The Magic of CRO (Guaranteed ROI)
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The relationship between conversion rate optimization (CRO) and return on investment (ROI) is often overlooked by businesses.
As Forbes suggests, it is all about quality over quantity with website traffic. But imagine being able to improve ROI using the traffic you already have, rather than spending more to increase your traffic.
The ROI opportunities presented from practicing effective CRO are not to be missed.
So to explain the magic of CRO and guaranteed ROI, we will explore why CRO improves ROI and how to improve ROI through effective conversion rate optimization.
Let’s get started.
Explaining the Return on Investment (ROI)
We know that conversion rate optimization (CRO) is the practice of increasing the percentage of visitors who take a desired action on your website. These desired actions can be when a visitor signs up to your mailing list or makes a purchase.
But what does return on investment (ROI) mean?
Generally, the ROI goal is to make more than a dollar for every dollar you spend. This could be from marketing campaigns, investing in new software, or hiring new staff.
Being able to calculate your ROI is important. Knowing your ROI goals and if you have achieved a return on investment helps you and your team make decisions, particularly when it is time to justify marketing spending for the next year and for allocating the budget for campaigns and projects.
How does Conversion Rate Optimization Improve ROI?
There are a few different ways that CRO improves ROI and they are often overlooked by businesses. When you understand the opportunities that CRO creates, it is surprising that companies are missing out on considerable ROI potential with adverting, utilizing current traffic, and designing and implementing marketing campaigns. Here are a few of the ways that CRO improves ROI.Customer Acquisition Costs
Improving your conversion rate reduces customer acquisition costs (CAC). How? It’s actually quite simple. Effective CRO makes your traffic acquisition worthwhile, which in turn improves ROI through converting more visitors. This means that there isn’t the need to spend more money on acquiring customers to hit the same revenue targets. To put it in the simplest way possible, you will receive greater revenue, with the same traffic numbers, without increasing acquisition costs. To explain in more detail, let’s go through what CAC really means.What Are Customer Acquisition Costs?
CAC is described by Neil Patel as the cost of convincing a potential customer to purchase your product or service. Some of the costs included in CAC are:- Advertising costs
- Marketing and sales teams costs
- Technical costs
- Production costs
Reducing Customer Acquisition Costs With Conversion Rate Optimization
Here is a great example using simulated data by Verifone of how conversion rates reduce CAC. CAC have been calculated by dividing the total expenses by the number of lead to customers.
As you can see from the table, from month 1 to 2, the conversion rate has increased by 0.5% to 3%, and there has been an increase of 100 customers to 600 in total in month 2. Ad spends is still the same but cost per acquisition has naturally decreased because there is no additional spending, but total signups have increased. All expenses are the same and total expenses are $21,000 for both months, however, customer acquisition costs have reduced from $42 to $35 (16.6%) as more customers have been converted by spending the same amount of money.
Let’s now use an example with profits. Similar to Shift 4 Shop’s article you can see below that with the same total number of visitors (200,000), the profit increases without needing to spend more on customer acquisition (profit increase of 200% through a 1% conversion rate increase).
Verifone echoes this again by stating that when you improve your conversion rate, it means you’re converting more customers by spending the same amount.
Contrarily, using the profit example above but with a reduction in conversion rates, if conversions dropped by 0.5%, there would be a $0.00 profit after the $50,000 PPC cost. Although we have been repeating that CRO makes your traffic acquisition worthwhile, ineffective CRO (poor strategies, lack of CRO expertise, or making gut-based decisions instead of using the data available) can harm your profits.
The key takeaway from this section is that effective CRO can make your traffic acquisition worthwhile and improve your ROI. Ineffective CRO can have the inverse effect and lead to an undesirable impact on your ROI.
We are relentless about ROI. All of our growth and optimization programs are designed to maximize Conversion Rate, Revenue, and Return On Investment. It’s even contractually guaranteed!
If you are looking to improve your ROI and boost your core conversion rate, get in touch with one of our experts today.
Understanding Your Customers
CRO is all about your customers. You need to know what brings your visitors onto your site, why they leave and what persuades your visitors to convert and take the desired action.
You might be wondering how this relates to ROI, but the more time you spend understanding exactly who your customers are, the more impactful your messaging will become. For example, it won’t be the best use of your time and budget if you set up ads in Spain that use very formal copy, when your conversion data indicates that 90% of your customers are situated in the States and respond well to informal copy.
Gathering and analyzing conversion data effectively will benefit your company in areas that are not just on your website. For example, ad campaigns and even Meta Description copy. Your research will enable you to really tailor how your customers are funneled through the website and into your website funnel as well.
How To Improve Your ROI With Conversion Rate Optimization
It’s very basic, but as we discussed earlier, you should always be reaching the right customer for your business. Using an all-encompassing approach to marketing will likely result in a poor ROI, so ensure you know who your customers are.
When you know what persuades your customers to take a desired action, update your campaigns and advertising strategies to focus on potential customers. If your messaging and user experience is tailored to your customers, they will be more likely to take a desired action. This will make your traffic acquisition worthwhile as you will be converting more visitors, rather than increasing your spending to drive more traffic.
In summary, if you use effective CRO, you will be able to reduce your customer acquisitions costs, increase revenue and ROI whilst not spending more on traffic.
Growing your CRO knowledge is definitely a step in the right direction to improve your ROI. If a business has a high level of expertise in CRO, then ROI is pretty much guaranteed. However, as we mentioned earlier, ineffective CRO can harm your ROI.
This is why we recommend that you invest in ROI by working with CRO specialists. Gaining CRO support is the most effective and quickest way to see returns on marketing spend. From our experience of working with companies including Facebook, Dropbox and PayPal, extra support with driving conversions and improving ROI makes a long-term impact on business growth.
Get more ROI from your existing traffic by increasing your core conversion rate.
Successful businesses work with us to identify growth opportunities, increase conversion rates and improve ROI. Our ROI is contractually guaranteed and we are always ROI positive (our average engagement has an ROI of 5-15x).
We always like to discuss what you’re doing and work with you to achieve your specific goals. Let us know how we can help you.