Conversion Rate Optimization’s Measurement Issues

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Quick question, can 15% conversion rate be better then 50% conversion rate? Yes it can. Now here we go with a little bit of advanced topic for those of you who understand what we’re talking about here. I have a problem with the way our industry measures conversion rate optimization success.

Measurement in percentage form is wrong in so many ways, let me show you an example:

Website A:

  • 1000 monthly visitors
  • Conversion rate 10% = 100 conversions
  • Improved to 15% conversion rate = 150 conversions

Website B:

  • 200 monthly visitors
  • Conversion rate 10% = 20 conversions
  • Improved to 50% = 100 conversions

As you can see at website B we did a miracle and made 50% of visitors convert, but website A has much more customers with much lower conversion rate. The thing is, website A for example has much bigger online presence and gains lots of visitors from social networks and referral sites that convert much less. Website B however only receives a smaller number of visitors and these are the high converting ones – targeted search engine traffic.

Although website B has much better conversion rate, we did better job with website A. This is why measuring conversion rate optimization success in percentage is pretty unfair. Basically what this means is, it’s not bad to have low conversion rate if the cause of your low conversion rate is a little bit of less targeted traffic. There’s nothing bad in receiving lots of traffic from social networks and referral websites. It will lover your conversion rate, but, it’s the money that counts, not the percentage of visitors that turned into customers.

The real problem is, the idea of conversion rate optimization is to increase website’s profit. Relying on percentage, we can actually increase conversion rate by lowering the profit of a website. Pretty stupid, right? Here is what I’m talking about:

A site gains lots of visitors from social networks. Now, we all know these visitors don’t convert as well as search engine traffic as they’re not targeted enough, but some of them still convert, right? Right. So by eliminating the use of social networks we get higher conversion rate as we’re only left with search engine traffic that converts much better. Well that’s great, we basically eliminated part of work needed to maintain the site’s marketing effort AND increased the conversion rate significantly, wooooohooo, we’re the champs, right? No. The problem is, although the website now has significantly higher conversion rate, website’s profits went down the hill.

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About Toni Anicic

eCommerce Consultant

SEO. Professional gaming. Home-brewed beer. Magento Certified Solution Specialist.

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6 comments

  1. @Dejan Nikolic

    Thanks for contributing to the topic. I agree, one of the key metrics that should be considered is how much every conversion costs.

    But that fact also supports the idea that percentage is a bad metric for CR. You could boost CR by paying lots of targeted SEM traffic with negative ROI but positive CR.

  2. Ok this is what happens when I write on Sunday mornings.

    “So, I wouldn’t say that bigger CR on a less traffic is better than lower CR on larger CR is a rule but a result of how “cheap” you get traffic from various sources. Having said that, CR evangelists would like to add to your post that even the traffic from SNs can be optimized CR wise :)”

    I meant:
    “So, I wouldn’t say that lower CR on a bigger traffic site is better than bigger CR on smaller traffic site is a rule but a result of how “cheap” you get traffic from various sources. Having said that, CR evangelists would like to add to your post that even the traffic from SNs can be optimized CR wise :)”

    :)

  3. Toni, you’re correct up to a point. I totally agree that the profit should be the ultimate measure and if you get more money with lower CR… bring it on. But relevant factor here is how much those converting persons cost? You may get bigger REVENUE if you don’t over-optimize CR but in order to get bigger PROFIT you have to look into how much you spend on SEM and SEO on one side and how much on Social Network Marketing (S&M?) on the other. Only by combining those metrics you can get a result if the less optimized is more profitable or not.

    So, I wouldn’t say that bigger CR on a less traffic is better than lower CR on larger CR is a rule but a result of how “cheap” you get traffic from various sources. Having said that, CR evangelists would like to add to your post that even the traffic from SNs can be optimized CR wise :)

  4. Toni, You are of course correct. How about some follow-up Posts on how to get this data from Magento/Google? i.e. linking your Magento ecommerce site with Google Analytics, Adwords, Google’s new Merchant Centre, Google Checkout, etc.

    Because, of course, the holy grail is to work out what Marketing brings the site visitors that buy, and then, as long as it is cost-effective – do more of that Marketing, and keep measuring, and optimising …

    The data is all there, but the integration and setup is not that simple. I’m sure a few Posts on these topics would attract even more interest to you :-)

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