The Misleading Nature of Conversion Rates: [10/19/2006]

Recently, a leading multi-channel retailer engaged in a landing-page test that sacrificed thousands of dollars and compromised plenty of ROI. The retailer’s fatal flaw? Relying solely on the almighty conversion rate.

The retailer tested two landing pages for its #1 keyword, “red jackets.” The first was a product list page featuring only red jackets; we’ll call this “The Red Page.” The second, “The Promo Page,” displayed an attractive young person modeling a jacket (not red), with a “Save $15 on orders over $100” promotion.

The search engine marketing team alternated “The Red Page” and “The Promo Page” for all keywords in their Google “red jacket” campaign. Two weeks later, in an executive meeting, the search engine marketing manager boasted about the results.

“The Red Page proved to be the winner in our landing-page test with a 21% higher conversion rate than our Promo Page,” the manager said.

The announcement of the test results prompted smiles, “good jobs,” and other congratulatory verbal and non-verbal reactions by executives; none of whom fully realized they had just been duped by the misleading nature of the conversion rate.

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Conversion rates are one of the most measured and optimized metrics in search marketing, and for good reason. A conversion rate is the percentage of visitors that result in a sale. So when a conversion rate improves, it is logical to assume that the ultimate metric, ROI, will also improve. Well, not so fast.

As a search engine marketing professional, I face situations like this all the time. Clients and other online marketers place too much emphasis on conversion rates when measuring performance. But conversion rates aren’t always king; king being defined as an “absolute ruler.” It is not absolutely guaranteed that one landing page, text ad, or other marketing component is performing better than another solely based on conversion rates.

While excited over the success of “The Red Page,” search engine marketer X neglected other factors that affect campaign success like traffic, revenue, average order value (AOV), earnings per click (EPC), and ROI.

Some visitors arrived on “The Red Page,” found a red jacket which retailed for $50, and went through the checkout process. Others landed on “The Promo Page,” found a red jacket for $50, and noticed the additional incentive, which offered $15 off of orders over $100.

The data below illustrates how other factors play a considerable role in search marketing performance. Had search engine marketer X considered more than conversion rates, the retailer would have maximized ROI and revenue.

Red Page: 2.3% Conversion Rate
Sales: 69
Revenue: $3,450
AOV: $50
EPC: $1.15
ROI: 2.3

Promo Page: 1.9% Conversion Rate
Sales: 57
Revenue: $4,845
AOV: $85
EPC: $1.62
ROI: 3.2

Lifetime value aside, the “Promo Page” is the true king in this test. If the retailer actually stopped testing the “Promo Page,” it would have forfeited $35 in AOV, $0.47 earnings per click, and a landing page that provided a 39% higher ROI. Not good at all.

Online marketers need to look at e-commerce conversion rates not as the sole performance indicator, but include it in a balanced scorecard that measures true online success.

I Need Leads: Who Cares about E-Commerce?

Improper understanding of conversion rate gets us not only in e-commerce, but also in lead generation campaigns. It’s easy to fixate on the impact of conversion rates in generating sheer volume of leads, while losing sight of other important factors like lead quality and lead closing rates.

The standard spiel in paid search lead generation campaigns frequently involves use of a lead form on landing pages. There is no doubt that pages with simple lead forms work extremely well to increase lead quantity. But consider this: lead quantity at the expense of lead quality?

Each lead has an associated value that ultimately affects ROI. Lead quality suffers when a poorly targeted text ad leads visitors to a content-lacking landing page with a prominent lead form. While it’s tough to find a sweet spot between increasing lead volume and increasing lead quality, continuous testing is imperative to narrow the gap.

However, testing goes nowhere unless granular tracking solutions are available to measure (1) conversion rate, (2) lead quality percentage, and (3) lead signing/closing rates on particular keywords and/or landing pages. Know and use this data to develop future tests. If it’s proven that a simple lead form on a landing page with little content provides poor lead quality, then shift your attention elsewhere.

A deep understanding of this triad of factors for lead generation campaigns will help search engine marketing managers accurately measure test outcomes and benchmark results for future efforts.

Other Factors & Influencers
In today’s dynamic online marketing space, I realize what worked last week, may not provide results today. Due to the multitude of factors influencing success, isolating causes for success or failure can become a time consuming process for online marketers. But despite the time intensive nature of this process, we must endure it to avoid heading down the wrong path.

When facing these common conversion rate fluctuations, marketing professionals should consider these factors & influencers:

- Landing page or text ad performance
o Factors to consider
 What’s the AOV, EPC, ROI, lead quality percentage, and traffic levels per page and text ad?
 Did your campaign positions in the search results change during your test?
 Did a new competitor enter the landscape and drive up cost per clicks?
 Did you give the test enough time considering your buying cycle? If your average consumer is in the buying process for 2 weeks before making a decision, then a 1 week test may not be sufficient.

- Understand seasonality and external market conditions
o Gas prices going up?
o How’s the consumer price index?
o Did you launch your new campaign too early or too late?

- Examine the performance of other marketing channels
o Did phone calls increase?
o Did visitors opt-in for email newsletters more readily?
o How were brick and mortar sales affected?


While conventional wisdom dictates the importance of conversion rates, as online marketers, we must dig deeper to uncover the key metrics that drive our clients’ success. Ultimately, the more control you have over each variable of a paid search campaign, the more effectively you will be able to deliver the maximum possible ROI to the client.

Source: by Michael Behrens,
Vice President e-Marketing WebMetro

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