• Pat Grady

    Love your article, really love it!

  • Pat Grady

    “and Return on Ad Spend don’t take Average Order Value into account”? I know what you meant here, but think you need to clarify for others.

  • http://www.delivra.com/ Cody Sharp

    Nice article. One question, in your experience do Bing Ads or Google Adwords give you a better ROI?

  • http://www.facebook.com/forfunandfreedom Josh Davis

    I have been thinking about this more and more lately. Thanks for the great article!

  • http://conversionscientist.com Brian Massey

    Thanks, Josh.

  • http://conversionscientist.com Brian Massey

    I couldn’t comment. I’m sure the answer is “it depends.” If you figure it out for your niche, please let us know.

  • http://conversionscientist.com Brian Massey

    You must be a conversion optimizer! ;-) Thanks for the kind words, Pat.

  • http://conversionscientist.com Brian Massey

    Good input I’ll request an edit. Basically return on ad spend (ROAS) and average order value (AOV) can go up even if your conversion rate is tanking. Thats why RPC is a preferred.

  • Tom Bowen

    Good article Brian, with your trademark approach and humor included! Biggest keys to me are a) as you cast a wider net with your ad spend, you get less and less qualified traffc, and b) the improvements you make from Conversion Optimization last, while money spent on traffic gives you a one-time benefit only and you have to keep paying to maintain that level.

  • http://conversionscientist.com Brian Massey

    Tom, I can tell you were paying attention! It’s easy to assume that these concepts are “given” since we work with this stuff every day. I’m finding that they are not. Thanks for the comment. –Brian

  • Guy Hadas

    I believe that a conversion optimizing is actually the single most important part of internet marketing today. If you already have your website online, making it showing up and not selling, will not benefit you at all. Make sure you have a good conversion rate is what matters…

  • http://twitter.com/jwdlatif Jawad Latif

    It is beyond my understanding. Poor me :(

  • http://twitter.com/jwdlatif Jawad Latif

    What are the meaning of “Order” in this post. And how will you differentiate “Conversions” & “Sales”? These three terms have confused me a lot.

  • seohimanshu

    Excellent article Brian. Glad to meet someone who is not obsessed with conversion rate metric.

  • http://conversionscientist.com Brian Massey

    Remember that the quality of the traffic is very important for conversion rates. It’s the bottom of the CR fraction. But quality traffic isn’t enough.

  • http://conversionscientist.com Brian Massey

    Conversion Rate is helpful, but can be misleading. Like all statistics.

  • http://conversionscientist.com Brian Massey

    Jawad,

    Good questions. An order is a completed transaction, a sale, or a completed subscription. Conversion Rate is measured by number of transactions divided by number of visitors. Each transaction, or Order may include several products and a wide range of order prices.

    A conversion is an order. “Sales” in this article is “Revenue” or the dollars (pounds, yen, lire) generated.

    I hope that clarifies things.

  • http://conversionscientist.com Brian Massey

    Phone tracking is hugely important. When we work with phone conversions, we require the client to provide a value of each call. That value may change from month to month as their close ratio changes, or even change from call to call if they have sophisticated enough tracking. This allows us to understnd the quality of the calls in dollars.

    Calls can be tracked and can be assigned a dollar value, so they can be addressed in this model.

  • http://twitter.com/jwdlatif Jawad Latif

    So,
    Order = Conversion
    Sales = Revenue

    Right?

  • http://www.LeadDiscovery.com/ Jerry Nordstrom

    Wow Brian that was a ton of great information! I think you like what you do too much :-)

    Strictly from a PPC point of view, the analogy is that you have a twisted up water hose and optimization is the process of finding and grabbing the start of the hose then working out the kinks from one end to the other until you have an efficient straight line.

    Where is the “start of the hose” for the optimization process. I believe the starting point is mapping out the exact intent for each keyword and phrase you’re targeting and aligning them with your sales goal funnel.

    These assumptions about keyword search intent will drive the reasoning behind the decisions you make in evaluating the performance of each element within your campaigns.

    Keyword and phrase intent should also line up with the business’ objectives. As you know they are not always revenue driven or measured by a “sale”. Brand awareness campaigns, sharing, new follower growth etc can also be goals. Thus,many of the indicators you may use to optimize a ecommerce campaign would be vastly different than a brand awareness campaign.

    Optimization is a daily effort and should be the focus of every PPC marketer.
    Testing is where I may segment budget to a specific set of marketing assumptions to see if they work.

  • http://conversionscientist.com Brian Massey

    Your image of the water hose is vivid. While the landing experience and the ad-side are clearly independent, your landing pages have to pick up where the ads leave off. The keyword phrases predict intent for ad selection, and the ad provides intent for the landing page design and messaging. You can optimize these separately, but not independently.

  • http://conversionscientist.com Brian Massey

    That is correct.

  • http://www.rimmkaufman.com/ George Michie

    Brian, Good post. I’ll see your conversion and raise you a few. Sophisticated ecom advertisers should be driving by margin/click factoring in order cancels, phone, and softer metrics like catalog sign ups, email sign ups, store locator visits, etc. Moreover, by improving conversion rates on the landing page you improve margin/click for that ad allowing you to bid more at the same efficiency, placing you higher on the page and driving more higher quality traffic. A virtuous circle that will result not in moving budget away from PPC to conversion optimization, but rather because of conversion opt you can profitably spend more in PPC.

  • http://conversionscientist.com Brian Massey

    George you are absolutely right. One thing catalog sites can accidentally do with poor landing experiences is sell more of the low-profit stuff. Revenue-per-click may be going up, but profit is going down. Not a good outcome.

    When you calculate margin-per-click are you using the profit margin based on the cost of goods, or does the margin include the click costs as well?

  • http://www.rimmkaufman.com/ George Michie

    We do it different ways depending on the needs/capabilities of the client. Some will pass us the margin (or COGs) dynamically, others send us a back feed at night. Some catalogers share which orders were from new-to-file versus existing customers. The margin is tied to an order which is tied to the ad(s) that drove it and the click costs associated with those ads. We have some clients who want us to optimize for maximum marketing income (Margin minus ad costs minus management fees), but others want to invest some fraction of lifetime value in customer acquisition. Goals vary, of course. The beauty of having our own tech platform is we can do anything clients need us to do.

    The power of PPC is that it can ALWAYS meet ROI targets given sufficient data flow (harder with little folks because the signal to noise ratio is lower). None of the folks we work with are looking to reduce their PPC spend consequently. Instead they’re looking to grow it profitably, and conversion optimization can be a valuable piece of that.

    Are you going to be at SMX West? Let’s grab a beer.

  • http://conversionscientist.com Brian Massey

    George, it sounds like you’ve got some smart clients. I won’t be at SMX, but have a beer for me. Look me up if you ever come to Austin.

  • http://twitter.com/HiConversion HiConversion

    Check out http://www.hiconversion.com for e-Commerce optimization. Specializing in real-time optimization and reporting metrics like RPV (Revenue per Visitor)

  • http://conversionscientist.com Brian Massey

    Are you listed in the conversion lab? http://www.myconversionlab.com