4 reasons for conversion rate optimization (CRO)

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Many companies begin working on optimizing the conversion rate (CRO) without realizing its true potential. In this article we intend to explain carefully the three CRO benefits that can take your company to a growing virtuous circle.

Reason n° 1: The obvious one, Optimizing the conversion rate makes you increase the number of customers and it’s free!

The obvious reason to improve your conversion rate is that you want more customers without having to spend one more euro on advertising.

Your revenue is the same as your visitors multiplied by your conversion rate (the percentage of visitors that become to your customers) multiplied by the customer’s lifetime spend (the amount that each of them spends on buying your products or services).

Revenue = Visitors x Conversion rate x Customer lifetime expense

Therefore, if you double your conversion rate, you double your income. Although it may seem complicated following the appropriate guidelines, the conversion rate can be greatly increased, especially in those digital assets where usability has not been overworked. Even so a small 10% increase in the conversion rate has a very significant impact on the total sales of the business that can result in a great office party. We strongly recommend that you perform the calculations for your own business. You can take a very pleasant surprise.

Reason n° 2: your profits are even more sensitive to the conversion rate than your income

Your benefits are equal to your income minus all your expenses:

Benefit = Income – Expenses

When you double your conversion rate, all your expenses are not doubled:

Your variable costs are doubled. This includes all costs that increase in proportion to the number of units sold, including the cost of goods sold, direct labor costs, distribution and customer service.

But your advertising expenses remain the same. And your fixed costs remain the same.

As a result, your profits increase disproportionately to your expenses. For some companies, a small increase in the conversion rate can mean the difference between suffering a loss and making a profit.

Reason n° 3: Optimizing the conversion rate makes it more profitable to invest in attracting traffic.

Once your conversion rate has increased, it will be more profitable to invest in traffic capture. It is worth sacrificing part of the profits obtained from the increase in the conversion rate to increase the expense in attracting traffic, which can drastically increase the number of customers. You can overcome the advertising bids of your competitors and dominate profitably all the advertising space of your market.

Many of our clients discover that CRO unlocks marketing opportunities that were previously expensive, allowing them to obtain many new customers.

For startups and small and medium businesses, CRO is often the catalyst that allows them to start advertising profitably, in PPC and other advertising spaces. The principle even applies to SEO: if a company will generate twice the income of the first place, you can afford to spend twice as much to capture it.

This principle is so extreme that many advertising agencies pay us to work on their clients’ websites, because they understand that the CRO allows its customers to increase their ads profitably. With the correct CRO combination and traffic purchase, you can delegate your competitors below in the ranking.

Reason n° 4: Reason n° 1 × Reason n° 2 × Reason n° 3 = The CRO dominance 

Here is the best: Motives 1, 2 and 3 are multiplicative. Which means that your benefits have a direct relationship with your conversion rate. (That is, your profits are equal to your conversion rate raised to something, maybe squared, cubed or even more).

We explain, when the conversion rate increases, revenues increase, which allows us to invest in attracting traffic and attract potential customers which generates a generalized increase in revenues. Since the expenses of the income statement do not increase in the same proportion as the income because the CRO is free, this has a direct impact on the company’s profits.

Of course, the multipliers depend on the finances of the business. You can do the test and see how your benefits would increase as a result of the increase in the conversion rate by simulating different scenarios in a spreadsheet.

Incredibly, this is not the end. As number of orders grows, scale economies come into play. These increase even more the amount you can spend to get more customers.

The CRO is a virtuous circle. The main web companies in the world focus on it: user experience, conversion flows, network effects and conversion funnel. Without optimizing the conversion rate, it is impossible to position yourself as a leader in a sector, so we strongly recommend that you start working on it or let yourself be advised to start selling more.

What should I do now?

If you have more questions and want to know how we work, contact us and one of our consultants will contact you for advice.

For further information on this subject and many more you can check out other articles in our current blog where you will find references on this subject and many more.

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