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A self-described Internet Ninja who has worked in Website Design & Development, Internet Marketing, Website Optimization and Web Analysis. David is a DZone MVB and is not an employee of DZone and has posted 24 posts at DZone. You can read more from them at their website. View Full User Profile

Why You Should Perform Conversion Rate Optimization On Your Website

05.20.2013
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In the current economic climate businesses are having to work harder just to stay afloat and harder again to drive a profit from their business. Online businesses have the advantage of lower overheads but many are wasting thousands and even millions of pounds every year through missed sales on their websites. Are you throwing money away?

why_conversion_rate_optimisationConversion rate optimization is no longer a new concept, it has been around for many years in the world of online retail and websites in general. I still remember the days when I would test many locations for my Google Adsense ads on my first blog in trying to increase my Click-Through-Rate (CTR) and ultimately my ad revenue.

I have spoken with many online business owners over the past couple of years and when I ask ‘What are you doing to increase revenue from your website?’, I often get the reply, ‘We are increasing our advertising spend to drive more visitors into the website’. Whilst this tactic will indeed increase revenue, it is not money well spent.

Let me give you an example of a website, this website gets 10,000 visitors a month and present and converts at 3% selling shoes online, their average basket is $40. Let’s say that the website owner spends $5,000 to drive in 50% more visitors per month. The math would work out like this:

Previous: (10,000 * 3%) * $40 = $12,000

New : (15,000 * 3%) * $40 = $18,000

This would work out as an increase of $6,000 per month in revenue, minus the $5,000 spent leaving a profit of $1,000 per month, at the end of a year you are left with $12,000 extra. Was that really worth the spend?

Now let’s consider that instead of spending the $5,000 on advertising you made the wise decision to invest the money in increasing your websites conversion rate. Let assume that you are able to increase your websites conversion rate be 50% rather than driving in 50% more visitors, the math would look like this:

Previous: (10,000 * 3%) * $40 = $12,000

New: (10,000 * 4.5%) * $40 = $18,000

So far you are thinking, ‘Hey dude, that’s exactly the same!” – This is true, the increase in conversion rate delivers the same increase in revenue as the advertising spend, but the magic is that in this instance the $5,000 spent is a one-off cost, so in the first month your profit is $1,000 then every month after your profit is $6,000. At the end of a year you are left with $67,000 extra!

So, Conversion Rate Optimization beats advertising spend by $55,000 a year in this instance and this is on a very basic example. Why not try doing the math for your business and see what the result would be.

The other thing I would point out is that Conversion Rate Optimization is no longer an expensive task that requires a lot of resources, there are now several websites that help you to run A/B tests on your website at a very good price, so there is no excuse not to be doing it on your website.

Are you one of the people wasting money in your business? Have you considered Conversion Rate Optimization? What is holding you back from giving it a go? Feel free to share your answers to these questions or your general thoughts about this article in the comments section below.

Published at DZone with permission of David Shaw, author and DZone MVB. (source)

(Note: Opinions expressed in this article and its replies are the opinions of their respective authors and not those of DZone, Inc.)