Getting Started with Digital Marketing Optimization Part 1 of 3: Conversion Overview
Two of the greatest advantages of digital marketing are the ability to track nearly everything, and to react to the data in real-time. In the past, businesses had to wait weeks or even months to determine if their paid marketing efforts were effective. They would place an ad in the newspaper, on TV or on a billboard and then if the phones were ringing, it worked. Now marketers can continuously monitor performance, determine effectiveness, and make changes as needed. But businesses and marketers need to know what to look for when analyzing the data. This three-part series is designed to give an overview on the most important metrics to observe, how to determine your top marketing sources and which metrics to use to identify your top audiences.
Conversions can come in many different forms. Most clients we work with at Trellis are eCommerce businesses, so the top-line conversion most often is a purchase. B2B marketers have different goals and sales cycles, so conversions can be identified as form fills, phone calls, or other forms of website interaction.
In eCommerce, there are many ways a purchase conversion can take place. Most often these are on-site orders, but can also be phone orders, in-store purchases, and even off-site online purchases if a business is selling through a third-party website or app.
Where and how your business tracks conversions can be done differently based on what eCommerce platform or CRM is used, but I’ve found that the most effective and reliable way for marketers to track conversions is a well set up Google ecosystem. Keep in mind not all Google tools will track a conversion at the same time. Google Ads may attribute a conversion to an interaction 3 days prior while Google Analytics will attribute it to the day/time of purchase.
Sound confusing? Don’t worry, we’ll have a conversion tracking deep dive coming soon.
Cost Per Conversion
When starting out with digital, or any type of marketing, it’s important to know what your business is willing to pay for a conversion. For instance, if your company makes shoes and sells them at $60 per pair, it doesn’t make sense to pay $100 for a conversion. It’s critical to create a cost per conversion, or cost per action (CPA), goal before you begin your paid marketing efforts to ensure profitability.
A few things to keep in mind when creating a goal CPA are:
- Make the goal appropriate – While it would be ideal to sell $60 shoes at a $2 CPA, it’s probably not likely. So, identify an appropriate and informed goal based on past data and sales history.
- Give it time – While digital marketing is responsive, that doesn’t mean it’s immediate. Most campaigns need a 60-90 day “ramp-up” period to begin performing optimally. It’s important give marketing efforts time to be optimized to reach the goal CPA. This will also vary based on what variables are in play. For example: how well known a brand is, how new a product is, the price of a product, how necessary a product/service is and others.
So, create an appropriate goal based on past data, give marketing efforts time to “ramp up” to meet the target CPA, and make data-driven decisions to optimize campaigns to reach the target.
What percentage of site visitors are completing the conversion action?
The goal of digital marketing is to get customers to your website and take a desired action. Not only do digital marketers need to bring in traffic, it must be quality traffic that is interested in your product or service. The website also needs to be optimized to ensure website visitors can convert as easily as possible, but we’re just focused on the marketing aspect now.
Here are a few steps to take a website’s conversion rate from just a number to a useful marketing KPI.
- Start by finding your website’s overall conversion rate, this will be a baseline to start from.
- Next, you can look at the conversion rate of traffic from different sources, audiences, devices, and more to determine the quality of the traffic from different campaigns.
- From here, you can identify ways to adjust paid advertising efforts to capitalize on the best traffic.
Keep in mind that different traffic sources will convert at different rates by default. For example, organic traffic will inevitably convert at a higher rate than paid traffic, branded paid search traffic will convert higher than non-branded, and search will likely convert at a higher rate than social. All of these differences are based on buying intent and where consumers fall in the funnel when they visit a website.
Return on Ad Spend (ROAS)
Return on ad spend is a metric to identify how profitable paid marketing efforts are, it’s calculated by dividing the conversion value from a market source by the cost of the advertising. This is a similar metric to return on investment (ROI) but doesn’t account for other overhead costs associated with producing a product or service.
ROAS is the guiding light in digital marketing and should be used to determine if your marketing efforts are actually providing a return. Your ROAS goal should be aligned with your cost/conversion goal. Both should be sensible and start off lower than the ultimate long-term target. It’s also important to understand ROAS may not start in positive territory when campaigns are first launched. Starting with an overly aggressive goal can severely limit the reach of your marketing efforts, reduce the potential for brand building, and imply failure before campaigns can even take hold. This is an issue many campaigns run in to, especially if Google or Facebook campaigns are optimizing for an aggressive ROAS goal.
While ROAS is a great broad metric to optimize for, it’s not as useful when making changes to paid advertising. Many factors go into ROAS changes and it’s important to dig in to find the data causing the changes. Are you paying too much to acquire traffic, is the conversion rate dropping or is the average order value decreasing? All of these and more factor into ROAS, so make sure to use this metric as an identifier, but not as the only input into optimization decisions.
To wrap up part one of Trellis’ three-part marketing metrics series, here are a few things to check out while you wait on part two. Make sure your organization optimizes paid advertising efforts by tracking the right conversions, understands how much a conversion costs and if paid efforts are meeting that goal, knows how often site visitors convert and has an idea on how all of that fits into marketing profitability. Next, in this series we’ll take a deep dive into how to identify top marketing sources in order to squeeze more performance out of current marketing efforts.