CRO For Ecommerce, Is it Worth It? A Review Of Our Experience With Convertica
I wanted to do this piece because it was something as a relatively small business owner had me stuck for over a year and I want to help other businesses learn from my mistakes as others have done for me through their blogs.
To give you an idea of our business we are an ecommerce business in the health space, we’ve been operating since 2014 and from 2014 through to 2018 we had really solid, consistent month on month growth but during 2019 it really felt like we had hit our ceiling and nothing we were doing would increase our bottom line.
We could increase our revenue by increasing our ad spend but our profit would stay relatively the same, just we were selling more units, which I knew wasn’t the solution as it was just creating more work for the same money. We were essentially spinning our wheels and just going below our desired profit margins.
What was more frustrating was that while we had a good headstart in this niche during 2019 it felt like while we were spinning our wheels our competitors showed no real sign of slowing down and like they might catch up with us. I don’t think I have to explain how anxious this made me feel, I felt like my business was slipping through my fingers before my own eyes.
It was actually by chance that me and my business partner stumbled across our solution to this. I was scrolling through facebook and someone had shared an article from Convertica.org about Just Thrive increasing conversion rate by 100% in just 3 months. While they’re not a direct competitor by any means they’re in a pretty close industry to ours, so it caught my attention.
I was aware of what conversion rate was as we often used Google Analytics but I wasn’t aware it was something that could be increased so significantly as ours had remained relatively stable since the beginning of our business. It honestly shocked me that design and structural changes could make such a big difference to conversion rate.
This is when I thought to take a look at our Google Analytics and I noticed that when we had our redesign done in 2018 it had decreased slightly but I hadn’t really paid much thought to this, I guess in hindsight because I didn’t think about how much this seemingly small decrease would affect our business so much over the long term.
We are much more aware of these numbers now and you will be after reading this article.
But back to the case study, it became clear that we were missing out on one of the levers to increasing our online profits. I showed my partner and we sat and read through the blog posts and case studies on the site and it seemed clear that we should at least consider conversion rate optimization for our ecommerce site.
What Is Conversion Rate Optimization?
So I guess we should back peddle a bit, I don’t want to lose any of you. Conversion rate optimization or CRO is essentially making the most of the traffic your website is already receiving. If 100 people come to your website and 1 person purchases your conversion rate is 1%, if you make some changes and now 2 out of every 100 people visiting your site purchase your conversion rate is 2% a 100% increase.
What conversion rate you should expect varies depending on a number of factors. These include:
- Your industry
- Your traffic source
- Time of year
- Your product price
- Your page load time
- Your product copywriting
- Your website design and structure
This is only a small handful of factors which affect your conversion rate.
A/B Testing – What Is It and Why Is It Important For Conversion Rate Optimization?
This is the backbone of true conversion rate optimization. As we’ve already spoken about there’s so many factors which affect your conversion rate of your website. Therefore, you need to be sure that the change you made
If we go back to highschool science I’m sure you will remember your teacher harping on about independent and dependent variables. The independent variable is the one you as a “scientist” manipulate and change and the dependent variable is the one you measure the change. For it to be a true scientific test you can only make a change to one variable otherwise you don’t know what affected what.
If we go back to our website for example, if we change our product price and our product copywriting both at the same time and our conversion rate increases it’s impossible to tell what change caused this. Both might have had a positive effect, or one might of had a positive effect that outweighed the negative effect of the other.
But this wouldn’t work as there are so many factors that are changing that we don’t control, for example what happens if tomorrow was Black Friday? Your conversion rate might skyrocket but this is due to external factors out of your control.
This is why in conversion rate optimization they do A/B testing.
Because there are so many variables which are always changing, for example for us one days facebook ad traffic could be very different to the next, especially when we are scaling ad campaigns.
So even if we made a single change to the site the other variables could have changed at this time, which could make a big difference to the outcome of the test.
So when testing conversion rate changes they split the traffic 50/50 and 50% goes to the original page and 50% to the page with the single variable change.
This means that the original page acts as the control for the new page with the changes.
It is worth noting that A/B tests are run for a long enough time to ensure statistical significance, which means that your test is not due to random chance.
But Will Conversion Rate Optimization Be Worthwhile For My Ecommerce Site?
This is the question that me and my business partner had in my head when we first started reading about conversion rate optimization and I’m sure this is what you’re thinking.
So now we have experience with conversion rate optimization we wanted to help by breaking down the numbers. Once we had read all the blog articles on Convertica as well as a search around the internet we felt like we understood the levers at play and could estimate whether it would make sense for our business.
I’m not going to use our actual business numbers to talk through the calculations but I still think this will be highly useful for you if you’re considering a CRO service.
In this example let’s assume all our traffic is from paid as that was the situation for us.
Ad spend: $60,000 per month
Cost per purchase (CPP): $50
Conversion rate: 2%
Average Order Value: $100
The Cost Of Goods (this includes everything, postage and labour etc.): $25
Profit per order: $25
So in the example we never want to pay more than $50 per purchase as this is the maximum we can pay to maintain our desired profit margin.
So at $60,000 ad spend our average CPP was $50, this means that we were selling 1,200 units per month, this was with our 2% conversion rate.
If you look at Convertica they suggest that they can increase your conversion rate from 20-100%+, this is a big range to work with but we were skeptical so stuck to the low side and said we would be using 30% for our calculations.
A 30% increase in conversion rate doesn’t mean that your conversion rate would be 32%, it means that your conversion rate would be 2.6%. This is a common mistake people make when talking about conversion rate, 10% of 2% is 0.2% and therefore, 30% is 0.6%.
So if we were getting 1,200 purchases per month with a 2% conversion rate with a 2.6% conversion rate we would increase to 1,560 purchases per month.
If you use a CRO service like Convertica and let’s say their fee is $3,000 per month. This 360 extra purchases would actually already cover their monthly fee with ease (360*25=$9,000).
So that means that using a conversion rate optimization service is a good decision if they can provide a 30% increase in conversion rate. You can play around with the numbers and see at what point it breaks even, in this case it would be a 10% increase in conversion rate.
But this is a short sighted view, but this was the view me and my business partner took before we decided to hire a CRO service.
The Calculation No One Told Me About – Compounding Benefits
The above section is where most people end their calculations and this is where I’m going to show you why it’s wrong to do so. This is where our spend on conversion rate optimization really compounded to new levels of growth for our business.
So while it’s great that the calculations above mean it makes sense, even when using the lower end of the estimate there’s more to be considered.
If we increase conversion rate by 30% we effectively decrease our CPP to $38.46 from the original $50.00. This means that we can further scale our ads and in our experience this is non-linear at least Facebook and Instagram which are the platforms we mainly use.
What I mean by this is that if we increase our conversion rate by 30% it doesn’t mean we can just spend another 30% on ads to reach the $50.00 CPP again usually we can spend significantly more, let’s say 50%.
For us this is way more important, while it’s nice to have a lower CPP we would rather scale as much as possible pushing our CPP to the maximum we’re happy with as this allows us to have more market share.
So in this case we could increase our ad spend to $90,000 at a $50.00 CPP which means 1,800 monthly sales, a 50% increase from the original 1200 per month all thanks to the 30% increase in conversion rate.
In our case we didn’t actually realise this benefit until we started using Convertica and it’s one that’s very hard to judge but I would say it’s worth taking into consideration.
The Residual Effect Of Conversion Rate Optimization
This was one benefit that we did consider when umming and arring over the decision to use Convertica. Me and my business partner agreed that we would give it 6 months because the conversion rate increases we were hoping to say wouldn’t just disappear when we stopped using Convertica.
So over the 6 months if it was $3,000 per month and they only achieved a 10% increase in conversion rate (opposed to their advertised 20-100%+) during the time we use their service we would gain a further 120 sales per month.
This would mean that during the 6 months of using their service we wouldn’t make or lose any extra profit, it would break even. Which doesn’t sound too appealing but after the 6 months if we stopped the services we would still retain the benefit. This means that our initial investment would pay for itself over the coming months and years easily.
You can see a visual representation of this in the graph below. On the x axis is time (months) and on the y axis is the return on investment of CRO ($). This graph assumes that we only stay on for 6 months and uses the 10% increase mentioned above. We also included what this would look like if there was a 20% increase in conversion to show how much difference this extra 10% would make. When we did this we wanted to play it very cautiously and use under estimates based on Convertica’s website.
So when we looked at it like this, we realised that the numbers make sense and even if we didn’t get the results that they expected (20-100%+ increase in conversion rate) it would still likely be a good business decision for us in the long run.
This was to be honest what sealed the decision for me and my business partner when we looked at it like this as we have no intention of leaving this business in the foreseeable future.
Hopefully this section helps you to understand if CRO is the right decision for your ecommerce business. I know I wish that we would have had this information when we were considering it.
A Review Of Our Experience With Convertica CRO Services
I don’t want to make this about my business or about Convertica too much because the point of this article is to help you decide whether using a CRO service is the right for YOUR business.
But I thought that it wouldn’t be complete without at least adding a little bit about what happened with our website when we use Convertica for CRO.
After around a week of umming and arring on the decision with my business partner we decided to book a call with Convertica to at least find out more information about their service and a quote on price so we could do the calculations like we walked through above.
When we got on the call and spoke with Convertica it was very pleasant, we didn’t really feel like they were trying to force anything on us. They just assured us that they were confident they could help us improve our conversion rate.
I mentioned that my conversion rate had dipped slightly when we changed to the new website design in 2018 and when I showed them it was clear that they could see why, they started listing a few things that they thought might have contributed to this.
Things that we hadn’t even considered when working with the web design agency.
When it got to price, it varies on the website so us providing the number that we paid isn’t really that useful to you. I would recommend just talking with a CRO provider you trust and getting a quote. But the number we gave in the example was close to what we paid in our situation.
When we left the call it kind of felt like a no brainer but we wanted to run the figures ourselves using the above calculations using our worst case scenario numbers to make sure we weren’t getting caught up in a sales spiel without understanding the numbers.
We ran the numbers based on the costs and the low end of their estimations (20%) and it made sense for us, so we agreed to try it for 6 months.
During these 6 months by the second month the service was paying for itself and by the end of the 6 months we had realised the compounding effect that I mentioned above.
I again don’t think mentioning our specific numbers can really help you make the decision for your business and I want you to take the time to calculate whether it’s worth it, so I won’t say our numbers but we saw a much bigger increase than the low end estimate of 20% increase when using Convertica for CRO.
We decided to extend beyond the 6 months as our conversion increases don’t seem to be slowing, the more tests we do the more our conversion increases and like we mentioned it’s not like the benefits disappear if we end our contract, these changes will continue to pay off.
We see Convertica as an integral part of our business now, just like we outsource our paid ads to experts because they give us a good ROI. It’s the same with Convertica for CRO.