Conversion Benchmarking Hell, Part #2
In Part 1 of Conversion Benchmarking Hell we went from a single-dimensional conversion rate (CR) comparison between two websites to a two-dimensional display that broke-down their conversions by traffic source type.
As we could see, the overall CR of the two websites is in fact the end result of the CRs the websites are achieving from each traffic source type.
Since their traffic sources structure differs, it is immediately more difficult to compare their conversion rates side by side, making benchmarking highly unreliable, even as an indication. The question we left off at was whether the data we have is enough to at least benchmark their internet marketing efficiency.
Round #3: Adding Traffic Source Data
While the CR can be a so-so indication of their efficiency, it does not provide nearly enough data to come to any reasonable conclusions.
The next logical step is adding their traffic source data to the comparison table.
Now we can finally see the tremendous differences between the websites and how they are marketed. Website #1 receives app. 7 times more traffic than Website #2 and has 3,5 more customers than Website #2, although it has a much lower conversion rate.
Unfortunately this hasn't really solved our mystery, but only reinforced the questions we started with.
Which of the websites is more efficient? The one with higher traffic and more customers, or the one with lower traffic, less customers, but a higher conversion rate?
The one thing that is clear is that Website #1 needs twice more traffic to generate the same number of customers as Website #2 ... if we look just at the overall conversion rate.
But what happens if we remove banner advertising from Website #1 from the equation?
With banner advertising out of the picture, Website #1 is now clearly the winner, strongly outperforming Website #2 in terms of CR, traffic and customers.
Just removing one traffic source from our strategy utterly changes the overall CR.
It's the same when you try to benchmark your website and internet marketing against the industry standards. You are comparing your unique mix of traffic traffic sources with hundreds of other websites with their own unique mixes of traffic sources. Change just one on your side and the story changes completely.
Is it clear now that industry conversion benchmarking is a hoax?
OK, if you don't believe me yet ...
Round #4: Adding Monetary Data
The key reason we are in the internet business is to make profits, making it impossible to benchmark without also knowing the monetary values behind the % and the traffic numbers.
Let's bring back banner advertising to Website #1 and also add the needed monetary data to bring the case home.
Now things really became interesting, and we can finally start seeing the big picture.
What's the conclusion?
Based solely on all of this data, is there any way we can conclude which website (and marketing) is performing better?
By any means no.
Round #5: Profitability
To get the final answer, we need to look at actual profitability of both of the websites. Without going into much detail, here's the new comparison table:
Just looking at their revenues and advertising costs, Website #1 is still doing much better than Website #2, although it is not spending its money efficiently if compared with Website #2.
But to get the answer, we still need to look at their other costs.
Just by also taking into account their overhead and cost of goods sold the picture is now entirely different. Website #1 is now actually unprofitable, while Website #2 is showing a good profit.
Again, just by looking at the numbers it now seems that Website #2 is much more successful than Website #1.
Round #6: Figuring in Business Goals
We could leave it at that. Website #2 is more successful, since it's more profitable.
Now, to complete this game, let's also figure in their individual business goals.
In this regard, the final winner would be Website #1.
Going from start to finish, it should now be apparent that is doesn't make any sense whatsoever to benchmark your conversion rates against any industry standards, because:
And I could go on and on and on.
All of these elements, and many others, make it impossible to compare websites side by side.
Stop benchmarking your conversion rates against industry standards. It doesn't work and it doesn't tell you anything. It only either puts you in a good or bad mood, but makes you ignore all the other factors that really impact your overall marketing success.
Internet Optimization Blog
Interactive Optimization and Analytics Blog focuses on practical strategies and tactics on optimizing your internative marketing mix, from traditional direct to online, including channel integration, e-commerce and processes.
Edited by Rok Hrastnik
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