Part 10: How to Explain the Value of Landing Page Optimization

You now understand the process of optimization, but you can’t start A/B testing until you get buy-in from your boss or clients. What’s a genius to do?

The easiest way to convince a stakeholder that optimization is a good idea is to talk to them in their language. And speak to their motivations. Revenue.

Today’s Course Outline

Your boss and your clients likely care most about increasing sales. What we’ll learn today is a way to convince your stakeholders that landing pages and optimization is the smartest investment to achieve these goals.

As a marketer, a powerful way to convey the value of optimization is to demonstrate the effect it can have on the cost of acquiring a new customer. We’ll do this by comparing two different approaches to increasing sales: buying more traffic vs. optimizing your existing traffic.

We’ll also look at how you can borrow from an existing budget to prove the effectiveness of landing page optimization and testing.

So our options are as follows:

  1. Paying for more traffic vs. optimizing your existing traffic
  2. Borrow from an existing budget to prove results

1. Paying for more traffic vs. optimizing your existing traffic

Often, the quickest way to obtain more traffic is simply to buy more of it, in the form of Pay-Per-Click (PPC) ads from networks like Google AdWords. For this reason, we’ll use a PPC campaign as an example to illustrate how to lower the cost of acquiring a customer through optimization.

Option 1 – Paying for more traffic (increasing your PPC budget)

Throwing more money at your campaign gives a predictable outcome. It grows in a linear fashion. Double your spend and you’ll double the number of customers you acquire while maintaining the same cost of acquiring each customer.

Note: these numbers are based on some average Google Adwords PPC stats.

Month 1 – Traffic Budget. No optimization investment.
Campaign budget $5,000
Traffic budget $5,000
Conversion investment $0
Cost-per-click $1
# of visitors to your page 5,000
Conversion rate 2%
# of new customers 100
Cost per acquisition $50

Month 2 – Increased budget, no investment in optimization
Campaign budget $10,000
Traffic budget $10,000
Conversion investment $0
Cost-per-click $1
# of visitors to your page 10,000
Conversion rate 2%
# of new customers 200
Cost per acquisition $50

You’ve doubled the budget, received twice as many customers and the cost of acquiring a customer remains the same.

More cash = more customers. It’s predictable, but it’s not efficient and not improving your marketing ROI.

Option 2. Optimizing your existing PPC traffic

It’s cheaper to keep an existing customer than to find a new one. Similarly, it makes sense to get the most from your existing flow of inbound traffic by improving the conversion rate.

Month 1 – Investing in optimization
Here you can see that by using a portion of the budget on optimization results in less traffic, but the improved conversion rate of 2.5% makes up for this, resulting in the same cost of acquiring a customer.
Campaign budget $5,000
Traffic budget $4,000
Conversion investment $1,000
Cost-per-click $1
# of visitors to your page 4,000
Conversion rate 2.5%
# of new customers 100
Cost per acquisition $50

Month 2 – Continued investment in optimization
In month 2, the continued investment in optimization has resulted in a further increase in the conversion rate to 2.75%.
Now you can see that the cost of acquiring a customer has dropped to $45.50.
Campaign budget $5,000
Traffic budget $4,000
Conversion investment $1,000
Cost-per-click $1
# of visitors to your page 4,000
Conversion rate 2.75%
# of new customers 110
Cost per acquisition $45.50

Month 3 and onward
As you can see, continuing to invest in landing page optimization further reduces your cost of acquiring a customer, without having to increase your campaign budgets. It’s hard for a stakeholder (be it a client or your boss) to argue with that.
Campaign budget $5,000
Traffic budget $4,000
Conversion investment $1,000
Cost-per-click $1
# of visitors to your page 4,000
Conversion rate 3.00%
# of new customers 120
Cost per acquisition $41.67

In summary

What this shows us is that as we increase our investment in conversion optimization, our traffic spend decreases which results in fewer visitors, however, the improved conversion rate more than makes up for this by bringing in more customers and ultimately reducing the cost per acquisition (CPA).

Why? Because an optimized page will continue to produce the new conversion results obtained in month 2, into months 3, 4 and 5 etc..

TAKE AWAY
By investing in conversion rate optimization, the cost of acquiring a new customer drops. A lower acquisition cost means your marketing campaigns are more efficient, ensuring that more sales are made from the same marketing spend.By proving you can increase sales, you will be able to convince stakeholders that optimization is a worthwhile investment.

2. Borrow from an existing budget to prove results

Rich Page recommends another excellent approach to obtaining buy-in from your boss or client: borrowing from an existing budget.

If the company you work for has an existing budget for PPC, a great way to demonstrate the value of a testing budget is to ask to “borrow” 10% of that budget for a period of time. Obtaining this for 6 months gives you enough time to get a few big testing wins under your belt and report back with clear metrics on the gains and ROI realized from the investment.

This type of evidence is hard to argue with, and will most likely result in your boss or client developing a very favorable view of the testing and optimization process.

TAKE AWAY
If you can use this information to convince your stakeholders to give you a portion of the marketing budget to prove the value of optimization, you have the opportunity to prove that you can make a difference. This will have the effect of placing landing page optimization at the forefront of your marketing initiatives.
  • http://www.reedbusinessopleidingen.nl Pieter van Diggele

    Hi Oli,

    Regarding extra spend on an existing campaign: in practice conversion rate tends to drop when doubling your campaign budget. Most of the times, budget is doubled by raising keyword bids, extending daily budgets or bidding on more generic keywords.

    Raising CPC bids will increase you CPA, since you spend more per click with the same conversion rate. On top of that, increasing CPC, increases avg. position, which means a higher CTR and more clicks with lower quality, which lowers conversion rate. Both combined this will result in a large increase of CPA. This effect is even stronger when adding more generic search terms (higher CPC, lower quality).

    Even more reason to invest in CRO :).

    • http://thelandingpagecourse.com Oli Gardner

      Hi Pieter,
      Thanks for adding so much extra detailed information on the topic. It’s really interesting to look at the impact of increasing your ad spend. The increase in clicks of lower quality is interesting. Is this just a result of the higher placement, so it’s more visible and gets a higher number of exploratory clicks rather than real interest?

      • http://www.reedbusinessopleidingen.nl Pieter van Diggele

        Hi Oli,

        Yes, people tend to click on the highest ranking ads without even reading. So the higher you bid, the lower quality traffic you receive in most cases. That’s why In most competitive markets with commodity products, the highest bidding advertisers need a superb landingpage to keep their ROI positive.

        We experienced this first hand lately, when our SEA agency made a mistake and added the keyword “event” to our campaign with a very high bid, instead of blacklisting it. As a result we received traffic on keywords like “cinderella party accessories” (!!!) costing us around $10 per click! Glad they fixed the error within a few days :).

  • http://spes.co Marisol Vergara

    Hi Oli. Thank you for this lessons. I don’t know if this is a silly question or no, but here it goes. I was wondering how do you do the math on the conversion rate? (2.5%, 2.75%, etc?)

    Thank you.

    • http://www.splashmedia.com Eric Tipton

      Hey Marisol

      Conversion rate is calculated by taking the number of conversions and dividing it by the number of clicks you received.

      If you are using a Pay Per Click system like Adwords or Adcenter you will be able to generate a conversion code that can be inserted on to your thank you page. This will give you additional information as well.

      Oli another great segment in this series. I look forward to the conclusion.

  • Paul

    I didn’t get anything in my e-mail about the course could you please send it to me.

    Thank you
    Paul

    • http://thelandingpagecourse.com Oli Gardner

      Hi Paul,
      Make sure you check your spam folder for emails from me, in case they went in there. IF you can’t find anything, the simplest way would be to sign up again. http://thelandingpagecourse.com/
      Cheers
      Oli

  • http://Www.agsglobalsourcing.com Juan Andrés

    Hello Olí,
    Its Been a great journey so far,
    In this chapter 10th, the optimización example that resultes in dropped visitors but lower New customer spend is a real example?? What seré the opinas in that optimización process that creares those results??
    Thanks and looking forward to the last capítulo !!
    Best regards
    JAF

    • http://thelandingpagecourse.com Oli Gardner

      Hi Juan,
      The examples are an illustration of the economics of optimization.
      The reason that you can receive a lower spend is that you have a higher conversion rate with an optimized page. Thus you can reduce the traffic spend and put more into optimization.

  • http://www.getsalesleads.co.uk/ Andrew

    Thanks Oli. Great course delivered in a nice style.

  • http://www.designandmeindia.com Trina Moitra

    Dear Oli,

    As a freelance writer this course of yours has helped me diversify into conversion centric design layouts and double my income. And the best part is- with the tips of Unbounce, client’s actually see results and they are phenomenal. Thank you for being so proactive in what you do and for sharing such great insights with us without expecting much in return. I recommend Unbounce to all my clients without reservations!

    Thanks again for this well structured program. It was transforming!!

    • http://thelandingpagecourse.com Oli Gardner

      That’s great to hear Trina!
      And thanks for the recommendations, much appreciated.

  • http://no.com Mark H

    Oli,

    Your course is the only one I have ever taken and followed so diligently in 10 years. I think the clear writing, and short and sweet paragraphs are the reason.

    Kudos to you my friend.
    PS: I don’t want these courses to end.

  • http://unbounce.com Oli Gardner

    Thanks Mark!
    Really appreciate you saying that.

  • http://musiclessonguru Deana

    Hello Oli,

    Great Course–well organized, concise lessons, and fantastic examples to illustrate your points! Very valuable! Thanks.

    Do you have any plans to make unbounce landing page creation work with wordpress based websites anytime soon?

  • http://studentloanre.org Johnson Biggs

    Thanks Ollie. This is a timely lesson. It is a Saturday and I came in to optimize our pages with pertinent content and enhance the flow of the page to the CTA.