Introducing metric of the month, a series of short articles from Joe Lynch Consulting, aimed at helping the non-marketeers in any organisation understand the language and the key drivers of the Commercial and Marketing Departments. Joe hope’s to focus your attention on the areas that really matter and attempts to demystify those subjects that are frequently clouded or shrouded in unnecessary complexity.
This month’s metric – Conversion Rate
Conversion rate is simply defined as the ratio of those people interested in buying your product or service, divided by the number that actually do. I have chosen conversion rate because it is my favourite and I think the most powerful of all of the marketing metrics we should be looking at constantly. It is used in both on and off-line environments and is equally powerful in both.
Why is conversion so important?
We spend so much of our time and energy developing an audience for products or services. We invest fortunes brand building, we create advertising campaigns, we attend exhibitions, we employ vast armies of content curators and fund so many other aspects of our sales and marketing activities, all in order to drive awareness and interest in our products.
The conversion rate simply indicates how efficiently we are turning that interest into transactions. Think of it another way; How effectively are we converting our marketing budget into revenue?
Of-course every different organisation, every industry, every category will have its own conversion rates and whilst benchmarking across different products, companies or organisations can be very informative; it’s more useful to look internally and see what is currently limiting your conversion rate.
Let’s illustrate this by way of an example;- imagine you’ve managed to drum up 100 people who have shown an interest in your product. Three days later you have received just five purchases.
Something must be wrong.
What has happened to the 95?.
In theory your campaign could be performing 20 times better. Who wouldn’t want to get 20 times more revenue without spending any more on marketing?
- Maybe the time is not right. Its often quoted that in a B2B environment only 5% of the year is a suitable buying window – so you need to be prepared to keep in touch and play the long game.
- Did you have enough capacity? What a crying shame if you had 100 people queuing up to buy from you, but only 5 widgets in stock. A waste of precious resources and potentially unhappy potential customers.
- Was it easy to buy from you? If your sales process, or your website was too difficult to navigate, or your payment terms too convoluted, people will just shop where it is easy to.
- Have you been undercut? With today’s remarketing and retargeting techniques it’s all too easy for a competitor to place his or her adverts in front of your customers what they’re still deciding what to do and where to buy. How can you reassure your potential customers that they can’t find a better deal for better product by shopping around?
- Do customers trust you? We know how easy it is to read customer reviews and to find out the “real truth” behind your marketing focussed promises. Can you prove what you claim to be true?
Of course in the real world, we know that these are just some of the many factors affecting conversion rate. Some can be more easily managed than others – but they all matter.
Constant iterative changes both of your sales process is both on and off-line can lead to huge steps forward and get you closer to that holy grail of maximising the revenue from your precious marketing budget.
How can I help
If you are the Marketing Director, I can help you create the marketing metrics that will help you build irresistible business cases. I can help you build testing and development plans to improve your conversion rate and identify those blockers that need removing.
We can also delve into the wonderful world of marketing effectiveness, supported by the analytical powerhouse of RedRoute International, where I sit on a panel of consultant marketing professionals.
If you are the MD / CEO I can help you create the entire suite of metrics to help you manage and monitor your business. I can show you how hard your marketing budget could really work. I can also help you evaluate the optimum investment to guarantee the best returns.
If you would like to discuss this metric or anything else that may improve your marketing effectiveness please don’t hesitate to get in touch.