2 Powerful Reasons you should STOP doing CRO Right NOW

 

One might find it odd to talk about not doing conversion rate optimization (CRO) when CRO is one of the most popular ways of increasing conversions for a web based business. But as odd as it may sound,

CRO has always been the sub optimal way of optimizing your business performance.

Many analysts are familiar with limitations of CRO and never really say or do CRO. But by and large CRO is still considered as the most effective way to increase sales/revenue of a website.

So what is the problem with CRO then?

CRO is just another form of obsession with a single metric, here the ‘conversion rate’.

BRO (Bounce Rate optimization) or CVO (Conversion Volume Optimization) and RO (Revenue Optimization) are some other forms of obsession with a single metric.

When we are too much obsessed with any one metric, we tend to lose the focus from the big picture i.e. the business bottomline, the net profit.

In the next few minutes I will convince you, why CRO is sub-optimal way of optimizing your business bottomline and why you should focus on Conversion Optimization instead of Conversion Rate Optimization. 

 

Note: Throughout this post whenever I talk about conversion rate, I am talking about e-commerce conversion rate. But my suggestions are also equally valid for goal conversion rate.

 

Conversion Rate is not that powerful

Contrary to popular belief

Conversion rate has weak positive correlation with revenue and zero correlation with cost and revenue is all that matters at the end of the day.

The conversion rate has little impact on optimizing revenue and absolutely no impact on optimizing cost.

The two metrics that actually drive revenue are: ‘average order value’ and ‘number of transactions’.

The conversion rate on the other hand has secondary impact on revenue because it doesn’t take into account ‘average order value’ in its calculation and it is a ratio metric in which the increase in traffic (visits) always tends to lower the value of the conversion rate.

It is quite possible and common that:

Increase in conversion rate results in decrease in revenue.

Decrease in conversion rate results in increase in revenue.

Increase in conversion rate actually results in decrease in gross profit

I have explained all these correlations in great detail in the post: Case Study: Why you should Stop Optimizing for Conversion Rate.

Because of the secondary impact of conversion rate on revenue and zero impact on the cost, it is no more important than a metric like Bounce Rate.

Ok little bit more important than bounce rate.

But just like you won’t measure the success or failure of your marketing efforts only on the basis of bounce rate, you won’t measure the success or failure of your marketing efforts only on the basis of conversion rate.

In order to truly optimize revenue you need to focus on increasing average order value and number of transactions for each of your market segment, product categories and other portfolios of outcomes.

So next time you carry out a test to optimize your business performance, focus on how the change is impacting the average order value, transactions volume and the acquisition cost. Don’t be fooled by the misleading conversion rate metric.

When you say you do CRO, you imply that all of your marketing efforts are conversion rate centric. You imply that all you care about is increasing conversion rate.

In order to get optimum results from your marketing efforts, you need to focus on the metrics that really matters i.e. revenue and cost.

And when you change your focus from conversion rate to more useful metrics like revenue and cost, you are no longer doing CRO as your marketing efforts are no longer conversion rate centric.

 

You Can’t Really Optimize Conversion Rate

As odd it may sound but you can’t really optimize conversion rate. Yet there are millions of blog posts out there teaching you CRO every breathing minute.

Following are two simple reasons:

1.  Web analytics tools like Google Analytics puts each and every visit on your website in the conversion funnel while computing conversion rates.

Not every visit leads to conversion, yet the formula for calculating the conversion rate is: number of transactions/total visits

Now the question that arises is that can you really optimize each and every visit on your website for conversion?

The answer is “you can’t”. You will always get some traffic which won’t convert no matter what.

 

2.  Now let us assume that you calculate conversion rate differently. Instead of taking visits into account, you take visitors into account.

So your formula for calculating the conversion rate is now: number of transactions/total visitors.

Now the question that arises is that can you really optimize each and every visitor of your website for conversion?

The answer is “you can’t”. You will always get some visitors which won’t convert no matter what.

These visitors can be people like job seekers, competitors, link builders or people who are just on your website for a reason other than completing a goal conversion or placing an order.

Other than these two simple reasons

the conversion rate metric is innately prone to errors simply because it is a ratio metric.

The ever increasing traffic on your website will always tend to lower the conversion rate.

Since conversion rate is a ratio metric, you can’t set achievable targets for it with any ease like increase the conversion rate by 5% in the next 6 months.

Conversion rates are horribly prone to misinterpretation. 

You don’t get what you see in case of conversion rate.

Conversion rate has got statistical significance issues, data collection, data interpretation and data reporting issues.

I have talked about all these issues in great detail in the posts:

  1. Here is Why Conversion Volume Optimization is better than CRO
  2. Is your conversion Rate Statistically Significant?

 


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Himanshu Sharma

Certified web analyst and founder of OptimizeSmart.com

My name is Himanshu Sharma and I help businesses in finding and fixing their Google Analytics and conversion issues.
  • More than ten years' experience in SEO, PPC and web analytics
  • Certified web analyst (master level) from MarketMotive.com
  • Google Analytics certified
  • Google AdWords certified
  • Nominated for Digital Analytics Association Award for Excellence
  • Bachelors degree in Internet Science
  • Founder of OptimizeSmart.com and EventEducation.com
I am also the author of the book Maths and Stats for Web Analytics and Conversion Optimization If you have any questions or comments please contact me