given cause. Today, more than 1 of every 4 retailers are promoting charities at some level — and the Web seems to be speeding that growth. In 2006, IEG reported that cause marketing sponsorship in the U.S. totaled $1.34 billion. (In 1990, that figure was only $120 million.) This year, cause marketing is expected to reach $1.44 billion in the U.S.
Is Cause Marketing Worth It?
- 64% say they have purchased from a brand because it supported a cause they believe in.
- A 2001 survey suggested that 81% would choose one brand over another if a cause were involved, assuming price and quality were similar.
- 96% of women say it’s important, and 87% of both men and women say its important.
- It enables highly effective market positioning and branding by connecting the company with the values of their customers. For instance, Target has been effective with its 5% donation policy.
- MissionFish, the organization that powers eBay’s Giving Works program, reports that auctions that donate to charity can sell for much higher than similar auctions that don’t donate.
- Cause marketing often builds customer and community loyalty while increasing employee pride and productivity.
- Innovations from the likes of Google Checkout and Maatiam are bridging the gap between online retailers, consumers, and non-profit in ways that help everyone account for campaign performance and tax concerns.
- Companies like Working Assets built donations as the main element of their business model.
- In addition to the feel-good benefits, cause marketing tends to generate publicity, which can lower business costs, particularly in terms of customer acquisition. (Just make sure you’re doing it for the right reasons.)
Potential Pitfalls
- As Holly explains, “Consumers are too savvy. They want to know who the charity is, what their exact involvement is, and how it fits in with your core brand.” In other words, people want to know their money isn’t going to a George Costanza-esque “Human Fund.”
- 70% of people want to see the company’s leaders participating in the cause.
- The company’s motives may be called into question, particularly if it’s experienced years of negative press (e.g., Wal-Mart).
- It must be accountable. Although there are often tax benefits for businesses engaged in cause marketing, it has to be a good deal for the non-profit as well. Not only must non-profits protect their own brands, they have tax concerns, too. As always, it’s important to look before you leap.
- ROI is a must. It could appear disingenuous when a company is spending, say, 7 figures promoting a particular cause when the campaign is only netting a 5-6 figure return. That type of situation begs the question as to whether the company really cares, or if it’s just a branding or PR stunt. Otherwise, why wouldn’t they just donate the money they’re spending directly to the cause instead of spending it on promotion? (The Microsoft Small Business Center has some great tips on how to avoid these types of missteps.)
It looks like this trend is here to stay, particularly in the U.S., where the government continues to cut social spending and the gap between rich and poor grows each day. Consumers will continue to expect a greater involvement from the private sector to put money toward public causes and will reward the businesses that do so. As long as cause marketing is conducted in a transparent manner, it can benefit to both business and non-profits.
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Written by:Ronald Patiro
The Double-Bottom Line on In-Text Ads
You may have noticed double underlined links on sites that create a pop up advertisement when moused over. These are “in-text” advertisements, and they’re increasingly appearing on content sites to generate additional revenue.
For content providers, the question remains whether additional short-term bursts of ad revenue will be justified against the potential decrease in brand affinity. Since the ads work under the guise of a regular-old hyperlink, some visitors are completely turned off after clicking on them.
From a usability standpoint, they’re a real pain. Text becomes a pop-up minefield with any slight mouse movement touching one of these ads triggering pop-up advertisements. This creates friction for the visitor, who’s simply trying to do what they came to a site for: to read the content.
The content’s credibility is also put at stake. Writers, and journalists in particular, are expected to be objective. These in-text advertisement pop-ups are further muddying the lines between editorial integrity and the sales team’s agenda, while posing as unbiased writing.
Speaking of “fair and balanced,” FoxNews.com adopted this measure and claims that they think its great. According to The Wall Street Journal, “FoxNews.com says it doesn´t consider in-text ads to be advertising, because they help provide information about the topic.”
Of course, many bloggers and other writers strive to make money for their work. When the content becomes the ad, visitors may not want to come back. Who in their right mind wants to actively read an infomercial in disguise when they can passively watch one on TV?
The bottom line is that these ads may present a good opportunity to monetize your content, but you risk losing credibility — and once that’s damaged, it’s not easily repaired.
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Written by:Ronald Patiro
Measuring Visitor Engagement: Tools + Tips
“Engagement” in the web analytics world is about as emotionally-charged a word as it might be with someone you’ve been dating for a week. At best, it’s a conversation-killer. At worst, it’s a nuclear warhead. Marketing and analytics experts have a hard enough time agreeing on what exactly engagement is, let alone finding the metric(s) to illustrate it.
But this confusion among smart people makes sense when you think about it. When was the last time you had a face-to-face conversation with someone, only to realize they weren’t listening? How can we expect to measure engagement with metrics, when we often can’t tell if the person right in front of us is truly engaged? In fact, the only people who can reliably tell when you’re tuning out are your friends, family, and significant others. There’s a reason for that. They’ve seen your behavior before, analyzed it, and suddenly, in their minds, you’re easier to predict than Paris Hilton.
Likewise, engagement means different things to different websites. Since each site has its own unique characteristics and purpose, engagement must be defined by your site’s goals — not by Amazon’s, eBay’s, or Ms. Hilton’s.
The first step is to define how an engaged visitor behaves in terms of your site’s goals.
- What is the ultimate purpose of your site?
- Content site example: Get people to read my cooking blog.
- Commerce site example: Get people to buy hats from me.
- What actions do visitors exhibit when they’re interacting with the site and moving toward its ultimate purpose?
- Content site examples: Reading articles, signing up for newsletter, subscribing to RSS.
- Commerce site examples: Viewing products, reading reviews, viewing about us page, adding items to cart.
So, what exactly does an “engaged” visitor do on your site? What are some of the clues that engaged visitors leave behind in your analytics?
- Do they stay long?
- Do they click a lot?
- Do they visit the site many times?
- Are their repeat visits days apart? Weeks apart?
- Do they penetrate deep into the site or bounce off of it?
- Do they view lots of pages?
- Do they take a given action like sign-up for a newsletter, refer a friend, or download a file?
- Do they leave comments on your blog?
- Do they link, Digg, Stumble, or otherwise find you del.icio.us?
- Do they purchase?
- Do they purchase repeatedly?
Some sites will have an even harder time than others at capturing the elusive engagement in their analytics and may instead need to combine the quantitative data with qualitative analysis, like surveys. (Here are three great survey questions.) But proceed with caution. While many sites could benefit from using surveys on their quest to find missing pieces of the engagement puzzle, it’s easy to be mislead by what customers tell you in a survey. Ever take an online survey where the questions were fundamentally flawed? Do you prefer the taste of New Coke to CocaCola Classic? (The folks who were surveyed did.)
What’s even more dangerous is that only certain personality types bother to participate in surveys in the first place. (And good luck getting a Spontaneous customer to fill out a survey unless they’re either angry or bribed.)
A common approach to getting an initial handle on engagement is to take certain metrics that relate directly to your visitor’s main goals: those that measure if visitors are taking the actions you want them to. Monitor them closely, and see how these metrics play off each other when certain changes happen — e.g., changes in season, updates to a checkout process, special promotions, inactivity on a blog, industry trends — affect the site.
When Metrics Lie
When selecting which metrics to use, keep in mind that it’s easy to be deceived by your own numbers. Proceed with caution by giving an in-depth look into the stories these metrics can tell you before placing your trust in them. In order to be sure that your metrics are an accurate reflection of engagement, you shouldn’t take one-off metrics at face value.
“Page Views” are a great example of a metric not worth trusting on its own. In this case, it may very well be that a visitor isn’t finding what they’re looking for. Perhaps they’re “pogo-sticking” from page-to-page in search of what they need. Now you’re keeping them on the site longer, thus increasing “Time Spent,” which, again, can be deceiving by itself. Although wasting the customer’s time — so long as they don’t leave the site — will increase the page views and time spent, it may not mean you’re actually engaging visitors. (Not in the way we’d hope, anyway.)
Engagement Metrics + Toolkit
With your site’s goals in mind, and a rough understanding of how an engaged visitor behaves, here’s a sample of some metrics that may be useful relative to your site’s purpose:
- Visitor Engagement Index = (Visits) / (Visitors)
- Take Rate = (# of Visits Taking Part in Desired Activity) / (Visits)
- Repeat Visitor Share = (Repeat Visitors) / (Visitors)
- Heavy User Share = (# of Visits with X or More Pages Viewed) / (Visits)
- Committed Visitor Share = (# of Visits Lasting Longer Than X Minutes) / (Visits)
- Committed Visitor Index = (# of Page Views in Visits Lasting Longer Than X Minutes) / (# of Visits Lasting Longer Than X Minutes)
- Committed Visitor Volume = (# of Page Views in Visits Lasting Longer Than X Minutes) / (Page Views)
- Bounce Rate = (# of One Page Visits) / (Visits)
- Scanning Visitor Share = (# of One Minute Visits) / (Visits)
- Scanning Visitor Index = (# of Page Views in One Minute Visits) / (# of One Minute Visits)
- Scanning Visitor Volume = (# of Page Views in One Minute Visits) / (Page Views)
- Average Order Amount = (Total Sales) / (Total Orders)
- Sales Per Visit = (Total Sales) /(Visits)
- Repeat Order Rate = (# of Orders From Existing Customers) / (Total Orders)
- Order Acquisition Ratio = (Marketing Expense/Number of Orders) / (Marketing Expense/Visits)
- Conversion Rate = (Number of Sales) / (Visitors)
- Page Views per Visitor = (# of Page Views) / (Visitors)
- Average Time on Site
(Eric Peterson even offers his own complex engagement calculation, and discusses the web analytics community’s challenges to it.)
Once a set of metrics is selected that directly relates to potential engagement on your site, constructing a weighted average of the set might help. This needn’t be some painfully complicated multivariate regression model, needing someone with rocket science experience like our buddy John to make sense of it; just some metrics that can serve as a collective vital sign to measure how well your site is engaging people while carrying out its core mission.
Jim Novo makes a potent case for using visitor recency to measure engagement and how to leverage it. If you can collect information relative to the history of each specific user, and the recency of their visits, his approach can send your ROI skyrocketing.
Novo’s approach shows how recency can explain a visitor’s potential value, given their propensity to return to your site frequently, as represented by the horizontal axis below. The vertical axis, meanwhile, shows how often the visitor has taken the action being measured.
Although fuzzy and directionally correct at best, engagement is vitally important to measure because it’s a predictive metric. If your current visitors are exhibiting behaviors indicating that they’re engaged, they’re likely to return soon — and often. If you see signs that visitors are becoming less engaged with the site, it’s safe to suspect that recent changes to your site or the flow of its traffic may be working against you. Either that or your competition’s finally outdone you. Regardless, it’s always good to know when to hang it up and try something new.
Engagement can also be a useful measure of the effectiveness of your branding. If visitors are showing signs that they’re engaged with your site, they’re generally showing affinity for your brand.
While engagement has become a heated buzzword, and arguably an excuse, it’s important not to be mislead. Since it’s a state of mind for your visitors, and therefore not easily quantifiable, there’s no simple way to measure engagement. But attempting to measure will help you to keep your site from proposing on the first date.
Do you have any unique approaches for measuring engagement? Let us know. We’d love to get a conversation going in the comments.
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Written by:Ronald Patiro
Google Website Optimizer: 7 Powerful Tests
This week, the Google Website Optimizer team hosted a two-part webinar series on how to use their powerful — and free! — testing software. In addition to the popular A/B and multivariate tests, Google walked attendees through basic testing methods, then went on to some more advanced techniques.
Here’s the “Cliffs Notes” version, in case you couldn’t make it:
A/B Test — Allows you to test different versions of the same page. Let’s say you want to test the homepage. To indicate which version of the homepage is performing better, a Goal Page is selected, e.g., an order confirmation “thank you” page. So, once a visitor comes to the test page — in this case, the homepage — they’re presented with one version (’A') that you created to test against another version (’B') of your homepage. Google Website Optimizer will then record the visit as a success or failure by crediting either version ‘A’ or version ‘B’ — whichever one ultimately led them to the Goal Page. Once sufficient data is collected, a winning page variation will be selected.
Multivariate Test — Very similar to the A/B test in that it allows you test different variations of the same page. The main difference is that in an A/B test, you’re creating and uploading different files and they’re presented as different URLs (”www.homepage.com/A; www.homepage.com/B”), so Google Website Optimizer splits the traffic to different version and tracks the performance of each. Mulitvariate tests allow you to select different sections on your page and create different versions for each section or content element. So, if you want to test different headlines while testing different “add to cart” buttons, a multivariate test can save time when coding. Google Website Optimizer will create different versions of the page, using every possible combination and variation for each page and content element you’re testing.
If we’re testing three headlines and two “add to cart” buttons, GWO will create six unique pages by combing every possible variation. The winning variation is then selected.
Split-Path Test — This test will split your traffic among different linear paths containing multiple pages for each path. This is different in that you’re testing the performance of grouped pages against other grouped pages. For example, you could test a checkout process by splitting it into two variations; one with four steps (or pages), and another with only three steps. Each variation of grouped pages will have the same Goal Page (e.g., order confirmation page). Once the data is collected, the winning checkout process will be the one that converted a higher percentage of visitors.
Multi-Path Multivariate Test — This will test different sections on multiple pages at the same time, all within one experiment. This test is best used after a winning combination from a split-path test is selected. For example, you could test images, testimonials, and contact information on the pages throughout a checkout to find out which combination of the elements across the group of pages is working the best.
“Do Anything” Test — This is a useful testing functionality that allows a test to have multiple Goal Pages, as opposed to only having one Goal Page. For example, let’s say you’re testing the headline and name of a category page. Now, to determine whether the headline is a success, simply test how many click-throughs you’re getting from the category page to any of product pages that it links out to.
Clock — This will register an experiment as a success after the visitor has spent a specific amount of time on the page. For example, let’s say you wanted to test variations on the title of a blog post. You can consider a visit from someone who stays on the page, reading the post for at least 30 seconds, a success. So, if you’re still reading this, hopefully that means we’re successful Google Website Optimizer will collect data on which headline is engaging the most readers to stay on the page for at least 30 seconds and show us a winning title.
Click — This functionality allows you to set the goal for an experiment as not just a page on a site, but a specific event, or click, on a page. An example would be to test which copy is getting the most people to click on your link to an external checkout source, like Google Checkout or PayPal. Since a click on any link brings the visitor to an outside page, you cannot send them to a Goal Page, but you can measure success by defining a specific click.
If you missed the webinar, don’t worry. There’s a wealth of information on the GWO Help, Forum, Case Study, and Demo pages. Google also said they will soon be posting abbreviated versions of the webinars. Besides, we have more free Google Website Optimizer resources to get you going. And if you decide you’d like expert guidance with your tests, we can help.
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Written by:Ronald Patiro
Unlocking Key Performance Indicators: Conversion Rate
After hitting on Take Rate, Bounce Rate, and Order Acquisition Ratio, it’s time to turn our attention to a metric near and dear to our hearts here at Future Now: Conversion Rate.
The Conversion Rate (CR) tracks how well your website is achieving its main objective. This goal will vary depending on the type of site. An e-commerce site’s main objective, of course, is to get people to buy product. Here’s how a commerce site would calculate conversion:
CR = Number of Sales / Visitors (A metric often related to CR, especially with content-driven sites, is Take Rate.)
The higher the CR, the better the ROI (Return on Investment). Improving conversion increases the amount of money you can make with the same amount of traffic. To determine exactly how conversion affects ROI, calculate your Order Acquisition Ratio.
Understanding what affects conversion requires an in-depth look at the entire online marketing strategy. To begin, break down the steps involved in the site’s sales process. For instance, a retail site would look like: Homepage -> Category Page -> Subcategory Page -> Product Page -> Cart -> Checkout.
Along with these steps, the Exit Rate for each must be calculated. Exit Rate shows how many people are not converting by leaving the site at various stages in the sales process — often thought of as a funnel, although it’s slightly more complicated in reality. Still, the funnel gives us a visual representation of where to find the biggest leaks, so we can fix them and optimize the experience to recapture money that would otherwise be left on the table (if you don’t mind me further mixing metaphors).
Each stage in the process is a micro-action that will lead the visitor closer to the macro-action of converting (e.g., purchasing). The best way to diagnose why various steps, or micro-conversions, aren’t performing as well as they should is to ask three simple questions:
1. Who is the audience at this step?
2. What action would we like them to take?
3. What information do they need to feel confident enough to be compelled to take that action?
When asking these questions, it’s important to recognize that a website is not one size fits all; it should be many sizes fit all. Multiple scenarios, or pathways through a site, need to be planned ahead of time in order to suit different personality types and how they prefer to behave online. It’s also important to take into account how close a person is to making a decision. Are they early on in their buying process and just researching, or do they know exactly what product they want? (Bryan’s recent screencast shows how to appeal to different buying modes and temperments.)
To help understand why visitors may not be taking the necessary micro-actions to move closer to converting, the Hierarchy of Optimization provides a useful guide in addressing potential problems. This hierarchy forms a pyramid and starts with basic requirements, then moving higher up toward the top, where persuading visitors to take the action is the highest aspiration.
Let’s look at them in reverse order…
- Functional. Does the site offer something that the visitor needs?
- Accessible. Is the visitor able to access whatever it is that the site offers?
- Usable. Are there unnecessary difficulties or roadblocks that cause friction for the visitor?
- Intuitive. How well is the site’s sales process structured? Is it compatible with how the visitor likes to buy?
- Persuasive. Does the visitor truly want and understand the problem by clearly knowing that it will solve their needs? Do scent trails carry through to the more funnel-like, conversion point on the site (e.g., the checkout process)?
If your CR is less than 10%, you should focus on optimization — but there’s always room for improvement. Along with taking steps to remove obstacles that impair the visitor’s buying process, causing them to waste their time thinking instead of doing, the most potent tool is empathy. Anticipating your visitors’ motivations will help you to answer their questions at each step — and that requires a good deal of planning.
Remember, a website exists to help its visitors achieve their goals. Give people visiting your site all of that, and the ROI will be well worth the effort you put into it.
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Written by:Ronald Patiro
Unlocking Key Performance Indicators: Order Acquisition Ratio
Now that we’ve taken a look at Take Rate and Bounce Rate, it’s time to look at another very important metric: Order Acquisition Ratio. Simply put, this performance indicator is used to measure the effectiveness of your marketing.You’ll need three numbers to calculate your order acquisition ratio:
1.) Visits to your site
2.) Number of orders placed
3.) Total marketing expenditures (which can include fixed costs associated with maintaining the site, but let’s focus primarily on marketing expenses)*
With these variables in mind, we will get two contributing metrics with which to calculate order acquisition ratio.
Cost per Visit (CPV) = Marketing Expense / Visits
CPV measures how much you’re paying to attract each single visit to your site.
Cost per Order (CPO) = Marketing Expense / Number of Orders.
CPO tells you how much you’re paying in terms of marketing budget to get a visitor to your site who converts and becomes a customer. This is directly related to your Conversion Rate.
Order acquisition ratio is then calculated by taking the CPO and dividing it by the CPV.
Order Acquisition Ratio = (Marketing Expense/Number of Orders) / (Marketing Expense/Visits)
It should be a positive number (if not, you’re in trouble). The lower the ratio, the better your marketing budget is being used. Some of the best ways to lower OAR include:
- Boosting conversion! Increasing conversion lowers your CPO. Since conversion is the website’s primary goal, there are literally thousands of factors that affect conversion. (Conversion is so important to online health and wellness that improving is integral to everything we do for clients.)
- Improving organic search rankings with relevant content. When you spend the time and money to create relevant content, the CPV and CPO should both drop — and you’ll further lower CPO by converting more visitors.
- Targeting quality traffic sources. In your analytics, segment your site’s incoming traffic by source in order to identify where to put those marketing dollars. (Bounce Rate is a great starting point for this.)
- Optimizing PPC campaigns. With an effective PPC campaign, you’ll be able to convert more visitors. While this will increase your CPV, but when done correctly, it will yield a larger decrease in CPO by converting a higher percentage of traffic.**
Order Acquisition Ratio is based on more traditional bored boardroom metrics because it has a close relation to traditional financial statements. It has nothing to do with “Web 2.0,” “Web 1.0,” or Facebook. So, it’s great for sharing with your boss since it’s directly tied to the bottom line. There’s even a cousin to this metric; a non-ratio, cold-hard-cash version of the Order Acquisition Ratio known as the Order Acquisition Gap. To calculate it, simply subtract the CPO from the CPV to get a negative number. This number shows how much money you waste in marketing dollars on visitors that don’t convert.
Order Acquisition Gap = CPV - CPO
There are other close relatives in this family of metrics, all of which focus on costs associated with generating new customers. To calculate these similar metrics, you’ll need to be able to track the same figures discussed above — except they need to be further segmented. Track the following numbers, and you’ll also benefit from a few additional metrics (listed in the bullet points below):
- New visitors to the site.
- Number of orders placed by new customers.
- Total new customer marketing expenditures.
With these figures you can see the effectiveness of your new customer acquisition efforts:
- Customer Acquisition Cost = (New Customer Marketing Expense) / (Total New Customer Orders)
- New Customer Cost per Visit = (New Customer Marketing Expense) / (New Customer Visits)
- Customer Acquisition Gap = (New Customer Marketing Expense/New Customer Visits) - (New Customer Marketing Expense/Total New Customer Orders)
- Customer Acquisition Ratio = (New Customer Marketing Expense/Total New Customer Orders) / (New Customer Marketing Expense/New Customer Visits)
[*Regardless of the expenses you include, it’s crucial to set a standard and stick with it in order to accurately measure and account for the specific impact of such changes.]
[**When monitering your order acquisition ration, never tolerate any increase in the cost per visitor without an accompanying decrease in cost per order.]
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Written by:Ronald Patiro
