February 28, 2008, 12:00 AM

A Simple Equation

Effective e-commerce site optimization addresses the problem of converting a shopper to a customer.

In the hypercompetitive, high-growth area of search marketing, how do you improve your search performance, generate more visitors and lower your cost per click? Bid a little higher? Work on your ad content? Hire a new search engine marketing firm?

Maybe.

Instead, let’s think about what happens when someone clicks on your search ad and is sent to your web site. Attracting visitors to a site through paid search and online advertising does not guarantee they will convert to paying customers. In other words, effective search campaigns can lead the proverbial horse to water, but can they make it drink? Today online merchants, on average, convert fewer than 3% of visitors who show up to their landing pages. That means more than 97% of your search clicks, and search dollars, are going to waste.

Converting shoppers to buyers

Savvy marketers know that search is just a tool-in and of itself it doesn’t bring your company revenue. Rather, marketers care about maximizing the impact of every dollar spent, regardless of the program or where dollars are spent. Online marketing return on investment is a function of “X times Y,” where “X” is the number of visitors to your site generated by each dollar spent trying to reach them (through search and other forms of lead generation) and “Y” is the financial impact made by the percentage of those visitors who actually take an action on the web site once they get there. “Y” is actually an easier variable to affect than “X.”

Effective web optimization addresses the problem of converting a shopper to a customer. Using web analytics can help identify problem areas of a web site and real-time multivariate testing can make that data useful in a very short time.

Through even a simple web site optimization program on a landing page––usually through multivariate testing-a web site can easily see double-digit improvements in conversion. Think of it this way. A modest 10% increase in your landing page conversion rate is the equivalent of knocking 10% off the amount you’re paying Google to generate that revenue.

So let’s zoom in a bit closer to how you can impact the “Y” variable through multivariate testing.

Multivariate optimization is a holistic approach; it is far more robust that just “offer testing” and much more than just landing page optimization. It recognizes the interrelationships of different facets on a landing page and identifies the most effective combination. For instance, you can test diverse combinations of variables, such as five page headers, four side links and five images (and many more pieces of content on a page), and then determine which combination results in the most conversions.

Very often such combinations of variables can create thousands or millions of permutations of a web page. Using advanced methodologies in the process known as Design of Experiments, which organizes information-gathering where variation exists, marketers sample a far smaller number of page permutations and still get statistically significant data on how every variable, and every page, would perform.

In the case of Delta.com, a client of my company, its marketers tested dozens of page variables to determine which combinations of content and presentation were the most effective in converting shoppers to ticket purchasers. Delta used the data to adjust certain pages accordingly-sometimes only small tweaks-that yielded large changes and will bring an expected $10 million to $15 million in incremental online revenue compared with a year earlier.

Lillian Vernon’s challenge

Lillian Vernon, a mail order and online retailer, and another client, had a similar challenge-it wanted to increase the number of shoppers who would add at least one product to their shopping cart and complete a sales transaction. By developing a test plan that included six variables and 24 different values of the universal page header, they were able to identify and test more than 2,000 different permutations.

Some of the key findings indicated many small changes could make an enormous impact. Everything from the location of the shopping cart, the size of the retailer’s logo and the appearance of the search button all significantly affected the number of visitors who added items to their shopping cart. The end result was Lillian Vernon had usable data from these tests, and the winning combination delivered a seven-figure increase to its annual online revenue.

Along the same lines, LetsTalk.com Inc., an independent reseller of wireless products and services for consumers and enterprises, and a client of my company, found 90% of its web visitors were abandoning the sales process prior to completing an order. The site’s rapid price changes and cross-carrier product selection required a dynamic content solution to maintain landing page relevancy.

In short, the testing solution needed to be flexible enough to handle a vast number of inventories and offer combinations. The testing helped identify and generate more than 1 billion possible permutations of the page and found the optimal landing page resulted in a 7.7% increase in order completion and an increase in annual online revenue of more than $2 million.

So, once a retailer has optimized its web presence, how does this translate to maximizing existing search spend?

Searching for the ‘Y’

Search marketing and web site optimization work hand in hand as they complete the “X” times “Y” equation. More important, web site optimization lets you extend the messaging of your search ads throughout a shopper’s entire experience on your site. True web site optimization combines content targeting-the ability to present specific messages to certain shoppers based on what you know about them-with controlled testing of the content presented.

All of your search traffic isn’t alike-some shoppers may be looking for specific products, others for special deals, while some are just window shopping. A carefully designed web site optimization program enables you to test different content, offers and presentations of your site differently for all of these different personas in your audience.

One financial services e-commerce client was spending approximately $10 million per year in Google pay-per-click ads. For the last two years the client has seen its cost per click steadily increase as the competition for its most important keywords intensified. After only 60 days of a web site optimization program on its landing page, the company increased sales by 24%. Every dollar spent with Google is generating 24% more revenue than it was just 60 days prior.

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