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I was going through some older articles I had written and I came across one I wrote while working for the marketing research firm, Marketing Experiments (owned by MEC Labs). Though I had written this article 8 years ago, I was surprised how much of it still applies today as it did back then.
This is a topic that I always thought of as online marketing common sense. Just like in any other marketing effort, we always (or should) want to know who our customers are, what they are buying, and how they are finding us. Much to my surprise, many online merchants do not have proper analytics in place, and those that do, often don’t understand what to make of them.
I was at a conference in Salt Lake City, Utah, speaking to about one hundred online merchants concerning ways to optimize their home pages, offer pages, and purchase paths. My presentation included Marketing Experiments’ best practices, principles of online testing and our conversion formula (C = 4M + 3V + 2(I-F) – 2A) .
When I finished my first presentation, I quickly realized that I had wrongly presumed that everyone in the room understood the importance of understanding their site’s metrics. I had been talking about A/B split testing, sequential testing, conversion, and other rudimentary online marketing topics, not realizing that more than half my audience didn’t have a solid analytics package built into their site. In fact, for most, the only numbers that they were concerned with was how much they were spending on PPC and what their revenue was each month. While these two numbers are important, alone they do not help us squeeze more profit from our websites.
I don’t want to alienate the folks from the conference because I also hear it every week when I’m talking to companies applying for research partnerships with MEC. One of the most erroneous misconceptions people make is that to increase revenue they must increase traffic, and thus increase their paid search advertising costs. This couldn’t be more off the mark. Let me use an analogy that we often use around the MEC offices to drive a point home: The water pressure in your house is low because you have several holes in your pipes. Buying more traffic to your website is like opening the faucet further to get more water output. You are wasting water and you’re wasting money. What you should do first is seal the holes in your pipes and the flow of water will increase. Water, in this case, is a metaphor for revenue. A strange coincidence that we should have a formula for this optimization sequence too: Opr > Oprn > Ocnn. This is our Optimization Methodology. All it means is this; the first thing we should optimize is the product (Opr), then the presentation (Oprn), and finally the Channel (Ocnn).
Let’s get back to why understanding metrics is important. Understanding the metrics on your site will help you understand where your “leaks” are; where are people falling out of the purchase path. Let’s take a look at an example to illustrate this point. Let’s say you have 10,000 people arriving to any given offer page on your site each day. Of those 10,000 visitors, only 100 of them (or 1%) start the purchase path. This is your conversion from page A to page B (offer page to beginning of purchase path). Now, let’s say that of those 100 people that start the purchase path 50 of them finish it. Your conversion from page B to page X (beginning of the path to completed purchase) is 50%. If you were only looking at the bottom line and nothing else, you’d conclude that your total conversion is at an abysmal 0.5% (50 buyers out of 10,000 visitors). Furthermore, you wouldn’t know what to fix on your website to increase conversion, so you would probably pour more money into your PPC campaigns. What you wouldn’t realize is that the majority of your losses or “leaks” are found on your offer page. Moreover, optimizing this page alone would increase conversion to your order path without the need of additional paid search traffic. This would ultimately yield higher profits for you. And after all, isn’t that the main objective?
The next series of questions would involve the topic: How do I optimize an offer page? I have good news for our readers; we have many free online journals describing in detail how you can optimize your offer pages.
Originally written and published in the Marketing Experiments Journal on April, 12th, 2007.