Paid ads and conversion optimization

Paid Traffic vs CRO: Which One Should You Focus On Right Now?

Your ecommerce revenues are growing. Your paid ads, from Facebook to AdWords, are performing better and better.

Cost per acquisition is dropping, revenues are climbing, and your PPC specialist is wearing a satisfied smirk to work most days.

You know that the more you invest in ads, the more money you’ll make. (If only our company had a larger PPC budget, you often think to yourself.)

Yet, you know you should probably be doing conversion optimization.

But with limited resources — and maybe not being *too* sure how to get started with CRO — you prefer to allocate most of your resources to traffic. After all, it seems like a safer option.

But when does splashing out for PPC traffic become the more dangerous, expensive option? When is the right time for you to start paying attention to conversion optimization and A/B testing?

Should you try spending slightly more (and more, and more) on PPC before you take the CRO plunge?

Invest in PPC or Conversion Optimization?

Read on for the definitive answer to whether your ecommerce business should keep investing more in traffic, or ramp up your commitment to conversion optimization.

First, consider what paid traffic can do for you

Pause for a second and think about it: Why do you want more traffic?

If you’re like most ecommerce marketers, your answer is probably clear. More traffic = more sales. Simple.

But the equation is actually not so clear-cut.

If you saw a solid return of $2 for every dollar you spent on ads, it’d be easy to say, “The more I spend, the more I make.”

The reality is that the cost per acquisition (CPA) of your ads won’t be the same forever. It will likely increase as you bump up your ad spend.

Take it from someone who spent time on the inside at Facebook:

When you have a limited budget, Facebook’s ad system is designed to always get you the cheapest conversions first, meaning you’ll end up with the most conversions you can get for your stated budget. But that means that as your budget goes up, the next cheapest conversions will always be more expensive than the ones you already got.

So, when you look at the average, the average always goes up. A ton of people use Facebook, but there’s also a lot of advertisers, so even for a modest budget change, you’re going to run out of conversions at any given price, and quickly get to gradually more expensive conversions.

– Eric Mayefsky, former Monetization Manager at Facebook (via Quora)

In other words, if you’re only looking at the cost per acquisition of your Facebook ads (or Adwords) — without optimizing the landing page where you’re sending that paid traffic — your growth will be limited. And soon, you’ll be eating into your margins.

After all, ads are a great way to get traffic to your website. But that traffic still needs to convert into buyers.

Traffic to landing page to conversions

On the flip side, if you don’t have traffic, you won’t have the chance to convert anyone. #catch22

Then, figure out if conversion optimization is a Mach 1 priority or a back-burner to-do

At this point, you’re probably saying,

“I get it, but from where I stand, is conversion optimization a ‘now’ or ‘later’ thing? Our ad CPA is pretty good.”

There’s only one way to truly figure out whether you need to prioritize CRO now: by running the numbers.

What would happen if you took 10% or even 30% of your PPC budget and spent it on optimizing your website and landing pages instead?

Would it be too risky? How would it impact your CPA and overall sales?

Unbounce put together a comprehensive table showing different scenarios and the CPA outcome of investing in conversion optimization:

Conversion-Optimization-CPA.png

1. Average cost per click, according to Google

2. Estimated conversion improvement of a successful test. Note: these numbers are also based on a diminishing percentage improvement per dollar spent. (25% initial increase by using a landing page followed by a compounded rate that bumps conversions by 25%, but is really only a 20% overall improvement in the second level. 25/125 equates to a 20% improvement.)

TL;DR: Here’s how to translate that table

  • If you spend too little on conversion optimization for your landing pages, no matter how much you’re spending on ads, you’ll be leaving a lot of money on the table due to a high CPA.
  • If you spend a portion of your marketing budget on conversion optimization, you will be able to achieve a lower cost per acquisition per customer. In other words, you’ll sell more, without spending more.
  • On the other hand, if your conversion optimization investment isn’t yielding the conversion rate increase needed for your traffic to be profitable, it won’t be helpful.
    (If this is you, and you’re frustrated that your CRO efforts aren’t paying off, here’s why it’s happening.)

Your competitors might outperform you if you’re not continually striving for improvement

Even if your CPA is “pretty good” and your ads are working well, think about what it would mean for you to lower that cost by a few more dollars.

What would that mean for your company? For your marketing budget? For your end-of-year review? 😉

For example, take a look at this conversion rate optimization ROI calculator, and you’ll see an estimate of how much more in revenue you could make with CRO… the result may surprise you.

Remember that there’s no universal “good CPA”. What’s “good” is anything better than what you currently have.

A company resting on its laurels, thinking it’s all set with its numbers, will quickly be overtaken by a competitor that’s always aiming to improve.

“Hey, you do conversion optimization! Aren’t you biased?”

Of course!

That being said, doing conversion optimization for companies who aren’t ready for it would be useless, and we probably wouldn’t be able to do generate the results needed for a positive ROI. So why would I try to convince you to invest in CRO if you aren’t ready?

To assure you that other digital marketing professionals share similar views, I asked Nicholas Kusmich, one of the world’s leading Facebook ads strategists, “At what point should a company with most of their marketing spend invested in PPC start to look more heavily at landing page optimization?”

Here’s what he said:

There are 2 times when a company should look more heavily at landing page optimization.

Nicholas Kusmich

1) When everything is working (their KPIs are being hit, they are profitable, and everything is humming as it should be)

2) When it’s not.

One (especially if running paid advertising) should always be looking at opportunities to make their numbers work even better than they currently are.

Slight tweaks could mean big changes in conversion. Big changes in conversion mean more profitability.

And at the end of the day, every company should be mastering the art and science of turning paid advertising into profit in the most optimal way possible.

Now, all of this might sound wonderful. “I’ll balance my investment in paid ads with an investment in conversion optimization. Could this be the answer to all my acquisition and conversion problems?”

Sadly, no. If your team sucks at paid advertising, or if they suck at conversion optimization, you’ll never reach your company’s growth potential.

I hear it all the time, even at large companies: “Conversion optimization didn’t work for us.”

Unfortunately, that’s a lazy claim. All it proves is that the company quit after a few uneducated stabs at optimization;

Maybe hired an agency that wasn’t qualified to do optimization, or that wasn’t an expert in the company’s industry…

Conducted A/B tests that were broken or invalid.

Or it may also be an excuse uttered by scared PPC managers — especially if they don’t fully understand the conversion optimization methodology required for CRO to work.

Investing in paid ads without investing in conversion optimization is like trying to eat soup with a fork.

Sure, you might get some soup. But you’re wasting a lot of soup. And you look like a fool.

soup-with-fork.png
Image source

“Fine, I’ll pay more attention to CRO. But where do I start?”

Start with this counterintuitive piece of advice: NOT by A/B testing.

Conversion optimization is a process. And A/B testing is only a tool within that process.

Following our Testing Trifecta™ model, in order to be able to test and achieve growth from conversion optimization, you’ll need not just quantitative data from your analytics, but qualitative data too, in order to generate a data-driven hypothesis to validate (or invalidate) through testing.

To sum it up, you have to start with research.

Testing Trifecta Optimization Methodology

You need to know what your buyers are looking for, what they’re thinking and feeling, and how they describe those thoughts and feelings before you can form one meaningful hypothesis or set up one single experiment.

You can read more about what that research should look like and include, how we pinpoint what to test, and how we optimize for business growth here.

The timing is never perfect

There’s no real “ideal moment” for starting to focus on conversion optimization.

Yes, you should optimize your ads, increase your ad spend when it makes sense, and always aim to improve your strategy to reduce your cost per click and cost per lead.

That being said, the purpose of your ads is to drive traffic. If your traffic doesn’t buy your product(s), then that same traffic is pointless in the first place (and you’re throwing money down the drain).

Website and landing page optimization go hand in hand with paid ads. Without investing in one, you’re devaluing the other — and missing out on the opportunity to scale your sales.

In the comments below, tell me: If you’ve been increasing your ad spend recently, have you also increased your focus on landing page optimization? 

Raphael Paulin-Daigle

Raphael is the founder of SplitBase, and spends his time optimizing SplitBase's own optimization methodology, and growing his clients companies.

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