The profitability of an online marketing program depends on two key factors:
- The cost of getting a visitor to your website, and
- The efficiency of your website in getting them to act
Most online marketers focus mainly on traffic acquisition; getting more visitors cost-effectively to their site. This is a challenge because they are competing in an open marketplace for the traffic – either a PPC auction, or paying the current “rate card” for other online advertising. Much greater profit improvements can be achieved simply by fixing the conversion rate of your website.
Lets look at a simple example: our hypothetical marketing program sells an online product or service that costs very little to deliver. An incremental customer is basically pure profit. The program has 25% return on investment (ROI) – for $1.00 spent on marketing, $0.25 in profit is created.
- Revenue – $1.25
- Cost – $1.00
- Profit – $0.25
Let’s assume that we can change the website and increase the conversion rate by a modest 20%. What would be the impact on the program profits?
- Revenue – $1.50 ($1.25 x 120%)
- Cost – $1.00 (Unchanged – same marketing activities)
- Profit – $0.50
The 20% increase in conversion rate will DOUBLE profits!
These kinds of results are very common for our clients. In reality the profits can be increased even more because previously-unprofitable marketing activities now become ROI positive.