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Why CRO Should Matter to Every eCommerce Store, Including Yours

Updated: Nov 21, 2023

Knowing what you should do and taking action often have a significant gap. To act, you must be intellectually and emotionally convinced it's worthwhile. Fortunately, conversion optimization consistently proves its long-term value, and here's why. 1. Profits Multiply Directly Primarily, increasing your conversion rate directly influences your revenue and profits. What's not immediately evident is the significant impact of conversion rates on profitability. This results from the cost structure of your business, with fixed costs incurred daily, irrespective of sales, while each additional sale only adds the variable cost of the product sold.

Let's assume your store incurs $80,000 in annual payroll and facility expenses while generating $150,000 in revenue. Currently, your store has a 1.5% conversion rate, with an average purchase price of $90 and an average profit of $45.

If you were to double your conversion rate to 3%, you would achieve the following:

Your revenues would increase from $150,000 to $300,000 (a 2x increase).

Your profits would increase from $22,500 to $90,000 (a 4x increase).

In essence, doubling your conversion rate results in more than doubling your profits because the increase in revenues doesn't entail a corresponding increase in costs.

2. Reduce the Expense of Acquiring Each Customer Secondly, elevating your conversion rate simultaneously reduces your cost of customer acquisition. Although this might appear self-evident, the ramifications are significant. Lowering variable business costs translates to increased profitability per sale. This is advantageous on its own, but the true potential lies in the additional net margin it provides – notably, the ability to access additional avenues for generating leads.

3. Incorporate New Avenues for Generating Leads The cost of advertising is on the rise, and it's becoming quite daunting. In February 2018, MarketingDrive reported a significant 43% increase in the average cost of Facebook ads. This trend is expected to persist as Facebook tightens its inventory and faces heightened competition. This cost escalation is a real phenomenon across various marketing channels.

As depicted in the image above, the majority of categories within Amazon's sponsored product listings experienced robust double-digit growth over one year. Notably, the Electronics category saw an impressive 89% year-over-year increase.

Nevertheless, businesses boasting higher conversion rates enjoy a clear edge when competing for bids against other companies. The additional margin they possess empowers them to competitively outbid their rivals, converting a larger customer base and perpetuating a virtuous cycle of profitability.

4. Enhance Affiliate Rewards and Compensation Likewise, your capacity to collaborate with affiliates expands in direct correlation with your ability to convert website visitors. Affiliate partnerships conducted through platforms like Instagram, YouTube, Snapchat, and even Twitch consistently draw substantial attention and drive significant sales.

In 2016, a study revealed that these campaigns yielded an average ROI 11 times greater than that of display advertising. However, presently, influencers and affiliates are primarily compensated based on their audience size. It's your responsibility as a store to transform that traffic into meaningful results.

Elevating your conversion rate not only enables effective influencer marketing but also provides you with the means to invest in these relationships and offer affiliates above-average compensation packages.

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