A million people may visit your site, but how many of them become customers? Conversions matter: that’s where Conversion Rate Optimization (CRO) plays a crucial role.
The phrase CRO speaks for itself. Conceptually, it is the methodology of combining user experience design with persuasive marketing tactics like storytelling to create a customer experience that promotes action.
Mathematically, it can be boiled down to a single formula:
Conversion rate (%) = Total no. of conversions/total no. of visitors X 100
But why does it play such a significant role in performance marketing? Because it helps organizations improve their conversions without increasing their spend or ramping up other marketing efforts. How?
Let’s say you got 10,000 visitors in a month and generated 50 leads. By the formula, your conversion rate is 0.5%. Like most good marketers, you know there is always room for improvement. So, you act on that by applying the principles of CRO. A month later, you check your analytics and find that while you still got 10,000 visitors, you’ve generated 100 leads. That puts your conversion rate at 1%. Essentially, without increasing your efforts or spend, you’ve maximized ROl. That is the first and most important reason any organization would benefit from CRO. However, it isn’t the only one.
Other reasons to apply CRO
Lower customer acquisition cost (CAC)
Customer Acquisition Cost (CAC) is the marketing dollars you spend to convert a single customer. You calculate it by dividing your total marketing spend by the total number of customers generated in the same time period.
CAC = Total marketing spend/total number of new customers
How does CRO impact CAC? Let’s look at this scenario. Your team spent $10,000 this month and has a 1% conversion rate, generating 50 leads. And your sales team closed 20 of the leads you delivered. That means your CAC is $500.
Now suppose that you double your conversion rate, and your sales team has maintained its closing rate. That means you generate 100 leads, and your sales team closes 40 of them. That means your CAC has been reduced to $250. You also maximize your Return-On-Ad-Spend (ROAS) by improving the conversion on landing pages connected to ad campaigns. Short story: you’ve grown your organization’s influence without spending more.
Improve customer experience
With CRO leaning heavily on user experience design principles, it emphasizes meeting and exceeding customer expectations and behaviour patterns. The improvement, in turn, increases engagement and builds trust.
The importance of CRO is evident, but to reap the benefits of it, you must know which conversions impact customer acquisition.
Defining the most valuable conversion event
Growing revenue that’s what everything boils down to for all organizations. But how does your organization generate revenue? That’s where the path begins to diverge.
For instance, SaaS companies grow revenue by growing their user base. In the e-commerce world, it comes down to the number of people who checkout and the value of the sale. Insurance companies instead aim to get more people to submit an application. Law firms, on the other hand, need to fill their appointment books. By isolating the action that impacts the bottom line, you can identify the conversion event that is most valuable to your business.
Now that you know this, what’s next? The next section of this article breaks down how to increase the number of site visitors who complete your conversion event in six steps.
How to operationalize CRO for performance marketing
Step 1: Build a conversion map
You know which conversion action brings in the revenue, but what other actions do your visitors take before that? These are the actions that help them evaluate your fit and build trust. The first step is identifying these actions and building a conversion map leading to the main event. Keep in mind; this map should have no less than four and no more than six events.
Step 2: Find the key drop-off moments
With the conversion map ready, it’s time to understand better how your customers flow through it. This step is tailored to uncover areas that aren’t meeting your audience’s expectations, and you need data to do that. Start with how many of your site visitors take the first action on your map. Then, build a flow of how many proceed to the following action until you arrive at the final event. This method of analysis will highlight key moments of drop-off.
Step 3: Uncover the behaviour behind the drop-off
Now that you know when visitors drop off, you need to find out why. Use heatmaps and session replays to watch how visitors behave at each conversion event. Their actions speak louder than any other form of feedback you might receive.
Step 4: Identify alternate conversion paths.
Now that you know the when and why, what alternatives can you provide them to keep their attention and move them toward the final step?
Step 5: Segment and deepen your audience profile
It all boils down to who is most likely to convert and what commonalities exist between them. The more you know, the better you can tailor your offerings and communication strategy.
Step 6: Test, analyze, iterate and repeat.
For each opportunity identified, formulate a hypothesis. It can be as simple as my CTA needs to stand out more. Or it can be a bit more involved, like, our offerings or features to benefit matrix needs to be formulated better. You create an alternate version, test it, analyze the results, and implement the successful version. And, then, you repeat.
CRO is a journey, not a destination.
The main objective of CRO is to improve over time, continuously evolving with time and technology. In the present day, CRO depends on first-party data analysis to get better results. With AI shaping up as it is, in the future, CRO will extend beyond to leverage much larger data sets on behaviour patterns to improve conversion rates and the results you generate from performance marketing. These capabilities will also enable advanced personalization options as the ability to segment and individualize communication at scale grows.
Any way you look at it, CRO will continue to play a crucial role in enhancing marketing performance. The sooner you embrace it, the better prepared your organization will be for the future.