Web Analytics 2.0 – How to use it to improve your conversions

You all have probably heard of web analytics 2.0 at some point in your life and thought what it is all about and how it can help me. In case you don’t know, Web Analytics 2.0 is a term coined by world famous Analytics Guru ‘Avinash Kaushik’ in 2007 when his posts used to be short :) But what is web analytics 2.0? Before we dive deep, let us first get a basic understanding of Web Analytics 1.0

What is Web Analytics 1.0?

This is what web analytics 1.0 is in a nutshell:

web-analytics 1.0

Web analytics 1.0 framework just focus on one thing and that is to determine what is happening on your website like how many people visited your website, how much time they spent on your website, which keywords they used to visit your website, which pages were viewed etc.

You know what happened on your website. But what you can do about it? Nothing much, unless you go ahead and try to determine why it is happening on your website and what actions you can take to get the desired outcomes.

What is Web Analytics 2.0?

web-analytics 2.0

Web analytics 2.0 framework not only just focus on determining what is happening on your website but also focus on:

1. Outcomes (sales, leads & other business goals)
2. Why it is happening (like why people buy or don’t buy products from your website)?
3. Competitors Analysis-  It helps in determine missing opportunities.
4. What actions should I take to get desired outcomes?

Fortunately, majority of us stopped relying on the web analytics 1.0 framework long time ago and have started computing the impact of our marketing campaigns (like SEO & PPC) on our sales, leads and other business goals. But we still haven’t full adopted the web analytics 2.0 framework. Have we?

 

For many of us, the number 1 way to increase sales and leads is to send more traffic to the website.

Here lies the problem. As you acquire more traffic through different marketing channels (organic, ppc, email, social media) you need to spend more time and resources on content creation and marketing.

Then at some point you realize that your company spends way too much on acquisitions (conversions) (By the way, have you ever calculated cost per acquisition for your organic search campaigns? If you haven’t then you should). We all know the conversion rate of our websites. But what do we do about it?

 

Many of us tend to live in a world where the conversion rate is a universal constant and all we can do is increase the traffic.

More traffic means more sales. But it also means more spend.  Let us suppose you have got a new client. Now what you should do to increase the revenue of his website? You have two options here:

1. Create more contents, target new keywords, and effectively use social media for links acquisition. Which we all do anyways (ignoring CPA and life time value most of the time).

2. Focus more on finding out why people don’t buy from your website and what you can do about it. (recommended)

Conversion rate optimization is all about improving the sales and conversions of a website without increasing the ad spend or traffic (at least considerably), to get the most out of our present traffic. Yet we tend to overlook it and spend majority of our time in acquiring more traffic through keyword research, content marketing and social media.

 

Why traffic driven approach is hurting your business?

When you work with the mindset of just increasing the traffic and sales through content creation and marketing:

1. You are not always acquiring the best customers through your campaigns

2. You are most likely acquiring low value customers who buy once or maximum twice in their lifetime.

3. You are not spending enough on acquiring most profitable customers and thus loosing big on revenue and net profit.

When you focus on improving the conversion rate of your website, you get best customers as you are doing two things better:

1. Targeting the right people

2. Making sure that the right people buy (via landing page optimization)

Why best customers generate more profit than average or low value customers?

 Let us suppose that your target market is US. So your average customer can be anywhere from US. Let us also suppose that after analyzing one year data you found out that people from New York City bought 2 times more than an average visitor to your website. They tend to spend 30% more than average per order. So now you know where your best customers live.

 

New York City Clients (Best Clients)

Average Clients (can be anywhere from US)

No. of transactions/year

4000

2000

Average order value

$70

$40

Total Revenue

$280000

$80000

Total Spend

$36000

$50000

Gross Profit

$244000

$30000

Your cost per acquisition will remain high if you target whole of the US through search marketing or any other ad campaigns. So  it is pretty obvious that your total spend is going to be higher for acquiring average clients.

So by directing your marketing efforts in acquiring more profitable clients, you can increase your revenue and profit even without increasing traffic or spending more on content creation and marketing.

Now the big questions that comes up is, why people from New York City are our best clients, what they are purchasing and what we can do, so that they buy more. If you can get answer to these questions, you can increase your sales within few weeks without increasing website traffic or spending more on content marketing. And this should be our aim as an inbound marketer.

 

How conversion driven approach will help you as a webmaster/SEO consultant/agency?

You can save lot of time and money on content development, marketing and traffic acquisition by running conversion driven campaigns instead of traffic driven campaigns.  All of this may sound so obvious to me and you but we still don’t pay attention to improving the conversion rate of a website or lifetime value of a visitor.

 

Traffic driven campaigns will sooner or later haunt you

Traffic acquisition is becoming more expensive and challenging with each passing month/year due to rise in labor cost and market saturation. At some point your cost per acquisition will become so high that you will no longer be profitable and soon be out of business.

 

Learn to answer ‘why’ if you wish you to remain in business for the foreseeable future

According to Avinash, the single most missing critical piece in today’s web analytics is ‘answering why’. Why people do what they do on your website? For e.g.

Why people buy products from my website?
Why people don’t buy products from my website?
What should I do so that people buy products from my website?

The answer is not ‘increase the traffic’.

The answer is ‘ask your visitors’ and ‘know your target audience’

Are we spending enough time and resources in getting answers to the ‘why’ questions?

According to Pareto Principal (also known as the 80–20 rule), 80% of the effects come from 20% of the causes which means:

1. 80% of your sales come from 20% of your visitors.
2. 80% of your output come from 20% of your input
3. 80% of your sales come from 20% of your products
4. 80% of your profit come from 20% of your products

So what you need to do is, to determine those 20% of everything and work relentlessly on them. You can’t sell each and every product of your client in each and every location of your country, so why spread your marketing efforts and resources too thin by trying to be visible everywhere for everything you sell.

 

Creating Web Analytics measurement framework to improve Conversions

Create an web analytics measurement framework for your business. This framework (which i have adopted from Avinash) will keep you focused on what is critical to your client’s success. Here is how you can create your own analytics measurement framework:

Step-1: Determine your business objectives. Whatever you want to accomplish through your website can be your business objective. It can be sales, leads, branding, user engagement etc.

Step-2: Determine your Goals – Goals are specific strategies you use to accomplish your business objectives. For e.g. we will increase our ad spend in this region to improve sales or we need to work on ‘average time spent on site’ to improve user engagement.

Step-3: Determine your key performance indicators (KPIs) – KPI is a metric that helps you in understanding how you are doing against your business objectives.

For example if increasing user engagement is one of your business objective then repeated visitors is a good KPI. So if we have good KPI, it also means that we have bad KPIs. For e.g. page views is bad KPI, exit rate is a bad KPI. So you need to be careful while selecting KPIs. Learn more about KPIs directly from Avinash.

Step-4: Set your targets – Targets are numerical values through which you measure your success or failure. As a marketer you must know what is going to be counted as success and what is going to be counted as failure. Without targets, no goal is unachievable.

Your targets must be SMART (Specific, Measurable, Attainable, Relevant and Time Bound). For e.g. ‘increasing the traffic of the website’ is not a SMART target. Increasing the traffic of the website by 25% in the next 6 months is a SMART target. You must create monthly, quarterly and yearly targets.

 

Step-5: Segment your data before you make business decisions – The aggregate of any metrics is useless. For e.g. the overall conversion rate of a website is a useless metric as you can have 100 % conversion rate if the individual conversion rate of your 5 goals is 20%. Moreover you don’t get any useful insight when you look at aggregates or averages.

In order to get useful insight you have to segment the data. The more you can segment it the more useful and actionable insight you can get. For example it is far more useful to know that majority of your sales come from New York than from US. It is even more useful to know that majority of your sales come from upper middle class Hispanic population in Brooklyn.

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  • Probuddha

    Excellent write up Himanshu!

    Very very insightful, thanks :)

  • Arjun Rawat

    Hi Himanshu! It is always a pleasure reading your blog. Thank you for explaining Web Analytics 2.0 framework.

  • odlasb

    Awesome insight. Great post.Keep it coming.

  • http://www.withlovefrom.com/ Joana

    I am always amazed at your posts. Thank you for providing such valuable insight to share with my team. I agree with you that we ignore improving conversion rate most of the time and just concentrate on increasing the traffic. I have one question. How i can get conversion rate by hour of the day in the new Google Analytics? Thanks.

    • http://www.seotakeaways.com/ Himanshu

      Create a new custom report. Set up your metrics to Revenue and dimension to Hour.

  • http://www.free-egreetings.net/ Amalia

    You seem an expert in Analytics. For the last few months i have been trying really hard to improve the conversion rate of my website. Can you please help me.

  • David

    Any ecommerce business selling products rely heavily on its site to convert visitors into sales. Conversion rate is a great way to track the performance of the site and any marketing campaign. I agree with you that every company should know their cost per acquistion even for organic search campaigns.Targeted campaigns drive more sales and leads on Google, Yahoo and Bing. But i think in the begining you need to loose money to brand your website. Only at advanced stage you are in the position to target your most profitable customers.

    Following are the methods we use to improve our conversion rate:

    1.A/b and Mutivariate testing

    2. Customers Surveys

    3. Geo targeting

    4. Behavioral Re-targeting

    5. Market Research

    • http://www.seotakeaways.com/ Himanshu

      Wow. Thank you for stopping by the blog.

  • http://www.i-vijay.com vijay

    Down to earth write up on understanding WHY is much better than driving volumes of traffic. The only issue with this approach is not all the businesses are ready to embrace this fact.

    I try to tell the same to every business I consult where conversion rate is an important metric and you know nine out of ten times, business owners want more traffic. It takes few months for them to understand it, when they see the same number of transactions (without huge improvement as not all traffic convert the same compared to the traffic improvement).

    I will pass this post to all my new clients and wish they will make the decision to focus on the conversions sooner than wasting few months time.

  • http://www.a1webstats.com Andy Harris

    A truly excellent article Himanshu! I was nodding my head in agreement all the way through because it’s an ongoing frustration that companies are obsessed with driving traffic but won’t invest the time to analyse and refine their websites/online strategies.

    This is an excellent blog for me to refer people to, so that they see that it’s not just me saying the same old thing!

    It makes me wonder how much the world economy could improve if businesses took a bit of time out + investment to sit down and set up proper analytics goals/systems. Sometimes I think it should be a pre-requisite before gaining access to resources such as bank financing.

    Andy

  • http://www.printingray.com/custom-stickers-printing.html custom stickers

    Its an amazing post. I am inspired of your way of explanation. I agree with you that concentrating on generating traffic is not sufficient if we forget improve conversion rates.