2023 Playbook: Lessons From the Recession Part 1 of 3
The Great Recession and the COVID-19 pandemic have taught us valuable lessons that are important for companies to take to heart. Recessions aren’t unique and are all typically characterized by capital restraints, and tough labor markets.
While I’m not a master of macroeconomics like our friends at McKinsey, I do understand that my skill sets are aligned with their findings in what successful companies did to thrive in past recessions.
Part 1 and Part 2 will deal with findings from our research, while Part 3 is dedicated to actionable insights that companies can take to help navigate and thrive in uncertain economic times.
Part 1
What has worked in tough times?
Improving profit margin beats improving revenue. Analysis of the past recession shows that companies that focused on improving their profit margins grew faster than their peers who focused on growth.
What McKinsey calls “optionality in the balance sheet” can be simplified to capital liquidity. Essentially, it stems from the first finding. A combination of increasing your margins, building your working capital, and decreasing your debt allows companies to be more flexible and respond faster to opportunities.
Being able to focus on growth and profit margins has an exponential effect. Increasing our margins and working capital gives us the flexibility to increase growth by exercising our options faster than the competition with our improved liquidity.
Companies that improved their margins AND were able to grow revenues experienced a “1+1=3” effect. This isn’t terribly hard to wrap our heads around, as this strategy tends to be successful no matter the economic climate. However, in tough times, it boosted companies ahead of their peers even more.
This McKinsey graph illustrates the point extremely well. Companies that improved margins outperformed companies that just focused on growth. But, companies that were able to capture market share while improving efficiency got an even greater boost to performance.
Where do we go from here?
It would be nice if every company could afford to hire McKinsey, Bain, or BCG to come in and help us navigate the storm, but we don’t have time to kid ourselves. However, we can use their free resources and hire the support we can afford to set ourselves up for success and capitalize on opportunities before our competitors.
We have the data, but the big question is what do we do next? All three takeaways of increasing margins, capital liquidity, and exercising our liquidity to capitalize on growth opportunities can be accomplished in a variety of ways. How you go about it will depend on how big you can build your war chest and the nature of your industry.
Improving margins for eCommerce retailers can involve more efficient inventory management and converting more traffic. Manufacturers can improve their payment terms, and tech companies can investigate ways to license and monetize intellectual property.
The importance and main takeaway of improving margins in tough economic times is strengthening your balance sheet to withstand strong economic headwinds, and building capital to allow for decisive action when opportunities arise. The studies showed that companies who acted before their peers experienced higher returns than those who waited or weren’t able to move as fast.
Stay tuned for Part 2 where we’ll discuss specific recommendations for staying on the ball with your audience and making sure you're providing measurable results.
Conversion Rates are crucial to any e-commerce business. It refers to the percentage of visitors to your website who complete a desired action, such as making a purchase or filling out a form. Having high conversion rates means that your website is performing well and is effectively communicating your value proposition to your customers. On the other hand, a low conversion rate may indicate that your website is not engaging enough or that there are obstacles preventing customers from making a purchase. Therefore, it is essential to continually measure and improve your conversion rates to optimize your website's performance and increase your revenue. By analyzing and optimizing your conversion rates, you can stay ahead of the competition and ultimately grow your e-commerce business.
In this article, I’m going to explain why your conversion rate is absolutely your most important KPI if you’re an eCommerce business, and what factors going into improving it. I’ll also be discussing other metrics that can hint at a conversion rate problem, and how to tell if there is room for improvement.
Define and Prioritize Your KPIs
Firstly, it is important to define and prioritize your KPIs so that you have a clear understanding of what you need to measure and what goals you are trying to achieve. Businesses should be setting SMART goals (specific, measurable, achievable, relevant, and time-bound) and aligning their KPIs with these goals.
Prioritization plays a key role, especially when it comes to data analysis. You will want to focus on the KPIs that are most relevant to your business's goals and objectives, and this should be your primary focus when analyzing your data.
In eCommerce, the most popular KPIs tend to be Return on Ad Spend (ROAS), Average Order Value (AOV), Customer Lifetime Value (CLTV), Add to Cart Rate and Conversion Rate. Most eCommerce platforms provide analytics for these metrics and will calculate conversion rates and give you an average conversion rate over time so you don’t have to worry about the math.
Monitor Your Conversion Rate
One of the most important e-commerce KPIs is the conversion rate. It is an indication of how well your website is performing and how effectively you are converting your visitors into customers. Tracking this metric provides you with valuable insights into the effectiveness of your sales funnel and can help identify areas for improvement.
But, knowing your conversion rate isn’t nearly enough. Take a look and compare it to your industry’s average to see how you measure up. Next, decide on your conversion goal, and figure out a plan for exactly how you're going to increase your conversion rate. Conversion rates are tied directly to user experience. If you have a conversion rate problem, chances are likely you have a user experience problem somewhere on your site. This is where other analytics tools and CRO tools can be utilized to help you focus on the issue, instead of making a huge mistake like redesigning your site to fix the issue.
Let’s take a look at some of the other metrics to help us diagnose where a problem is occurring on your landing page or site.
Track Your Customer Lifetime Value (CLTV)
Another important e-commerce KPI is Customer Lifetime Value (CLTV). It is the amount of revenue a customer will bring to your business over their lifetime. CLTV is a great metric to monitor as it provides insights into how much you should be spending to acquire new customers, the type of customers you should be attracting, and how to better retain your existing customers.
This can vary dramatically depending on your business model. Do you offer a subscription service in addition to products? Are people signing up for loyalty programs and taking advantage of them? Does your business model only require a one-time purchase (i.e. wedding dresses, maternity)? How long should one purchase technically last your customers? CLTV is also a measure of how long people are sticking with your business, and there can be more than one way to measure this. You need to establish a goal for your CLTV, and establish and action plan for increasing it.
Sure fire ways to do this include personalization for repeat site visitors, remarketing/re-engagement campaigns via email and sms, or loyalty programs that offer VALUE to customers for their loyalty (i.e. not just run of the mill discounts).
Keep an Eye on Your Cart Abandonment Rate
Cart abandonment is when a customer adds items to their cart but leaves the website before completing the purchase. This can be a major problem for e-commerce businesses, as it means that potential revenue is being lost. Monitoring your cart abandonment rate is crucial in identifying problematic areas in the sales funnel and taking corrective action to rectify them.
Your cart abandonment can some sometimes feel like a war of attrition. Your cart abandonment may be on par with industry averages, but take a look at what percentage of visitors are viewing your product pages. We’ll often see that PDP views are extremely high, while add-to-cart is average. For reference, eCommerce industry averages for sessions with a page view are about 43%, while sessions with an add-to-cart are around 14%. This is where the war on attrition comes into play. If your PDP views are 60%, and your add-to-cart is 5%, then you’ve just diagnosed a PDP issue.
Google Analytics is a helpful tool for tracking conversion funnel drop-off, and helping diagnose if you have a Cart Abandonment problem, or a PDP problem. Cart abandonment in a vacuum can usually be handled by personalized remarketing campaigns to customers to encourage them to checkout. However, take the time to analyze your checkout process to make sure the user experience is on par with customer expectations. Check out our article on Cart Abandonment to learn more about a conversion optimized checkout experience.
Analyze Your Traffic Sources
To make informed decisions in your business, we highly recommend that you analyze your website traffic sources. Traffic from different sources can have a variety of conversion rates, customer lifetime value, and even return rates, hence its significance. Tracking your traffic sources and the data that follows will give you insight as to where the majority of your sales are coming from and which sales channels might need to be optimized.
Make sure your marketing messages are consistent across all channels. You don’t want to confuse potential customers who see an ad on Facebook with one message, and a completely different message on YouTube. That’s a big no-no.
If you really want to go above and beyond, try personalized messaging for visitors from specific traffic sources based on their existing behavior on site. Visitors from social media vs. direct traffic may have completely different behavior and interests, so tailor your messaging specific to where they are coming from. This requires a lot of work and audience intelligence, but the up side is well worth it.
Track Average Order Value (AOV)
By analyzing this metric, you'll be able to identify trends and make informed decisions about pricing strategies, promotions, and product offerings. A higher AOV means you're effectively getting more value out of each transaction, which can lead to increased profits.
If your AOV is considerably lower than the average cost of your products, then it’s probably time to think about revamping your upselling and cross selling strategies. A lot of times these are placed in horrible positions on the PDP, and are rendered ineffective. Test different placements, strategies, and bundles to entice visitors or let them know that they experience could be enhanced for a marginal increase in spend.
Track Your (and Your Competitor’s) Bounce Rates
Bounce rates are black sheep of eCommerce KPIs, but often times it’s where we start. Bounce rates can give you a holistic view of your site’s user experience issues, and let you know where you stand against the competition. A poor bounce rate is typically indicative of poorly performing copy, confusing navigation, or busyness bordering on chaos, or all of the above. This metric is easy to gain access to for your competitors, which is why we recommend it as a starting point for evaluating your performance within your industry and niche.
The Name of the Game is Audience Intelligence
All of these issues we’ve listed above can be resolved by getting in-depth intelligence about your target audience and site visitors. We’ve found the best companies don’t sit back and passively collect information about their visitors. The best companies are actively engaging with their audience to create insights that lead to focused strategic decisions that are verified through A/B testing.
Understanding your audience, especially the ones visiting your site, means understanding what they want and need when they arrive, and speaking to the emotions they experience before and after a purchase is made. It means understanding and alleviating the pain points they encounter during their user experience, and using that information to make better decisions in your marketing, customer service, operations, and supply chain.
Conclusion:
Key Performance Indicators are critical performance measures that should be monitored, analyzed and reported regularly. By understanding and utilizing the metrics we have touched on in this post such as conversion rates, customer lifetime value, cart abandonment, traffic sources and prioritization of your ecommerce KPIs, your business is on the right track to achieving a data-driven approach that will allow you to make informed decisions and steer your e-commerce business downstream to success.
Conversion rate optimization (CRO) is a crucial part of digital marketing. It’s an effective way to maximize the number of visitors that convert into customers. With the right CRO strategies, you can boost your website’s performance and increase your ROI and advertising efficiency. Let’s take a look at some of the different types of CRO strategies that you can use to optimize your site.
A/B Testing
A/B testing is one of the most popular types of conversion rate optimization methods. It involves creating two versions of a page or element on your website and then testing them out on different audiences to see which performs better. This allows you to determine which version resonates more with users and which one drives more conversions. You can also use A/B testing for email campaigns or other marketing materials.
The greatest benefit of A/B testing is it removes the guesswork from your strategy. You may have an idea of what your audience needs and wants, but A/B testing allows you to test that hypothesis on a limited number of your visitors and prove your hypothesis correct before committing to any changes.
You can even segment the results of your test by traffic sources and see which audience segments respond to certain changes more positively than others. This provides a wealth of knowledge about the little differences in your audience segments that can generate HUGE results.
Testing different variations of your products or services pages is something ALL eCommerce sites should be doing on a regular basis.
Personalization
Personalization is another type of conversion rate optimization strategy that can help you increase conversions by providing tailored experiences for each user. By understanding user behavior, you can create personalized content that speaks directly to their needs and interests, making it easier for them to find what they’re looking for and more likely to complete a purchase or sign up for a service.
The entire theory behind Conversion Rate Optimization is better understanding your audience and customers to determine what information they find most valuable, and what experience makes them most likely to convert. Personalization allows you to speak more directly to different parts of your audience at the same time while providing both of them with the information they each find more useful. It shouldn’t come as a big surprise that this is an extremely effective strategy for increasing your number of conversions.
Mobile Optimization
With mobile usage continuing to grow every year, optimizing for mobile devices is becoming increasingly crucial for businesses looking to increase their reach and sales volume. A key component of this is Conversion Rate Optimization (CRO), which ensures that the correct offerings are displayed to users during their mobile visits and the checkout process is highly optimized for a hassle-free experience. After all, no one likes dealing with long forms or slow-loading images on their phones! Through the strategic use of CRO, companies are able to boost user engagement, nudge potential customers toward a purchase, and make sure they come back time and again. The bottom line: If you’re not prioritizing mobile optimization and CRO, you’re likely missing out on an essential piece of your success puzzle.
An important part of mobile optimization is making sure the user experience is consistent across all devices. Users are extremely turned off when they find a brand on their mobile device and decide to continue their search on their desktop only to find a completely different experience. Consistency is essential for creating seamless transitions between devices. Mobile and desktop web should not be in competition, but your approach should ensure they work in tandem to deliver a full journey experience.
Mobile traffic was a higher percentage of traffic vs. desktops across all industries this past year (58% vs. 42%) but desktop still has a higher conversion rate on average (3% vs. 1.6%) and an average higher order value (91% higher on desktop vs. mobile). Having a multi-device strategy will ensure you capitalize on opportunities across all devices and acquire and retain your customers.
User Testing
User testing websites is a great way for companies to get feedback on their products and website experience. It allows developers to see how people interact with their web pages and receive honest observations. This information is invaluable as it allows companies to make improvements that customers actually need and want. User testing websites offer a range of services from simple surveys and polls to detailed feedback interviews. They can also help identify problem areas, compatibility issues, and usability bugs. With the help of these services, companies can ensure their websites are optimized for the best user experience, making customers more likely to stay on the site longer and return in the future.
The most effective user tests involve identifying the main conversion goal on your site and asking testers to go through all the steps required to perform that action. You create a scenario that acts like an actual purchase on your site and see where a user experiences difficulty or enjoys a particular part of the experience.
A famous adage in CRO is “don’t make me think” made famous by CRO expert Steve Krug. The idea behind it is that any interaction with your website where the user has to “think” or guess what to do next has the potential to make them bounce. User tests allow you to identify all the areas in your conversion funnel that might cause a user to “think” for an extra millisecond, and remove them before they start to add up and prevent visitors from taking that desired action.
Heat, Click, and Scroll Maps
Heat, Click, and Scroll maps are essential tools to understand your consumer behavior. Heat maps provide a visual representation of how people interact with online content, such as which sections they spend the most time on and which links they tend to ignore. They are a vital tool used to measure how well different elements of a website entice customers to purchase or take action. These analytical tactics can be incredibly useful for monitoring user engagement and developing marketing strategies by providing insight into what works best across all platforms.
Best practices involve using heat maps to show the most popular elements on a landing page, then using that data for creating your A/B test to fine-tune conversions. When and where your users take action can help you optimize your campaigns for the best results.
Onsite Surveys
Onsite surveys are an effective method to conversion rate optimization. They allow businesses to measure customer satisfaction and gather feedback on website design or product performance. Additionally, they can provide customer insights that help to improve a company's services and products. By offering onsite surveys, companies can understand customer behavior and uncover areas for improvement that increase conversion rates. With the help of onsite surveys, conversion rate optimization is easier than ever!
Conversion rate optimization is an important part of any digital marketing strategy, as it helps maximize the number of visitors who convert into customers. There are many different types of conversion rate optimization strategies, from A/B testing and personalization to usability testing, that can help improve your website’s performance and ultimately drive more sales and profits. With the right CRO strategies in place, you can ensure that your website is providing an optimal user experience while also boosting conversions across all channels.
FAQs
How do you improve conversion rate optimization?
There are a number of ways to improve your conversion rates, but conversion rate optimization in its simplest form is understanding exactly what your audience and visitors are looking for and providing it. There are a number of boxes to check along the way, and I haven’t done CRO justice by summarizing it in one sentence. If you want to learn more about how to boost your conversion rates, check out this article.
What is Conversion Rate Optimization in eCommerce?
Conversion Rate Optimization as it applies to eCommerce is the process of getting more visitors to your website to buy something. For example, if you sell stuffed animals on your website, and 2 out of every 100 visitors make a purchase. Then, your conversion rate is 2%. Simple. CRO aims to lift that number to something that would be considered STRONG for the industry that you are in, say 4 to 5 out of every 100 website visitors.
Why is conversion rate optimization important
CRO is vitally important, regardless of your business model, because you’re getting the most out of a precious asset (i.e. your website). The goal is to make your most publicly accessible asset part of your marketing funnel and turn it into an efficient lead generation and sales tool. If people are visiting your website and leaving without filling out a form, placing a call, or buying something, then you have a problem with your CRO (conversion rate optimization) that you need to address immediately.
What are conversion optimization tools?
CRO tools typically include but are not limited to the list below.
A/B Testing
User Testing
Heat maps
Click maps
Session Recording
Conversion Funnel Analytics
Traffic Analytics
Call Tracking
Lead Form Analysis
Is conversion rate optimization part of SEO?
Not technically, however, CRO is extremely valuable for SEO. CRO aims to improve the usability of your website and create a positive user experience. Google takes into account what people do when they get to your site. Improving your interaction rate, time on site, pages visited, links clicked, bounce rate, etc. are all benefits of CRO and positively impact SEO.
What are the benefits of Conversion Rate Optimization?
Conversion rate optimization (CRO) is a great way to maximize the potential of website traffic. Put simply, it refers to the process of increasing the number of visitors that become customers on your website. By applying strategies such as user experience testing, A/B testing and tweaks to design and layout elements, you can increase conversions and make your website more effective at generating leads. This can be beneficial in reducing costs associated with traditional marketing efforts or paid advertising channels, providing a better return on investment for those services. Additionally, it opens up new opportunities for growing customer bases and achieving higher ROI from online activities. Overall, conversion rate optimization is an essential element for any successful online business and should not be overlooked in strategic planning for increased success.
Landing pages are typically a single webpage or a standalone site page linked directly to a marketing campaign with the goal of lead conversion. Landing pages can be your most profitable weapon in an ad campaign. Increase your ROI (Return on Investment) and ROAS (Return on Ad Spend) without increasing ad spend by driving users to a specific page with one action in mind.
Landing page optimization is a must-have if you want to increase conversions. The average landing page conversion rate across all industries is just below 10%, yet landing pages remain the least popular type of sign-up form. In addition, only half of the companies that utilize a landing page have optimized it for conversions. Keep in mind, companies that utilize conversion rate optimization tools on their landing page see an average increase of 30% in their conversion rate.
A landing page is an essential part of any website. It serves as a hub for your visitors, allowing them to easily access the information they need and guiding them through the process of becoming a customer, subscriber, or donor. To make sure your landing page does its job effectively, you'll want to pay attention to five key elements: design, message, content, call-to-action (CTA), and optimization. Let's take a look at each of these in more detail.
Design
Design is one of the most critical aspects of your landing page. It should be visually appealing and easy to navigate, while still adhering to your overall brand identity. If you're working with a web designer or agency on this project, make sure to provide them with detailed feedback and style guidelines. That way you can ensure that the design meets your expectations and accurately reflects your brand.
Message
The message of your landing page should be clear and concise; there should be no confusion about why people are visiting this page or what action you want them to take after reading it. When crafting your message, ask yourself: What makes my product/service different? Why should someone visit this page instead of another? What value do I offer? Answering these questions will help you focus on the essential elements of your message and get visitors excited about what you have to offer.
Content
Once you've got the design and message nailed down, it's time to start adding content! Content is crucial for engaging visitors and getting them interested in what you have to offer. Make sure that all the content on your landing page is relevant, informative, and easy-to-read—no one likes slogging through long-winded paragraphs! You'll also want to include visuals such as photos or videos if possible; these can be great ways to draw people in and show off what makes your product/service unique.
Call-to-Action (CTA)
Every good landing page needs a strong call-to-action (CTA). This could be anything from signing asking for contact information, a phone number, or an email address or buying something from an online store; whatever action it is that you want visitors to take after reading your page should be clearly stated at the end! Your CTA should also link directly back to where users can complete their desired action—for example, if they're signing up for emails then there should be an email signup form on the same page so they don't have to click away from it first.
Optimization
Last but not least comes optimization—making sure that all the above elements are working together in harmony! This includes optimizing things like title tags, meta descriptions, URLs, loading times (the faster the better!), image file sizes (make sure they're small enough!), etc., so that everything looks good both on desktop and mobile devices. This step is often overlooked but it can make all the difference between a successful landing page and one that falls flat!
Tools that can show which copy users are engaging with the most (i.e. heat mapping) can be valuable for improving not only your copy but your layout as well. If your most important copy is being overlooked then heatmaps can help show you where the user's attention is drawn to the most. A/B testing is another must have tool to help optimize your landing page. Creating variations with minor or major changes can give you key insights into what your target audience is really looking for.
A well-crafted landing page can mean more leads for businesses large and small alike. When designing yours remember these five keys—designing with purposeful aesthetics; crafting an effective message; producing thoughtfully selected content; creating persuasive calls-to-action; optimizing every element—and success will surely follow! With just a bit of effort & attention paid towards making sure each element works together perfectly, businesses will see results reflected in their bottom line soon enough!
FAQs
How do you improve conversion rate optimization?
There are a number of ways to improve your conversion rates, but conversion rate optimization in its simplest form is understanding exactly what your audience and visitors are looking for and providing it. There are a number of boxes to check along the way, and I haven’t done CRO justice by summarizing it in one sentence. If you want to learn more about how to boost your conversion rates, check out this article.
What is Conversion Rate Optimization in eCommerce?
Conversion Rate Optimization as it applies to eCommerce is the process of getting more visitors to your website to buy something. For example, if you sell stuffed animals on your website, and 2 out of every 100 visitors make a purchase. Then, your conversion rate is 2%. Simple. CRO aims to lift that number to something that would be considered STRONG for the industry that you are in, say 4 to 5 out of every 100 website visitors.
Why is conversion rate optimization important?
CRO is vitally important, regardless of your business model, because you’re getting the most out of a precious asset (i.e. your website). The goal is to make your most publicly accessible asset part of your marketing funnel and turn it into an efficient lead generation and sales tool. If people are visiting your website and leaving without filling out a form, placing a call, or buying something, then you have a problem with your CRO (conversion rate optimization) that you need to address immediately.
What are conversion optimization tools?
CRO tools typically include but are not limited to the list below. For more details about each item visit our Website Optimization page.
A/B Testing
User Testing
Heat maps
Click maps
Session Recording
Conversion Funnel Analytics
Traffic Analytics
Call Tracking
Lead Form Analysis
Is conversion rate optimization part of SEO?
Not technically, however, CRO is extremely valuable for SEO. CRO aims to improve the usability of your website and create a positive user experience. Google takes into account what people do when they get to your site. Improving your interaction rate, time on site, pages visited, links clicked, bounce rate, etc. are all benefits of CRO and positively impact SEO.
Where can I get more information about how to improve my conversion rates?
Check out our CRO Blog here for more tips and tricks to improve your conversion rates.
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