What Executives Need To Know About Conversion Rate Optimization (CRO)

Conversion rate optimization is one of the marketing activities most suited to appeal to executive leadership. This white paper explains why.

Every year a new marketing tactic arrives on the scene and everyone hails it as the next big thing. A few years ago it was Snapchat. Now it’s live video and chat bots. Next year it could be augmented reality or virtual reality.

The marketing landscape is often like Google: every year something new and “revolutionary” comes out. Occasionally it truly is revolutionary, but most of the time it fades quickly (see: Google Glass, Google Buzz, Google Wave, etc.).

You may assume that Conversion Rate Optimization (CRO) is yet one more marketing flash in the pan – something everyone’s fired up about now that will soon fade away. And while that’s certainly understandable, there’s much more to it than meets the eye. In fact, CRO is one of the marketing activities most suited to appeal to executive leadership.

Why? Because it’s not a tactic or a hack or a secret strategy. It doesn’t depend on a hot social platform that could quickly go the way of MySpace, and it doesn’t hinge on any current technological trends, like augmented reality.

CRO is a framework, not a tactic. It’s designed to systematically, incrementally, and consistently improve marketing results. It’s data-driven, so you’re not gambling on hitting a cultural trend at the right time, and when done right, it always builds exponentially, generating a high ROI.

What Is Conversion Rate Optimization?

When you think of CRO, you probably immediately think of A/B testing the colors of call to action buttons and email subject lines. While that’s certainly part of CRO, it’s only the tip of the iceberg, much like the Department of Agriculture is a tiny part of the government. There’s much more to it than button colors and subject lines.

True CRO is an iterative process of split testing design changes on high impact portions of a website in order to tailor a website to the unique goals of their consumers. Let’s break that down.

It’s An Iterative Process

Rather than slapping one random design change after another on a website in the hopes that something will resonate with customers, CRO is an iterative process. A test is run, the results are noted, changes are made, and then another test is run.

Each test builds upon the previous one, ensuring that the results are always positive and statistically significant. In other words, changes are only made if they statistically prove themselves to generate more of a desired result (clicks, sales, sign ups, etc.).

It Is Primarily Concerned With High Impact Areas

CRO is primarily focused on the areas of a website that are going to have the greatest impact. With an end goal of increasing revenue,  it can involve a variety of things like removing areas of friction in the buying process, make the site easier to navigate, etc.

It’s Tailored To The Goals Of The Consumer

In other words, CRO is all about making your website work better for your customers. They come to your site with a particular goal, and CRO seeks to make it as easy as possible for them to achieve that goal. The end result of CRO is lower friction on the path to purchase, higher conversions, and therefore more revenue.

The beauty of CRO is that it’s always data driven. Changes aren’t made based on hunches, random conversations someone had with an irate customer, or the fear of missing out on a hot marketing trend. Hypotheses are formed and tested, and changes are made only if the test is positive in terms of ROI. Everyone from Amazon to AirBnB to Google are using CRO to maximize their marketing efforts. As Chris DeRose told Investor’s Business Daily:

“As Amazon pursues growth through small experiments, they have tried to use data to trump intuition. The company culture embraces experimentation and Bezos recently said at a shareholder meeting that 99% of all innovations at Amazon are incremental.“

Smart marketers know that intuition and hunches are often terribly wrong when it comes to marketing. Safety is found in data.

Why Conversion Rate Optimization?

Let’s say you’re in the market to buy a new pair of Bluetooth headphones. You go on a site, only to find it slow, difficult to navigate, and confusing to check out. How long before you go to another site? Probably about ten seconds (at most).

Consumers are more empowered today than ever before when it comes to purchasing. If your site doesn’t engage them quickly, or if it frustrates them, you can be sure they’ll go purchase from one of your competitors. If you’re not constantly seeking to improve your site experience, you’re going to fall behind those who are. We live in an age of almost infinite choice and possibility. Unless you’re selling something that’s not available anywhere else online, you need to make it as easy as possible for your customers to purchase from you.

It’s important to note, however, that CRO has benefits that far exceed simply getting more conversions. When done well, CRO can:

  • Turn more of your existing visitors into customers, which ultimately translates into more revenue. If you increase your conversion rate by 20%, you also increase your revenue by 20% (assuming all other things stay equal).
  • Increase your overall profit margin. First and foremost, CRO is about increasing the number of conversions from your existing visitors. In other words, you’re not generating more revenue by spending more on advertising. Rather, CRO allows you to get more revenue while all your fixed costs remain the same. In short, your profit rises disproportionately to your spending. Your return on ad spend (ROAS) goes up.
  • Allow you to drive more traffic to your site. You can take some of the excess profit generated and plug that right back into driving more traffic to your site. Because you’ve improved your overall conversion rate, this traffic will turn into even more conversions, which then leads to more profit. It’s a beautiful cycle, and the more aggressive you get with it, the faster you can outpace your rivals.
  • Reduce customer support issues. As your site becomes more and more tailored to your customers, you end up with less confusion, fewer abandoned carts, and fewer overall customer problems. This, in turn, can reduce customer support costs.
  • Be far less risky than wholesale redesigns. Doing a complete redesign of your website is expensive, and can actually reduce conversions if you haven’t evaluated your data. CRO allows you to make small, incremental changes based on solid data, which presents a very minimal risk.
  • Improve your brand reputation. The more people enjoy browsing your site, the more your brand reputation will grow. On the flip side, if your site is clunky and frustrating, customers will go elsewhere.
  • Lower acquisition cost and increase retention. Why does Amazon do everything in their power to make the buying process as easy as possible (1-click ordering, Dash buttons, etc.)? Because they know that the easier it is to buy, the more customers will keep coming back and the lower their customer acquisition cost will be.
  • Reduce office politics and meetings. Without data, debates over design are often ruled by the highest paid person. Sometimes this is jokingly called “HPPO” – Highest Paid Person’s Opinion. CRO puts all the decision making power in the hands of the data. Changes are only made when the data bears them out.

Speaking of the value of CRO and user experience, Andrew Kucheriavy notes:

“Jeff Bezos invested 100 times more into customer experience than advertising during the first year of Amazon. AirBnB’s Mike Gebbia credits UX with taking the company to $10 billion. Tom Proulx, co-founder of Intuit, was one of the pioneers of usability testing, putting emphasis on ease of use in his products.”

CRO isn’t a flash in the pan marketing strategy. It’s a proven framework used by some of the best companies in the world to achieve astronomical growth.

A Step-By-Step Guide to CRO

So what exactly is involved in CRO? What steps do companies like Amazon and Airbnb take when they want to increase their conversion rates? While the process will vary somewhat depending on the company and industry, it typically follows a standard series of steps:

Step #1: Define Your Ideal Customer

Before you can optimize your site, you need to first define your ideal customer. Why are they coming to your site? What are their goals? What are their pain points? You won’t be able to identify areas for improvement if you don’t first understand who your customers are and what they’re hoping to accomplish on your site.

This step typically involves:

  • Persona research
  • Identifying various user journey scenarios (how people are using your site)
  • Focus groups
  • User surveying

It’s easy to assume that you understand your ideal customer. Unfortunately, this assumption is often incorrect and leads to incorrect conclusions about your site and what will or won’t improve your conversion rate.

Step #2: Examine The Data

Before you can form any hypotheses or ideas, you need to do a deep dive into your current data. Your goal is to understand what is currently happening on your site – where bottlenecks are occurring, where customers are experiencing friction, and where they’re abandoning the purchase process.

This is typically done using a variety of tools, such as web analytics, heat maps, click through maps, traffic reports, and more. The goal is to find the places where customers are getting stuck or dropping off.

By examining the data, you are eliminating all guesses, hunches, and opinions. You are relying solely on something that can be objectively measured.

Step #3: Identify High Impact Areas

After defining your ideal customer and doing a thorough analysis of your data, you need to identify the areas of your site where changes will have the highest impact. These are going to be the areas where improvements will result in significant revenue jumps.

The data will help you understand the areas where customers are experiencing friction, and then you can rank those areas according to the impact on your bottom line.

Step #4: Create A Structured Testing Plan

Once you’ve identified your high impact areas, you will need to develop a structured testing plan for improving those areas. It’s important to note that this is a structured plan, not a series of random actions that may or may not improve your overall conversion rate.

This structured plan involves a number of different steps and tools, all designed to help create hypotheses and test hypotheses. Some of these tools include:

  • A/B and multivariate testing to determine which version of something (page, call-to-action, etc.) perform better
  • User testing, which allows you to visually see how customers journey through your site while they tell you what is going through their mind as they complete tasks on your site
  • Eye tracking and heat map analysis, which reveals where customers instinctively look and click when they use your site
  • Analytics analysis to evaluate click-through rates, drop off points, entry points, exit points, and a host of other items

The point of all these tests is to statistically prove which changes improve your conversion rates. If there is no statistical proof, then a change simply isn’t implemented.

Step #5: Repeat

Once a positive change has been identified, the process is repeated. A new hypothesis is formed, tested, and either implemented or discarded. You systematically follow this structured process starting in your areas of highest impact and then moving down through areas of lower impact.

As each incremental change is implemented, you begin to see compound growth in your conversion rate. The quicker you can cycle through the process, the faster your conversion rate will increase and the more your bottom line will grow.

Does It Really Work?

This might all sound great, but the ultimate question is whether it actually works. Does CRO actually increase your revenue, or is it yet another risky marketing tactic that could tank you?

Short answer: Yes, it works, and thousands of companies have proven that it works.

A 2015 study by Watermark Consulting demonstrated that companies who focus on constantly improving customer experience significantly outperformed the market from 2007-2014, while those who didn’t focus on customer experience far underperformed compared to the market.

The study noted:

“The competitive opportunity implied by this study is compelling, because the reality today is that many sources of competitive differentiation can be fleeting. Product innovations can be mimicked, technology advances can be copied, and cost leadership is difficult to achieve let alone sustain.

But a great customer experience, and the internal ecosystem supporting it, can deliver tremendous strategic and economic value to a business, in a way that’s difficult for competitors to replicate.”

It also worked for Barack Obama in the 2008 presidential race. Using A/B testing, Dan Siroker was able to increase email signups by an astonishing 40 percent over the original design. As Brian Christian notes:

“By the end of the campaign, it was estimated that a full 4 million of the 13 million addresses in the campaign’s email list, and some $75 million in money raised, resulted from Siroker’s careful experiments.”

Speaking of how he used CRO to massively increase the number of people using GrowthHackers, Sean Ellis noted:

“We grew from 90,000 MAU [monthly active users] to 152,000 MAU in about eleven weeks without spending a dollar on advertising or increasing the size of our growth team. The only thing that changed was the velocity of our experimentation. We achieved that velocity improvement by adopting the high tempo testing framework to help us prioritize and close the loop on the growth experiments that we thought would move the needle.”

The list goes on and on. Many of the best and brightest companies are using CRO to significantly increase their revenue and customer engagement. It’s not one tactic among many in their digital marketing toolboxes. Rather, it a systematic framework they’re using to constantly improve their overall user experience and ultimately increase their revenue.

It’s important to note, however, that CRO is somewhat like going to the gym. Going once or twice a month won’t do much for you. The power of CRO is unleashed when it’s used consistently and repeatedly over time. If you’re focused, disciplined, and have a plan, it can produce incredible results.

Are there some companies that have tried CRO and not seen positive results? Sure. CRO isn’t easy. It takes work, persistence, and a willingness to stick with it. The companies who use it in hopes of a quick fix or instant success don’t truly understand CRO and are sure to fail.

However, the data has proven again and again that CRO is incredibly powerful. You ignore it at your own peril.

How Would It Work For Me?

Implementing a robust CRO process in your business involves steps similar to those outlined above, with specific aspects tailored to your company.

For example, Xerox contacted us because they were experiencing a number of conversion problems with their site. We recommended our Conversion Advisory and A/B & Multivariate Testing to help identify the roots of their problems. The process started with our complimentary Stuck Score™ assessment and our in-depth conversion audit, which revealed numerous issues. The conversion and site abandonment problems Xerox was facing were primarily due to a series of usability challenges across the site.

We then developed a testing roadmap that would allow us to optimize the most challenging areas and then launched A/B and multivariate testing through our ongoing Conversion Growth Program™. The end result was an 86.7% increase in conversions for returning visitors. You can read the full case study here. We followed a similar process with outdoor retailer Snow Peak and helped them to achieve a 149% growth rate in their online revenue and 108% increase in their conversion rate.

The Bottom Line Is Your Bottom Line

Ultimately, your decision to use or disregard CRO will affect your bottom line. As noted earlier, companies who disregard customer experience lag significantly behind those who are constantly improving. You can be sure that your competitors are using CRO to increase their conversion rates, improve user experience, and increase their revenue. You can also be sure that if you don’t pay attention to CRO, your customers will eventually become their customers. CRO is here to stay. It’s not dependent on any particular platform and can be implemented in virtually every type of website. Eventually, you’re going to have to answer the question of why you’re not using it.