Maximizing the ROI of an online marketing campaign requires companies to invest time and money in conversion efforts to generate more orders or leads from their current traffic. Companies have two options for increasing the profitability of a landing page or a website:

The choice is not always easy. The challenge with conversion optimization is the difficulty in estimating the improvement a company can expect as a result of the project. We recommend creating a simple financial model that outlines different possible outcomes based on target conversion improvements. This model can help determine the viability of conversion optimization and set profitability targets for the project. The following case study demonstrates how to create this model.

CASE STUDY: Showing Delay As Dollars

One of our clients is a software company that sells IT training software through a variety of channels, including:

  • The company’s website

  • The company’s call center

  • Other ecommerce partners

  • Direct mail catalog

Individual licenses of the software are sold to consumers who are looking to advance their careers in IT. Multiple licenses are sold to companies looking for effective ways to save on IT training costs. The client considered its website to be its most effective channel since it had the highest profit margins.

On the business-to-consumer (B2C) side, the client made $165 for each license sold through its site. Naturally, management wanted to move most of the software sales activity online. However, with 20,000 visitors per month, the site was converting at a low 2.2%.

Our team conducted a survey of the client’s industry to understand what factors influenced the decision to purchase IT training software. As we investigated consumer behavior, different purchasing trends emerged among individuals buying the software and companies buying a multilicense deal. Ultimately, the product pages played a major role in deciding whether to buy the software package. Our solution focused on creating separate product pages based on each market segment.

During the initial phase of the project, the team created a financial model that showed how incremental changes in the conversion rate will have a significant impact on the company’s bottom line. Even with increasing conversion from 2.2% to 2.5%, our client would see an additional annual profit of $118,800. The model demonstrated that increasing conversion rates to 4% would translate into an annual increase of $712,800 in profit. Table 2-6 shows a sample of the monetization model for the project.

Table 2-6. Monetization model for conversion rate optimization

Conversion rate

Monthly traffic

Total orders

Monthly increase in orders

Monthly profit impact

Annual profit impact

Cost of three months of delay

2.20%

20,000

440

–

–

–

–

2.50%

20,000

500

60

$9,900

$118,800

$29,700

2.75%

20,000

550

110

$18,150

$217,800

$54,450

3.00%

20,000

600

160

$26,400

$316,800

$79,200

3.25%

20,000

650

210

$34,650

$415,800

$103,950

3.50%

20,000

700

260

$42,900

$514,800

$128,700

3.75%

20,000

750

310

$51,150

$613,800

$153,450

4.00%

20,000

800

360

$59,400

$712,800

$178,200

Each term in the table is defined as follows:

Conversion rate

Current and future percentage of site visitors who place an order through the website.

Monthly traffic

Current number of visitors to the site. We used a constant number in this table to simplify the calculations.

Total number of orders

Total number of orders the client should expect to see as a result of the increase in conversion rates.

Monthly profit impact

How much additional monthly profit the client should expect as a result of the increase in orders collected via the website. This number is equal to the total number of orders multiplied by $165.

Annual profit impact

How much additional monthly profit the client should expect as a result of the increase in orders collected via the website.

Cost of three months of delay

Based on the target conversion rates, the lost profit if the client decides to delay the project by three months.

Tip

DON’T FORGET!

Conversion optimization is a new area for many companies. By developing a financial model for cost/benefit analysis, you can determine how seriously to consider optimization initiatives.