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You are here: Home / analytics / Show me the ROI and not the Conversion Rate. Thank You

Show me the ROI and not the Conversion Rate. Thank You

March 27, 2013 by Himanshu Sharma 7 Comments

In the last few years somehow the metric ‘conversion rate’ seems to have taken the place of metrics like profit and ROI for many CRO consultants/agencies. That is why every second CRO agency boasts of improving the conversion rate of their clients by not less than 2 digits and at the same time shies away about its impact on the business bottom line. 

conversion-rate-promotion

280% improvement in conversion rate

 Sounds familiar?

Now the problem with this type of promotion is that we don’t know how this 280% increase in conversion rate impacted the net profit and ROI of the business. Did they spend 280% more to get this conversion? Did they decrease the traffic to the website to achieve this level of conversion rate? Did they increase the conversion rate of the conversions which don’t really impact the business bottomline? Is the conversion rate they are talking about goal conversion rate or ecommerce conversion rate? How was this conversion rate calculated? Did they use visits or visitors in their calculations?  Is it in aggregate form or segmented? When was this conversion rate calculated? Was that the peak season? Does this improvement really mean anything?

With so many questions, it is hard to gauge the effectiveness of the service provider who is selling the conversion rate metric to promote his/her business.  If a 280% improvement in conversion rate was such a big deal, it would have made any business owner a multi-millionaire overnight. 

What good is ‘conversion rate’, if it is not tied to, and reported with, business bottom line impacting metrics like revenue, profit and cost. There is always a possibility that an increase in the conversion rate actually resulted in an only marginal increase in sales or even a decline in gross profit. How do we know as an outsider or as a client? It reminds me of the old days when SEO agencies boasted of search engine rankings they acquired for their clients like they really mattered.

I would like to see more marketers talking about improving the sales and the ROI of their clients.

Sales improved by 50%………..ROI improved by 10%

I would like to see experiments/tests being carried out with the focus to improve sales and ROI and not the conversion rate.

Now it is your turn. How much does ‘conversion rate’ alone impact your business decisions? What do you think about the service providers who boast of improving the conversion rate of their clients by 3 digits but don’t talk about how it impacted the business bottom line?

Filed Under: analytics, Conversion Rate, Return on Investment

About Himanshu Sharma

The founder of optimizesmart.com, Himanshu has more than 12 years of experience in web analytics and digital marketing. He provides a popular web | digital analytics training course on optimizesmart.com and has got hundreds of students.
Learn more about Himanshu Sharma
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Comments

  1. Michael says

    March 27, 2013 at 8:57 am

    Himanshu, you make a great point. I just recently saw a presentation on click-through rates for homepages. While CTR’s generally improved, sales decreased. Sometimes a lower conversion rate + increased sales is the way to go.

    Reply
    • Himanshu says

      March 28, 2013 at 2:57 am

      Conversion rate need to be tied with business bottomline impacting metrics like revenue, cost and profit to get the complete picture.

      Reply
  2. Jonathan says

    March 28, 2013 at 4:01 am

    I think this article is a prime example of over complicating things.

    If it’s a proper business (i.e. has proven it can make money) and you increase their conversion rate by 280% they’re going to make more money. Just no two ways about it.

    Can you give me an example of business that increased ecommerce conversion rate by 280% and didn’t make more money as a result of it?

    The only way that could happen is if they paid a CRO expert more than the revenue they generated from the additional sales or they suddenly decided to sell their products at a loss. In which case that’s there own fault and they won’t be in business very long.

    I also don’t like the way you toss around the word profit as though you have much say in that. The only profit you control is that of your own business. If you’re carrying out CRO it’s your job to increase conversions and increase the revenue generated through a website. If the business owner can’t make a profit at the end of it who’s fault is that?

    And search engine rankings do matter.

    Reply
    • Himanshu says

      March 28, 2013 at 10:24 am

      Hi Jonathan! This post question the practices used by some of the consultants to promote their business in a rather misleading way. There is no objection raised on whether or not conversion rate impacts the revenue.

      Reply
    • Matt Aster says

      April 1, 2013 at 2:25 pm

      Search engine rankings don’t matter in the grand scheme of things. If you optimize 100 keywords to page one and all those are research keywords you haven’t done any good for the client.

      I’d rather optimize 10 ROI driven keywords than 100 “rankings” keywords.

      Search rankings are an indicator, ROI is the measurement.

      Reply
      • Himanshu says

        April 2, 2013 at 6:13 am

        couldn’t agree with you more Matt

        Reply
  3. Alex Clifford says

    April 3, 2013 at 4:47 am

    I’d have to agree with you Himanshu. Conversion Rate Optimisation started as a: “let’s improve this landing page”. But then when you get blinded by that constant desire to increase that rate, you can ignore the ROI. Which is the only thing your clients really care about!

    Reply

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