What is Conversion Rate Optimization?

Conversion Rate Optimization (CRO) for eCommerce is the science and art of getting more of your online store’s visitors to purchase, without getting more traffic.

For eCommerce stores, the conversion rate is typically defined as the percentage of unique visitors that make a purchase. Say for example you have 10,000 unique visitors to your online eCommerce store each month, and your conversion rate is 2%. This means 200 of these 10,000 unique visitors made a purchase. The goal of conversion optimization is to increase this 2% conversion rate to something higher than 2%.

Different Conversion Rate Optimization Strategists and agencies have different approaches to doing CRO, but generally we follow a strict scientific method which involves first rigorous quantitative and qualitative research into the website’s data and customers, then taking this information and creating a hypothesis to test.

Creating a Scientific Hypothesis

Now, what is a hypothesis? By definition, a hypothesis is a proposed statement made on the basis of limited evidence that can be proved or disproved and is used as a starting point for further investigation.

In the case of eCommerce stores, we propose a change that will cause conversion rates to change. For example, a hypothesis could be that “adding a security seal to the cart page will increase the percentage of people checking out”. Creating a good hypothesis is very important in Conversion Optimization, otherwise, you’ll be testing random stuff blindly, and are unlikely to get good results.

Once we have the hypothesis, we have to test the hypothesis to prove or disprove it. For eCommerce CRO, we are generally looking to test whether a change will affect the overall conversion rates, revenue per unique visitor, or average order size.

Testing the Hypothesis

Rather than just making the changes without testing, CRO Strategists test the changes using an A/B or multivariate split tests, unless we don’t have enough traffic to run such a test.

In a typical 50/50 split A/B test, we typically spend half the traffic to the original website (called the control), and half the traffic to the new proposed design (called the treatment). After some time, there will be enough visitors going through the test to draw a conclusion about the outcome of the test.

In scientific terms, each unique visitor is a sample in the test.

Apart from the sample size, there are several other things we usually need to validate before we conclude that the test is valid, including making sure that the test is generally representative of the long term traffic patterns of the site. Since this is an introductory post, we’ll go into other factors that might affect the validity of the test.

If you’re curious, Marketing Experiments has a great free resource on validity threats.

Concluding the Test

Once we have validated the test, and if the test shows that the treatment performs better, it’s time to implement it on your eCommerce site and reap the benefits of a higher conversion rate.

If, however, the test was valid but resulted in the treatment performing worse than the control, we still consider this a good test as we can build upon the knowledge of what did not work to come up with a different hypothesis.

Using this iterative approach, we can build upon the knowledge gained from each and every test and eventually get good gains on conversion rates.

Why do Conversion Rate Optimization?

The first obvious benefit of CRO is that it will allow you to sell more on your store without getting more traffic. This directly translates into more revenue and also usually translates directly into profits (since you’re not spending anything extra to sell to these customers).

For eCommerce stores, increasing the conversion rate has several other positive benefits.

Get More Visitors at the Same Budget

A higher conversion rate means that you’re now making more per website visitor. This means that you can now spend more to acquire each visitor. If you’re spending money to get customers through paid traffic channels, this means that with the same budget, you can get a larger volume of visitors (of the same quality) to visit your site.

A Higher Conversion Rate Translates into Better PPC Results

Specifically, if you are bidding for traffic on a Pay-Per-Click (PPC) basis on a platform such as Google Adwords, being able to spend more to get each visitor means that you can bid a higher amount per click.

This means that you can possibly outbid your competitors to get higher placement in the paid listings, bringing you more paid traffic. Higher placement in the paid search listings also might mean higher quality traffic (although this isn’t always the case), which can further improve overall conversion rates.

Getting Started with Conversion Rate Optimization

There is no reason not to get started with Conversion Rate Optimization now. CRO is iterative in nature, and the earlier you start testing, the more knowledge you can gain about your customers and website visitors.

If you have sufficient traffic, I highly recommend that you start doing an A/B split test using one of the popular A/B testing tools available. We typically recommend you have at least 15–20 conversions a day to be able to run a good test in a reasonable amount of time.

If you want to be sure, you can use an A/B split test duration calculator to check how long a test would take to run. We typically recommend that you do not run a test past 4–6 weeks.

Even if you don’t have enough traffic to test, you can always just make changes and monitor the results carefully after you make the changes. This is known as a “before and after” or sequential test. This is not scientific, but by carefully monitoring the results and conversion rates after you make the changes, and accounting for seasonality, this is still a worthwhile approach for sites that have insufficient traffic.