This is part of a series of digital marketing basics aimed to help marketers and business owners to learn the lingo of the online marketing world. We have selected the most commonly asked questions by our clients and new hires when entering the digital realm.

What’s CRO?

“CRO” is an abbreviation for Conversion Rate Optimization. The goal of CRO is to improve conversion rate in websites, advertising, sales or marketing.

Hold up! This is marketing basics, right? So what’s a conversion?

In simple terms, it’s the goal of getting a person to a specific desired action.

For example, when I was a kid, I sold lemonade iced-tea by the side of the road in front of my house. I wanted people to buy my drinks so I can buy the latest Lego set. In this case, my “desired action” was a person handing me money in exchange for a drink.

So what’s a conversion rate then?

The conversion rate is the amount of people who took the desired action divided by the amount of people who were presented with the choice.

In my lemonade iced-tea stand example, my conversion rate is calculated by the amount of people who bought iced-tea from me divided by the total amount of people who passed by my stand.

Ok. You’re not reading this article for advice on running a street corner lemonade stand but rather because you have (or want to have) some sort of digital web presence like an e-commerce store, website, blog, Facebook page etc. So let’s use an online store example – a store that sells powdered lemonade iced-tea. On your product page, you have one main conversion goal, you want people to add the powdered lemonate iced-tea into their cart and ultimately make the purchase. CRO aims to increase the number of people clicking on the “Add to Cart” button – but you may ask, how do you do that?

How do you optimize conversion rate?

It has to be done scientifically. The first action should always be research. Abraham Lincoln phrases this very well.

Give me six hours to chop down a tree and I’ll spend the first four sharpening the axe.

Conducting research is like sharpening that axe. You want to increase your chances of chopping the tree down at the first attempt, rather than swinging away hoping to hit something – that may or may not be even a tree.

To increase our chances of achieving our goal, we must gather information, analyze the data and strategize a method of approach.

Unlike other facets of marketing, CRO is a multidisciplinary strategy that involves a lot of trial and error. Michael Aagaard from Unbounce describes CRO as having “psychology, statistics, UX & design, web analytics, research, copywriting and not least business sense” as its “core components.”

What I believe Michael means is that to analyze and optimize human behaviour on the internet we will need to involve several fields of study.

Ok, it all makes sense but why should I (my business) care?

CRO is valuable because it is a way to improve processes within your business.

For example, let’s consider a significant amount of money was spent on radio ads and TV commercials to drive people to visit your website. If CRO was used to improve the conversion rate of your site, not only does it generate more conversions from organic visitors (visitors from unpaid sources such as links from other sites, google search, facebook etc), it also improves the ROI (return of investment) of all the upstream investments (the TV commercials and radio ads) that were made to get people to your website to begin with.

Best Buy improved their sales using CRO. Like all big-box retailers, Best Buy feared losing buyers as they expected potential consumers to visit their retail shop, try out its products and then buy from the massive e-commerce giant, Amazon. However, by analyzing their customer’s behavior, Best Buy optimized the buying process by implementing customer service improvements and price-matching tactics that converted their shoppers into buyers.

I don’t think that Best Buy has got it perfect – the gap between Amazon and Best is still increasing but the rate at which that gap is growing has surely slowed down – while some retailers like Radio Shack have already gone belly up.

Still not convinced? Let’s crunch some numbers…

Here are the facts:

  • Jon sells vitamins online and has a monthly average of 30,000 organic visitors on his site.
  • Out of the 30,000 visitors, about 0.5% make a purchase.
  • He gets about 150 (30,000 x 0.005) transactions per month averaging $50 each transaction.
  • This amounts to $7,500 in gross sales per month ($90,000 yearly).

Jon then runs a 3 month CRO campaign for $6,000 that optimizes his checkout process.

The campaign consisted of:

  • Adding extra payment options to reduce payment frustration.
  • Adding reviews on the product pages to instill confidence in the shopper.
  • Reworking the pricing to include free shipping.

This resulted in:

  • An increase in transactions to 0.8% (a 0.3% increase from 0.5%).
  • Jon’s organic traffic remained the same at an average of 30,000 visitors but his transactions increased to 240 (30,000 x 0.008).
  • An increase in 90 (240 – 150) transactions that brings the monthly gross sales average up to $12,000 ($50 x 240).
  • An increase in gross sales by $4,500 ($12,000 – $7,500) per month, which averages to an increase of $54,000 ($4,500 x 12) yearly.

This can be summarized in the table below:

It gets sweeter with other marketing efforts

Whether it be paid advertising, inbound marketing, SEO or offline marketing, they all will benefit from the increase in conversion rate. An increase in your marketing efforts will increase the amount of visitors to your site which would lead to an increase in sales.

I’m digging this, where do I start?

A bunch of marketing Jedis made some awesome equation that involves motivation, clarity of value, an incentive to take action, the friction of elements of the process and anxiety about entering information to help determine the probability of conversion.

So what does this all mean? It could mean many things, such as a shopping cart redesign, a product page content refresh, or even a full new site. Some tasks can become very time consuming but we believe there are also a lot of quick wins. But it all starts with research and understanding the problem and goal.

With that, we have tools to help you observe and analyze your current visitors to collect important information. Don’t have them in place yet? Do it now.

What tools do you use? How do you conduct research? Want to know more or need help getting started? Comment below or give us a shout.

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