If you look at this equation, your revenue is equal to your number of customers multiplied by the Lifetime Customer Value. And if we break this equation down, your number of customers is actually the number of visitors you get multiplied by the conversion rate of visitors into customers.
So, you can make more money from your e-commerce site in three ways:
- Get more visitors to your site.
- Convert more visitors into buyers.
- Make more over the lifetime of the customer.
Most focus their budget on acquiring more visitors like everyone else. But with higher ad costs and competition your revenue per visitor is diminishing. Hence why we should look at a different part of the e-commerce marketing equation… conversion rate.
Why is conversion so important?
Now, one of the great things about focusing on increasing the conversion rate is that the revenue increases. But if you increase the conversion rate by 20% in x months, then not only has the revenue increased, but the revenue per visitor has increased by 20%. And what that means is that suddenly you're able to spend more per visitor on acquiring visitors.
How conversions affect PPC, SEO, affiliates, print, and other media.
With PPC, to be able to automatically spend 20% more per visitor (based on our example above) means you can automatically get more visitors. But it also means that you can outbid competitors. Not just on paid search, but also on affiliates marketing. You can outbid all of your competitors and get the best affiliates. And even SEO, suddenly a number 1 ranking becomes 20% more valuable to you.
The economics are the same with SEO. Your rankings becomes more valuable to you. And so you can afford to spend more on SEO and on any other kind of media — on print, on radio, TV. Everything suddenly changes economically.
Not only are you increasing revenue but a by-product is you're making a site your visitors will like and buy more from. Which increases word of mouth marketing and referrals.
This is how you grow quicker & divide your costs upon a larger amount of customers.
The goal for almost all web businesses is scale. The e-commerce marketing strategy is to grow quickly because more customers equals to economies of scale. Your costs of marketing and development get divided upon a larger amount of customers. One of your main strategies should be to grow or become big so all those costs could be divided.
Look inside any successful business, and you'll find a powerful conversion engine.
If you look at Google, Facebook, eBay, Amazon, etc. – the history is not a story of traffic. It's a story of conversion, of user experience, of creating a website that customers actually want to use and do use again and again. If you read these biographies of the big web companies you’ll discover how they got to where they are by focusing on conversions. And a great goal is actually to become that dominant company in your industry.
Basically, if you look at those web giants and look at how difficult they are to topple, you want to be in that position. At the best companies, you'll find a team of engineers tuning their conversion engine. The people within those companies are spending their time on optimizing the conversion, looking at all the flows through their site and optimizing the efficiency of those flows.
Dominate your industry by focusing on conversion.
As you can see, moving some of your budget to focus on conversions actually increases revenue and revenue per visitor. Allowing you to focus on the whole equation because the extra revenue keeps feeding the business which drives exponential growth.