Most organizations I have worked with have some kind of marketing performance dashboard that they look at daily or weekly. Sometimes this is built in Google Sheets or – preferably – in a sophisticated tool such as Looker.
And in most of the cases, what sits on top of these dashboards are KPIs and absolute metrics such as spending, the number of visits/leads/sales, and subsequently, unit acquisition cost metrics like CPV/L/A.
However, what most of these dashboards don’t show are conversion rates broken down by each individual funnel step. Yet, in my opinion, exactly these conversion rates are the most crucial metric. Not only do they help to understand at a glance how much you “don’t sell,” but they are a vital tool to show improvement (or the opposite) over a time period.
Let’s first look at an upper-funnel conversion rate to illustrate this.
Most performance marketing publishers, regardless of whether they let you bid for conversions or leads, essentially operate on a cost-per-click basis. Let’s look at the Conversion Rate 1, also referred to as CR1 or e-commerce rate. It calculates the conversion from site visit to the first meaningful interaction such as a lead or making an order.
With a reasonably broad targeting and a mass marketing product, your CR1 would normally be in the area of 1% to 4% (see here for more benchmarking information). There can be valid exceptions, but if it is lower, you really need to question your product-market fit and/or funnel – and if it is higher, you should see if you can broaden your targeting or diversify channels.
Why is CR1 so important? The answer is simple.
Because any efforts that you can make to increase your CR1 will have an incredible effect on your overall performance. According to an Adobe study, the global e-commerce rate benchmark is 2.58%, which means out of 100 visitors to your website, 2.58 take a meaningful action.
That’s not a lot. Imagine a shop that has 100 visitors a day and less than 3 make a purchase.
Now imagine that you put as much effort as you put into your offsite activities (ad assets, campaign management) into a hypothesis-based test and measure framework and as a result you manage to create one more purchase for each 100 visitors. You will gain 1 percentage point of CR1.
This does not sound like much, but what it means in reality is that you increased your performance by more than 38%. Remember, you already paid the publisher for all of those 100 visitors. This means you achieve a 38% performance increase at no extra cost. Not only will your ability to generate revenue go through the roof, but your unit acquisition cost will reduce dramatically.
Of course, there are already many businesses out there who built conversion machine websites (e.g. booking.com, HelloFresh, Amazon, to name a few), but in my experience, most marketing organizations still spend more time on what happens off-site than what happens on-site. Yet, the resource invested in improving conversion rates can have much higher multiples.
Where do you invest your resources?
Are you spending as much time as you should on your lead-generation funnel and form? Are you constantly thinking about the information structure of your website and landing pages? Are you permanently coming up with hypotheses about what could be done to make more of your visitors act? If not, you should.
Again, imagine you own a shop on the high street and out of 100 visitors a day, less than 3 would make a purchase. All the others just come in, browse, and leave. You could either question the quality and intent of your visitors (another story for another article) or you could take action and work every single day and test new approaches.
This is the retail mindset that we marketers need to live up to.
We are great at celebrating each sale. But, we need to look equally as closely at those people who came to us and haven’t bought, as we need to look at those who bought.
As a matter of fact, we should take every single potential customer lost on the way personally. And we should ask ourselves what we could have done better.
That’s why the conversion rate should be your most important metric.
The above illustrates the importance of the CR1, but it doesn’t stop there. If you know lead-gen businesses, then you know that in many cases, the hot leads (i.e. those that are ready to convert) get handed over to the sales department to be converted into orders.
But what happens to the ones that are not that hot? I have seen too many businesses where these just get ‘parked’ or worse, forgotten/ignored.
Also here, you should take every non-converted lead as a personal insult because a) you have paid for them already, and b) they must have been somewhat interested; otherwise, they wouldn’t have been on your site and provided their lead information.
So, find out why they didn’t buy and develop programs or tactics to get them to buy. Maybe they need to find out more about the product? So give them more information. Maybe timing wasn’t just right? So, keep them engaged until the timing is right, and they will come to you first. Or maybe it was just too expensive? Then think about a one-off discount (after all you have no more acquisition cost).
The essence is always the same, no matter which conversion rate we will look at:
Rather than investing more money into getting more visitors, the secret to success lies in making more from the visitors you have. This should have always been the case, but in the currently much more challenging startup climate, it is more important than ever.
So:
Think like a retailer. Be creative. And take every lost potential customer 100% personally. Make the conversion rate your hero metric.