What is Conversion Rate Optimization?

O8 is here to give you the scoop on CRO basics, the best testing methods to use, and the benefits to having an agency partner working with you on CRO. Manager of Marketing and Business Relationships, Hadley, is joined by Seth, Founder and CEO of O8, and Cory, VP of Digital Strategy, to discuss all things CRO.

 

Question

Hadley Hirsch: First and foremost, I thought we could start with a brief overview. What is CRO, and why is it important?

Answer

Cory Docken: CRO stands for conversion rate optimization. It's the process of optimizing your website or landing pages based on visitor behavior to help improve desired actions or conversions on that said page.

Seth Viebrock: I'll just add that there's this thing called the power law, the CRO power law. And so, for one, it gets you more customers by increasing your conversions. Your profit is sensitive to your conversion rate. So once you improve your conversion rate, your profit can increase exponentially. You’ve got this chunk of investment that's for CRO, but once those revenues increase, they might even double based on the results while that chunk is steady. So your profit is widening at much higher levels. And then, you know, given that you're getting more profit, you can reinvest that into ad traffic. So that opens up another flood of traffic, which then hits those optimized pages and further expands your profit. And then you combine those three effects, and you've really got a multiplicative exponential growth pattern. And that's why Amazon is where they are today, because they've just tested and tested and tested for the last however many years. They really were foundational in creating the field of CRO by how they run their business.

 

Question

Hadley Hirsch:  And who doesn't want to become the next Amazon, right? So how do you calculate your conversion rate?

Answer

Cory Docken: So to calculate, you need two numbers, the number of visitors and the number of those who take action, or convert. Your conversion rate is expressed as a percentage. So if you have 10,000 visitors and 500 take action, your conversion rate is 500 over 10,000 or 5%

 

Question

Hadley Hirsch: So what's considered a good conversion rate?

Answer

Cory Docken: Well, it varies by industry. It also varies by what you're converting, so it really depends on each specific use case.

Seth Viebrock: And I would say, of course, a better conversion rate now than you had last quarter is good. It's about continuous optimization, continuous improvement. When you look at landing pages, it really varies by the awareness or consideration or decision making cycle that the traffic is in. There are so many variables, so that's a hard question to answer. But with that, our goal is to always improve so that it drives revenues and it drives all these exponential growth factors.

 

Question

Hadley Hirsch: What testing methods can I use to improve that growth, and learn from it?

Answer

Seth Viebrock: There's A/B testing, multivariate testing, UX testing, and  all these different ways. But the goal is basically to get data and try a version that's better than the previous one and then confirm that through statistical validation. So if you have to A/B test a homepage, and A is the current page and B is the changed page that we think will increase conversions, let's split traffic between the two. And if the hard numbers say that B is better, no matter anyone's feelings or whatever you might think, sometimes traffic and the statistics and the hard numbers really surprise you. So if B is better, then we go B. And then next time we try C. But there's a certain amount of testing that is just not valuable. Actually, it's a really frequent thing if you're not skilled in CRO. There's a lot of testing of button colors or the titles on the buttons, which, sure, can make a difference if you have a huge amount of traffic. But really what we're focusing on is changing customer behavior. And changing colors on the button or these little things can end up, frankly, in what we call garbage testing. It's just low value, and you're spending company resources on tests that are not having the CRO power law effect. You're not driving revenues, you're not getting this exponential growth that you should be getting if you're doing the right kinds of testing. And so that means the tests need to be a bit more innovative than just changing this little title or changing this little button or color. Sometimes, given all these parameters, we need to think bigger, and those bigger ideas are what get you actual significant growth.

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Question

Hadley Hirsch: How do you know if your testing is set up correctly? How long should it be running, things like that?

Answer

Seth Viebrock: Well, there is definitely a window, and there's some statistics behind it, where if you run a test for too long, it can actually become invalid. This could be the same traffic hitting the site over and over, when people's cookies clear, etc. There's a lot of complex information about that. Without getting into the details, any good testing platform will tell you how long you should run the test, given your traffic. Or, a skilled agency can tell you these things as well.

 

Question

Hadley Hirsch: And how do you know when it's time to stop testing?

Answer

Seth Viebrock: We call that a local maximum in CRO terminology. You’ve tested, you've optimized along the way, and now something about the architecture or just the overall system you're dealing with, whether it's the website or your mar-tech stack, isn’t working. It just makes sense to start over, reinvest in a redesign. You, of course, take that data and apply it to the redesign, don't start completely from a blank slate. But you can reach a local maximum with your website or a component page or homepage, whatever it is, you can reach a stopping point.

 

Question

Hadley Hirsch: You mentioned that any good platform can really advise you on best practices, duration of the testing, things like that. What are the best tools available to begin working on CRO and learning about it myself?

Answer

Cory Docken: I can mention a few tools. At O8, we're a very technical agency, and we love our technology. So when it comes to observing user behavior, we use tools like Hotjar and Crazy Egg to develop heat maps and also to record their behavior and collect that data.

Seth Viebrock: We're pretty tool agnostic, we've used a lot of different tools, and we can recommend them based on your budget. There are some free tools like Google Optimize all the way up to Optimizely, which can do personalization, A/B testing, and tons of very fancy things. There's also intent-based pop-ups and reactions, it can get very complex. But the goal is to just start out with a few tests to just do it. And then improve as you go along, test more and more each day.

 

Question

Hadley Hirsch: So it sounds like there are a lot of tools out there, potentially even free tools that I could use. Is there a true benefit to having an agency partner to handle these tools on their side, or what's the benefit of bringing in somebody like O8?

Answer

Cory Docken: By  leveraging the right agency partner, you're getting an unbiased, fresh perspective, someone that can break down the data into a digestible format. This stuff can get highly technical and overwhelming, so you can bring in that right partner, and they should have a solid process in place for achieving those results.

Seth Viebrock: Absolutely. What we've seen is that a company tries to do this and has someone with zero training and background do this low-value testing. And they’re wasting time that could be put towards exponential growth. They’re testing these very low-value things that make it seem like the person is doing work, but they're actually not moving the needle at all, or very insignificantly. Without the right understanding of the statistical significance and how these tests actually work at a deep level, sometimes you'll actually see tests that actually harm you.

Hadley Hirsch: That makes sense. It sounds like every business should be focusing on CRO, especially during times where everything's moving digital!

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