Episode 12

CRO's Role in Ecommerce Growth

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About this Episode

In every business there are tools specific to that industry or type of business that will help them grow. Ecommerce is no different. CRO is one of the most important tools to grow an Ecommerce business. Today, Jon dives into the role CRO plays in Ecommerce businesses.

For help with your CRO:
https://thegood.com/

TRANSCRIPT:

Ryan:
Oh Jon, most people start businesses because they've got skills, knowledge, and the desire to control their work and what they're actually doing on a day to day basis. I would also guess most business owners want to grow and in every business there are tools specific to that industry or type of business that help them grow. E-commerce, as we know, is no different. You and I both know CRO is one of the most important tools to grow an e-commerce business and it's never a bad time to grow.

Ryan:
Today I'm really excited to dive into the role CRO plays in e-commerce businesses. You, Jon McDonald, knowing more about CRO than anyone I know, can you start us off today by giving us your thoughts on CRO and the growth process of an e-comm business, at a high 30,000 foot level?

Jon:
Yeah, sure. Well I think the best way to think about this Ryan is that there's only a small number of ways to grow your company just at a high level before even thinking about conversion rate optimization. You can get more new customers, you can get your current customers, or even those new ones, to spend more with you, and you can get your average customer lifetime value up by getting those customers that have purchased to come back and purchase again. Those are really the only three mechanisms you have for earning more revenue out of your business.

Jon:
So, of course, traffic generation can hit that first one really well. We might argue, and maybe you could fill in on this a little bit Ryan, but traffic generation, when done well in digital marketing, can help you also increase average order value. Then remarketing, you can resell to the people who have already purchased perhaps and you can run campaigns around that.

Jon:
But I think if you're really looking to impact the first two of those in a major way, conversion rate optimization is really going to be how you're going to get a higher return on that ad spend and how you're generally just going to convert more of your visitors into buyers. So if you're thinking about growth the biggest lever with the highest return on investment, and of course, I'm biased, but I think that the highest return on investment is going to be conversion optimization because with a small investment in making it easier for people to purchase on your site you're going to get a high value back that's going to be sustainable over time.

Ryan:
Well yeah and I think even on a previous podcast we talked about CRO after the sale even and increasing some of that lifetime value in areas I hadn't even considered actually being CRO. Like even some of the things in the shopping cart post purchase which would increase lifetime value had never even occurred to me.

Ryan:
I think it does play in all three, but I think for most people as they're thinking through their entire e-comm business they're going to probably see CRO in those first two buckets of growth. As you're looking at e-comm businesses and you analyze tons of businesses, is there a place in the growth curve of an e-comm business where you really see CRO as being the most impactful? I'm thinking in my head of a bell curve and growth or maybe you're growing up to a plateau like where would you in a perfect world insert CRO?

Jon:
Well I think that you need to have enough traffic to effectively do certain types of CRO. Let's break this down a little bit. Let's look at this bell curve in three chunks. The first chunk would be the folks who are just getting started, maybe we'll just say less than a million dollars in revenue, which is a pretty big gap there. But that first million what you really need to be focused on is making sure people know that you exist.

Jon:
They need to have an easy to use website but normally you're going after those early adopters who are willing to put up with a little more complications on your site than the average customer. So it's really important for that first third of that curve that you are mainly focusing on driving traffic that is going to hit a very specific segmented marketplace that is going to be your key customers that are going to stick with you no matter.

Jon:
You probably aren't going to be converting much on branded terms because people don't know who you are, so when people do find your site, at that point, you want to make it as easy for them to purchase but you're not going to be able to do things like AB or multivariate testing because AB testing and multivariate testing, et cetera, require enough traffic for you to get results in a meaningful timeframe.

Jon:
So in that first third what I usually would want people to do is when I'm looking at these companies I want to see them collecting data. What do I mean by that? Well are they actually looking at great analytics data? Have they actually ever dived in there and customized it a little bit or is it just they just put the snippet from GA on their site and that's all they have.

Jon:
Couple other things to be thinking about there, like you could easily pretty cheaply get things like heat maps and movement maps. You can do that type of stuff to start understanding how people engage with your website and just make changes based on data. You don't have to test it, right?

Ryan:
Mm-hmm (affirmative).

Jon:
Just make the changes. The best way to test there is just to do week over week or month over month. Now if you're making changes every day that's going to be hard to really know what worked well, but I don't want that to stop brands. They should still be tweaking their site as much as possible and then sticking to perhaps even larger changes in that first third.

Ryan:
In that space, in that first third, a lot of times the business owners generally don't know best practices on website. They know their industry, they know their products well. But how much would you as that business owner trust your gut looking at small pieces of data like that on a daily, weekly basis where you can't actually get an AB test and have full confidence that this is what is better. You just say hey, go with your gut on that because it's probably better than not going with your gut?

Jon:
Well I think that it goes back to the phrase I say quite often which is it's really hard to read the label from inside the jar. I think that with that in mind that it's still as an owner of a site and a daily operator you're still too close to it and you really still need that consumer feedback. Collecting that data and paying attention to it, even if it's only 100 visitors a day or a week, that's still data that you should be looking at. Where are people leaving, what pages are they getting stuck on perhaps, where are they dropping off in the funnel, that's all good information to know where are the holes in your bucket because they're flowing right through that bucket instead of collecting them as revenue. You really need to know where those holes are and that's really what I'm getting at here.

Jon:
The other thing you can be in this first third of that curve, go talk to consumers. You should email every single person who buys personally. There's not a volume at that stage under a million where you can't email every single person individually and just ask them, "Hey, this is me, this is actually me," just start the email that way. "I'm sending you a personal email. I want to know why you purchased and what your experience was." That's it.

Jon:
I have never gotten an email like that and I purchase online almost exclusively now, that's my job. I have never gotten a personal email from a brand. It's always an automated give me a thumbs up or thumbs down, or what's my net promoter score and they're doing it in a really horrible way. I don't want to rate you on a scale of 1 to 10, that's not what this is about. I'm not going to waste my effort there. If you sent me a person email and said, "Jon, thank you so much for buying from me, we're just starting out, as you likely know. If you didn't know, well hey, welcome to the small club. Excited you're here.

Jon:
I want to know about your experience because we want to continue to improve our site. Can we chat for 10 minutes at some point or can you just spend 10 minutes right now just write down your thoughts? Nothing is going to be better than that." There's a lot you can do in that first third that people just aren't doing and that's what I'm looking at these businesses if I'm going to give them a passing grade they're doing at least some of these items and most aren't.

Ryan:
No, I think that's important as somebody that's launched my own brands. You get, as a business owner, so many different directions that many times it's difficult to I think step back and think about okay, if I am selling online what's the most important thing to me right now. If I'm acquiring traffic I need to make sure it's doing the best. I don't like wasting money.

Ryan:
So I think most business owners probably need to do a little more of what I would consider some of that grunt work on their own where maybe it's not going to be your most favorite thing to do, but it's highly important if you really want this brand to work.

Jon:
Right. I think to get to that next level, and I would say that middle of that curve is generally a million to 25 million, big gap. But you can get easily get over a million by just doing what I mentioned. If you put in all that grunt work you will get over a million dollars a year in revenue of your site. Then once you get over that point you will likely start having enough traffic, and by enough traffic, let's just say 40 or so 1000 visitors per month. At that point, if you have 40 or so 1000 individuals hitting your website, and I should say users instead of visitors, there's a difference there in analytics. But when you have that 40,000 users on your site you can now start running AB testing on your site and actually get things to hit statistical significance, which is the mathematical formula that's going to tell you that this is proven with math that it's going to improve the metric you went after.

Jon:
I think that's what's really important here is that once you hit that middle part of the curve that you are really starting to invest in data-driven decision making that is run by testing ... and usually in this part when I'm looking at these businesses, these are the ones who have some money to start growing and reinvesting on a regular basis. It's usually no longer just the owner spending their own money to grow the company because when they got over that million mark now they have some employees, they start having enough margin, ideally, that they can reinvest. Maybe the owner is still involved, but they also might have hired a digital marketing manager or an e-comm manager.

Jon:
So at that point, that's when you really start to see some rapid growth and that's why that band is typically a million to 25 million because you can really grow pretty rapidly in there if you're AB testing in each of these 3 points we talked about earlier, which is the first time visitors, getting people to buy more, and then also a repeat customer. You can start optimizing all three of those because you have enough traffic going far down the funnel where you can even run tests in the checkout, which typically is going to be one of the pages that has the least amount of visitors to it because you're only in checkout if you're actually going to buy something. That gives you a wide range.

Jon:
Now if you're over 25 million, what I really start to look for there on that growth curve at that point is these people have in-house teams, generally, focused on optimization. They've proven out the value in that middle tier and now they've moved up to the top tier and they can start having a whole team centered around this, and if they don't, they realize that they're missing out. They know that they're missing out but there's something else holding them back from doing that.

Jon:
Generally, that's when they also either start to outsource that or they're looking to augment their team and come up with some additional new, fresh ideas because at that size they start to realize that they're too close to their site and they need some outside ideas. It could be as simple as they're just looking for test ideas or it could be as simple as they want to accelerate their testing and do more of it, or they want to train up their team and refresh the skillset there.

Ryan:
Got it. So grunt work "CRO" what we termed an earlier episode CRI where you're just making improvements to the site that are removing some friction even if there's not tests to back it up, you're just seeing some of the friction. Really it's 40,000 visitors, million dollars plus in revenue, really want to take the next step and grow. If you don't want to grow you're probably not even listening to this podcast.

Jon:
Right.

Ryan:
So you're probably not appropriate for this anyway. But here's something I don't think I've ever asked you about this, and I don't know why. Obviously when you're doing CRO on a site it's impacting everything all the site, all visitors are going to convert better once CRO process is going. What traffic channels generally see the biggest uptick in conversion rates once you've started the process and you're really seeing some good improvements going on? Is there a certain part of the site or type of traffic that you're seeing as just takes off really, really well?

Jon:
Well I think that it can affect the entire lifecycle of the customer, as we talked about earlier, and thus all the different types of channels once they get to your site. Now in terms of traffic generation channels, I think that generally what we see return on ad spend does improve because you're getting more people to convert. Now at The Good, we focus exclusively on onsite test, so we don't do any testing offsite, so we're not testing ads or any of that type of stuff.

Jon:
That's where Logical Position in your team comes in. But what we do see here is the match between having a successful ad campaign direct that visitor to an optimized portion of the site, that is like adding fuel to a fire. At that point they both become way more effective. So there's definitely synergies there.

Jon:
Now in terms of overall channels, generally, we see organic go really, really high. This is because people are already looking for you. They already know you exist. At that point, they've made their mind up that they likely want to purchase, maybe they heard about you through a friend, or it's all those channels that are going to have the people who are going to clearly fit your ideal customer profile.

Jon:
Now you're going to see those organic numbers really start to increase and improve because you've made the site easier to use. You've reduced all of the barriers that person who already really wants to buy that they're not going to get as frustrated. They're not going to have a reason to desert like they had prior to optimization.

Jon:
So that's one of the benefits because at that point you can get your cheapest traffic to be optimized and convert higher, then that's where you're going to see a massive return on your investment. But that's not to discount that you would see higher conversions from people who come by clicking on an ad and I think that's really going to be valuable in terms of return on investment. So there's a couple ways to look at that.

Ryan:
For a business's initial foray into CRO do you recommend their focus be on increasing the number of conversions, increasing the average order value, something else, or all of the above at the same time? Is there an order that I should be looking at those as a business owner?

Jon:
Yeah. I think that unfortunately The Good is in an industry called conversion rate optimization, so a lot of people come in with the expectation that conversion rate's the only metric that matters. Now I totally understand that 100% matters and if you can move that lever then you're going to see a massive return on your investment in it. But there are a ton of metrics that you do want to be looking at that are I would argue as valuable, if not more valuable and more sustainable. So if I get your conversion rate to double or I get your average order value to double we're going to have this very, very similar outcome, mathematically. People spend twice as much or let's just break it down, I get 100 people to spend $2 or I get a 100 new people to spend $1, we're going to make the same amount of revenue, right?

Ryan:
Mm-hmm (affirmative).

Jon:
So I think you want to look at these metrics more holistically and then develop a plan to one, analyze where your weakness is. Maybe you already have a really strong steady conversion rate and it's more about getting your average order value up, or maybe you notice that your cart abandonment rate is really, really high, or maybe there's not enough people even adding something to a cart, so there's all these clues, there's all these clues around why people aren't buying.

Jon:
If you just focus on conversion rate you're going to be, as a consumer, an untrained eye or maybe just somebody who's in that first band of up to a million dollars. They're going to go online and read a bunch of articles about improving conversion rates, and the reality is, a lot of them are just going to start running discounts, do pop-ups. Do all these that will show you an immediate boost of numbers but it's not sustainable in any way. And you start having long-term systemic issues where you're stuck on the discount train and once that discount train leaves the station your consumers are always going to be expecting discounts at every single purchase and every single stop, and that's really hard to get off the tracks once that happens.

Ryan:
And that's not a fun business.

Jon:
Right. Nobody wants to be in the business of, how do I put this, of giving everybody free stuff. It's basically what it is if you over discount. So I think you really want to be thinking about what metrics are most important to moving the needle for your business. The only way to do that is to go back to what I said earlier, which is early on in your business you need to set up the right tracking. You need to get used to looking at the numbers and you need to start making data-backed decisions. If that guides you into understanding where your metrics could be improved then that should be where you're going to start working on your optimization moving forward.

Ryan:
Oh man, and I will double down on that statement. I have talked to so many businesses in the startup process or they've been in it a couple years even and they're with a platform like a Shopify or a Bitcommerce and they don't have Google Analytics. How are you looking at your business, oh I just look at the back end of Shopify or Bitcommerce. It's like wow, there is so much more available in a more robust analytics platform than just your shopping cart or the web platform that you utilize that I think both can be important for various things, matching each other up, verifying certain things are working, but for sure make sure your analytics is working and tracking reasonably close. Because even with the Shopifys and the Bitcommerces of the world that have 1000s, millions of users if you're Shopify, the implementations of analytics do not work the same on each one of those. They don't line up correctly all the time, so you got to make it at least line up as close as possible.

Jon:
Yeah and there's one thing that one of your team members at Logical Position, Brian Aldrich, he really hammered into my head over the years. I've seen him speak at the same events all the time, and stuff. He always says, "You need a single source of truth." Unfortunately, if you the e-commerce platform be your single source of truth you're missing out on a full picture.

Jon:
So just getting started early on using Google Analytics, or some analytics package, I mean I don't know why you wouldn't use Google Analytics for this, but make that your single source of truth because no two analytics packages are going to line up exactly, and I think that's the point you're making.

Jon:
But if you just look at one of them like Shopify's built-in analytics that's great for at a glance how did I do day over day, et cetera, but the reality is, it's not going to help you optimize your site so you really need to have that real truth, source of truth, be something that is a full picture of the consumer experience.

Ryan:
Funny enough, analytics is top of my mind because I had a contact from another one of our partners. He's going off to look at other businesses to get involved with and one of them was an analytics company, so he had me sit down and talk with him to see what it was about and if it had some validity. They started their pitch at me was, "Well you already know analytics is bad, right? Google Analytics?" I was like, "Well, no."

Ryan:
Their whole thing was like oh yeah, Google's just bad. Google Analytics is bad because it gives itself too much credit and doesn't actually let you see the full attribution of everything. I'm like, well, I mean I don't believe that. But you see it's probably more in depth analytics products across the board. Does one in particular stand out as a business owner when you're looking at things? Is Google Analytics okay but actually bad or is it Adobe is way, way better, or something most companies haven't heard of that they should be looking at in addition to analytics, or instead of?

Jon:
Well I think you make a good point here and that's that every analytics package is going to be a little different. The thing is it's all in how you use it and the consistency in which you use it, it doesn't matter which platform you use. Also, a startup doing less than 10 million, they have no business looking at Adobe. They can't afford it, just be upfront about that. So it's also what is your return on your investment going to be?

Jon:
If you are spending a ton of money to get some data but you're not utilizing that data to get a return on that spend then don't do it, what's the point? This is where Google Analytics really serves in a great need is yeah, look, you're giving data to Google, if you're not paying for it you are the product. So the reality is it's a trade off. A lot of people think there's privacy issues in giving that data to Google, and whatever.

Jon:
Reality is that if you're a site doing under a million dollars a year, or even way more than that probably, Google doesn't care about your data, quite honestly. They've got bigger fish they're working with. The reality here is that out of the box Google Analytics is a great tool to get started with. Then if you don't ever touch it and you don't customize it, yeah, there's going to be better tool sets out there that come customized out of the box. But what I highly recommend is that you start learning early about Google Analytics, you learn how to set up custom dashboards, you learn how to feed information into GA through events on your site.

Jon:
There are limits on what type of personally identifiable information you feed in, but you can still feed in stuff without tying it back to a user pretty easily. You don't have to send a user's email, or an order number, or a phone number, or any of that kind of stuff into GA to warehouse it there, but you should be able to feed in whenever someone buys a product you can event that says this product was sold and this is the dollar value. That's not tied back to anybody.

Jon:
So I think there's a lot you could be thinking about there that could extend the Google Analytics to do everything you need and it's going to happen pretty easy out of the box. Now if you're looking to do segmentation that's really drilled down and have a lot of other information, you're going to need tools on top of Google Analytics to do that. But quite honestly, Google Analytics is great for the vast majority of brands out there.

Ryan:
Good insights, I appreciate that. As we're winding up I do have one more question that maybe it's interesting for people or not, but what's been the longest CRO engagement you've been a part of?

Jon:
Yeah, it's a great question. If I understand why I usually get this question it's because people want to know how long can conversion optimization influence growth. Is that basically where you're going with this too?

Ryan:
Yeah, it's like is it 2 years, is it 10 years, is it 6 months.

Jon:
I have a couple of answers to this. The first is that we've been in business over 11 years and if conversion optimization was not a sustainable thing then there'd be no way we'd be in business this long. I think the longest that we've been, I would say, we had a customer for four or five years and the engagement ebbed and flowed over time, meaning that we would sometimes be launching a lot of tests and sometimes just be holding their hand as they went through changes and coming back and forth. But they were a paying customer of ours for a handful or quite a few years, however you want to look at that.

Jon:
Now an average, an average goes about two years. Right around that timeline is when I see an average customer that we've helped them get to that next level where we have helped proven the value of conversion and optimization to the point that senior management decides this line item, that's not going away, so we should probably hire and bring that team in-house. I applaud that. I think at that point it makes sense.

Jon:
If you have a brand that has grown and you've used optimization, and you know that you're going to continue doing this, and you have successfully changed how you think as a brand to where you know that you are going to use data to make decisions, that you're going to put the consumer interactions on your site first, that you're going to really, truly care about your consumer's user experience on your site and the customer experience over all, then great, we've done our job.

Jon:
We have fulfilled The Good's mission of removing all of the bad online experiences until only the good remain. If I can do that at a brand and help them eliminate all of that, and want to have that same mission, and carry the torch, then I applaud that. So I think after about two years is generally when I see brands start to take that in-house, but there's a lot of brands who decide not to and continue to work with us beyond that.

Ryan:
In the CRO process does it ever work where you can start and stop constantly like hey, I want to do a three month here, stop for six months, do another three months, six months, stop, does that ever work or is that just more butter and can't finish the process when you start and stop constantly like that?

Jon:
Yeah, look at it this way, if you want to run a marathon are you going to train to win a marathon by one week running and then taking a couple weeks off and then running again? No. You need to build up [crosstalk 00:27:03].

Ryan:
Did you get my training schedule?

Jon:
Yeah. I'll leave that one.

Ryan:
Yeah.

Jon:
But I think it's interesting, a lot of brands and business owners approach it the same way, they just feel like hey, well I can go optimize my site right now and do this once, and be done with it. That's not how it works. I think anyone can go out and do this checklist but that's just step one, that's really just the beginning. So I think all in all that when I see that and I try to set that expectation upfront and when somebody says, "Yeah, I'm going to do this for three months and then reevaluate," it's like well you know what, we can always reevaluate. We can just have that conversation at any point.

Jon:
But if you're only truly going to do this for three months then we're not going to be a good fit. In fact, do not spend your money on optimization at all because it's not going to have a sustainable long-term impact. You're better off just taking that money that you are going to spend and just running a bunch of discounts on your site, or spending it to drive a lot more unqualified traffic, or doing a lot of other things just to get your brand out there.

Jon:
But if you really truly want sustainable investment and optimization it needs to be a small amount spent on your site in a regular interval over time and it needs to be a long-term line item. So spend each month and compound that growth very much like a retirement investment account. You need to put a little bit in with every paycheck and then eventually you're going to start getting a lot out of it that it's going to just grow and grow and grow over time.

Ryan:
That is a phenomenal analogy, I think, for what CRO and what you should be looking at it as. Thank you Jon, I appreciate all the insights today.

Ryan:
Is there anything I didn't ask that I should have or a point that you wanted to get across in this topic that you couldn't get in there?

Jon:
I think I wanted to emphasize that CRO can be done at a company of any size, it's just the methodology in which you're going to do that. So I think you have the option to look at getting some data and making data-backed decisions at any size company. How you might use that data and approach, are you going to use that data to run AB testing? No, not for every size company.

Jon:
But I do think that there are options for every size company. So the mistake I see small brands make is that they feel like they can't do optimization because it's just too expensive and they look at it as an expense instead of investment, and perhaps they're intimidated by the data. But I think that there's a lot of options out there.

Ryan:
Jon, thank you as always for enlightening me and teaching me something new. I appreciate it.

Jon:
All right, looking forward to the next chat Ryan.