Tuesday, March 27, 2007

Traffic's Nice, but Money's Nicer

This piece from OM Strategy on conversion rates nicely illustrates an important idea: the visitor-to-customer funnel on your web site. We often get distracted by site traffic, because it's the easiest thing to measure; but unless you're making money just because somebody visits your site, it's not the whole picture.

More importantly, focusing too much on traffic can make you invest your time and money in the wrong places.

Think of the entire process by which a site visitor becomes a customer. It begins with reaching your site - that coveted hit - but continues as the visitor explores content on your site, and eventually places an order (or, if you don't sell directly on-site, completes an information request or quotation form - whatever your desired final action is).

Obviously, the more traffic you have, the more of those conversions (however you define them) you'll have at the end, all things being equal. But that doesn't mean that more traffic is the key to more sales; in fact, your effort may be better spent on other parts of the process than traffic-building.

The OM Strategy piece gives a simple set of examples; on one extreme, there's a site with 1,000 visitors, a 1% conversion rate, and $1,500 of revenue. On the other extreme is a site with half the traffic but a 3% conversion rate and $2,250 of revenue (on the same hypothetical $150 average order).

The first site owner needs to work on conversion rates, while the third should double his traffic (roughly speaking).

What does this mean for you? It means you need to look at each step of the process. How many people come to your site? Once there, how many pages do they look at? How many make it to the order (or information request) page? How many then place an order, ask for information, or do whatever it is that you call a successful conversion? And, equally importantly, what are the trends over time for all of these things?

If most of your site visitors are abandoning you after viewing one page, you don't need more visitors; that just means more people rejecting you. You need to either find the right visitors through more targeted marketing, or change the content on that first page to keep them interested (or, more likely, both).

If your visitors are spending quite a bit of time on your site, but then not converting, your problem is different. Maybe your price is too high, you're not providing some key piece of information to close the sale, or your shopping cart is just too onerous to deal with. Maybe your information request form is asking for way too much information for a first contact. (Maybe the shopping cart or form is simply broken - sometimes it's embarrassingly mundane things like that which foul things up.)

If you're in the latter situation, though, don't waste your money cranking up your search marketing or running banner ads or the like. You'll get some benefit, but you're really just putting more gas into an inefficient engine. You'll get more for your money by investing a tune-up to get those conversion rates up.

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