In a world with self-driving cars and AI-driven robots, you’d think Conversion Rate Optimization would be the life of the marketing party.
But alas, it’s still waiting for an invitation to join the budget allocation club.
According to a survey of 405 CMOs by Marketing Charts, CRO is still struggling to get a seat at the table:
Experimentation is the backbone of every unicorn, and yet, the CRO industry is still playing catch-up to its more mature counterpart, SEO. However, we can’t deny the incredible value that comes from testing and optimization.
Unlocking the mystery behind why so many businesses overlook Conversion Rate Optimization can be a challenge. That’s why I went straight to the source: seasoned experts who have been mastering the optimization game for over a decade. In this article, we will dive into the secrets of the CRO budget and what makes it so elusive.
But before we delve into the nitty-gritty of this article, let’s meet the experts:
– Brian Massey, CEO of Conversion Sciences
– Ben Labay, CEO of Speero
– Jon MacDonald, CEO of The Good
– Johann Van Tonder CEO of AWA Digital
– Khalid Saleh, CEO of Invesp
Now that you know the experts, let’s get started.
What Is CRO Budgeting?
As the name implies, a conversion rate optimization budget is the amount of money set aside yearly to run an optimization program in a business.
This amount could vary from 10% of the entire budget to 30% or even more.
So, if a marketing department has a budget of $3,000,000 across the board to share across different channels, if the percent allocation to CRO is 15%, this means;
15% of $3,000,000 = $450,000.
$450,000 is the amount of money that will be spent from the marketing budget for conversion rate optimization activities.
What constitutes a CRO budget? We’ll get to it shortly, but Ben Labay, CEO of Speero, has something interesting to say about CRO budgeting;
‘ The percent of the marketing budget dedicated towards CRO depends on the money in the margins. It means it depends on what questions are being asked, where, and by whom. CRO can be used to test out a new layout, or new pricing strategy, or even a new product or channel. The CRO budget, therefore, can be the SAME as the marketing budget in many ways. Even paid ads can fall into this budget. ‘
Brian Massey, CEO of Conversion Sciences, explains;
‘I believe 100% of your budget should be allocated to CRO. I’ve never told a client how much to allocate in percentage to experimentation. If you feel like you’re not learning enough from your CRO program, there are only two things to do. End the program, which isn’t advisable, or increase your budget.’
Shedding more light on this, Johann Van Tonder, CEO of AWA Digital, says;
‘It’s difficult to give an exact figure, but this is how I think of it. The more you spend on acquiring traffic to your website, the more money you should allocate to CRO, and that’s because you want to maximize the traffic coming to your website.
There are also times when a business has strategic priorities like just getting their brand out there or driving traffic. At this time, it’s possible not to spend as much on CRO, but you can still A/B test your ad copy, email sends, etc., when the strategic priorities shift towards maximizing the brand and traffic already built over time, now more of the budget can be put on CRO.’
Benefits Of A Dedicated CRO Budget
1. It provides a basis for assessing actual results i.e. how much was spent vs how much was made back.
2. A conversion optimization budget allows you to plan a CRO roadmap and execute strategic campaigns.
3. It gives you a competitive edge. If your competitors aren’t considering CRO at all, with a budget, you can learn more about your collective audience and if implemented correctly, win a large share of the market.
4. A conversion optimization budget allows you to allocate your resources effectively. You begin to answer questions like, should we hire an agency or hire an in-house team? Should we go for tool A or B?
5 Reasons Why Businesses Don’t Invest In CRO.
1. Misconceptions About CRO:
You’ll be surprised at what many ecommerce managers define CRO to be.
For some, it’s merely a traffic acquisition strategy, while others perceive it as a win-only experimentation system.
Unfortunately, this is largely due to the number of CRO agencies offering services without taking responsibility.
As a result, businesses become hesitant when partnering with agencies that perform actual experimentation.
Here’s what Jon Macdonald, CEO of TheGood, says;
‘Many companies come to us with a skewed perception of conversion rate optimization. This is in part due to many full-service marketing and traffic-generation agencies claiming that “they do CRO”, but that can mean a variety of different things. Companies that simply tack on CRO as a way to bolster their service offering are rarely doing anything close to what a real/full conversion optimization program entails.’
According to Jon;
‘A true conversion optimization program revolves around one thing: data-backed decision making, applied in an iterative manner. CRO is the business of understanding how customers see, engage with, and navigate a website. The goal is to increase the percentage of website visitors that convert into customers, or more generally, take any desired action on a webpage.’
2. They value traffic over optimization.
In the ecommerce industry, many people believe that the more money they spend on traffic acquisition, the more sales they’ll make.
While this may seem like a good idea in theory, it’s not sustainable in the long run.
The purpose of conversion optimization is to convert the traffic already coming to your website, not just replace it.
Therefore, conversion optimization should be viewed as enhancing your acquisition efforts by increasing your returns and lowering your customer acquisition cost (CAC) over time.
‘Before you start sinking money into traffic generation, it’s important to make sure your site is optimized to get the most value out of the traffic you’ll be paying for. While CRO can often be a larger up-front investment, its value is long-lasting and outweighs the importance of getting more people to your site.’
3. Senior Management Doesn’t Want To Look Stupid
Many eCommerce managers and top management are uncomfortable with having someone point out where their site design isn’t converting, especially when they have a hand in the design process.
Now, nobody wants to look stupid, so they refuse to bring in a CRO agency because who knows if they’ll find an issue with the aspect of the site they(top management) contributed to.
This is a faulty mindset, and that’s because conversion optimization isn’t about making anyone look stupid but improving the site’s usability and customer experience.
This won’t be much of an issue when a business is customer-centric.
Jon categorically states that;
‘ The overarching goal of CRO is to make your customer’s shopping experience as frictionless as possible, not to make the ecommerce manager look like a fool. ‘
4. Short-Term Focus:
Different organizations are run based on different business models; for many, it’s all about getting the first sale at all costs.
This involves deploying different strategies to hit that first sale.
This short/immediate-term mindset doesn’t allow top-level management/decision-makers to see the benefits of investing in CRO.
Note: It’s not that CRO doesn’t offer short-term wins, but the real power of CRO is seen in the long term and the positive change in user experience.
5. No Budgetary Allowance:
Just like in the introduction, many CMOs don’t have space for CRO in their budgets, and the reason is simple.
They view CRO as an expense instead of a long-term Investment.
Conversion rate optimization is indeed a cost-intensive program (more on this in the ‘what constitutes a CRO budget section’), but it has the potential to impact the bottom line the most.
According to Jon;
‘Categorizing CRO as an expense rather than an investment with a measurable ROI is a misconception that we, unfortunately, see very frequently. Especially for smaller ecommerce companies, CRO is believed to cost “too much,” and/or there isn’t a line item in their budget for it, so they have to create or find the money to finance it.
It really pains us to see this happen because the truth is CRO can have the greatest ROI compared to many other marketing strategies you may utilize (SEO, traffic generation, social media, etc.).
How To Identify If A Business Needs Conversion Rate Optimization.
On a broad scale, there are a couple of factors (metrics included) to look at to identify if a business has a poor user experience and will benefit from conversion rate optimization.
1. Low conversion rates:
If your website receives a lot of traffic but the conversion rate is low, it may be a sign that you need CRO.
You can check the landing page conversion rate overview using Google Analytics.
On your GA dashboard, on the left, click on behavior, site content, then landing pages.
This gives you an overview of all the important metrics regarding your product pages.
To know if your conversion rate is low, compare it against relevant benchmarks in your niche.
Required reading: The Average Website Conversion Rate By Industry
Note: You can also drill deep into individual product pages to see how they’re faring regarding these metrics. All you need to do is click on one of them.
2. High bounce rates:
A high bounce rate on your site means visitors are leaving your site without taking action, which means a low conversion rate.
Following the same procedure above, you can find your site’s bounce rate overview and drill deep into individual pages.
Note: If visitors leave your website without taking action, it may indicate a problem with the user experience.
3. Low average session duration:
If visitors are not spending much time on your website or not engaging with your content, it may indicate that they are not finding what they are looking for.
4. High shopping cart abandonment rates:
If visitors are adding products to their shopping cart but not completing the checkout process, it may indicate a problem with the checkout process.
This is an indicator of a horrible checkout experience.
Go to your analytics dashboard, conversions, click on ecommerce, and then shopping behavior.
You want to look at the number of site visitors that get to the checkout and how many dropped off. If the drop-off is greater than the number that got to the checkout, that’ll indicate an issue with the checkout.
5. Low return on investment (ROI) from marketing campaigns:
If you are spending a lot of money on marketing campaigns but not getting the desired ROI, it may be a sign that your website needs CRO.
6. High customer complaints:
If customers are complaining about the usability of your website, it may indicate that you need to optimize it for better user experience.
How to get this is simple, add exit intent surveys on your website money pages that trigger when a site visitor wants to leave and ask them about their experience on your website.
If the responses tend to be non-satisfactory, this indicates poor user experience, and you need to optimize your site.
Required reading: The Best Examples Of Customer Satisfaction Survey Questions in 2023
7. Outdated website design:
If your website design is outdated and not mobile-friendly, it may turn off visitors and affect their user experience.
The points mentioned above are a good starting place to evaluate whether a business is ready for conversion optimization.
My conversation with the experts showed they had more niche insights to share.
Hear from Khalid Saleh, CEO of Invesp;
‘What matters is the number of conversions the site generates monthly and not the number of monthly visitors.
If an ecommerce website does less than 500 conversions monthly, it’ll take their AB tests time to achieve meaningful results.
The number of conversions matters because it tells you how fast the AB test comes to a conclusion.
At a minimum, 500 conversions are needed to start running AB tests.
Between 500 and 1000 conversions monthly, any ecommerce site can comfortably deep its toes into the sea of testing.
Above 2000 conversions monthly, things get interesting, and you should be able to deploy AB tests quickly and get results quickly.’
Brian Massey shares his thoughts;
‘A CRO program is going to be most effective if a business has got a good product with an established value proposition and has found an audience i.e., they’ve figured out customer support, shipping, marketing, and everything that goes with it.’
On the flip side, whether it’s a budding business or an established one and they want to launch a new product, here’s the route Brian usually takes;
‘For entrepreneurs launching new products, our testing is absolutely brilliant for deciding what product should be developed, if it’s good enough to be launched, and if yes, what words you could use to sell the product.’
But that’s not all. When poorly qualified businesses approach a CRO agency for help, here’s the diagnosis Brian uses.
‘ Two things are at work here, they’re yet to figure out their value proposition, and they don’t have enough repeat visitors that hit that monthly conversions for A/B testing. So I advise them to go and figure those two things out before we can help them.’
What Constitutes The CRO Budget?
Every expert agreed that 2 main pillars make up a CRO Budget.
1. Human capital/people:
In many instances, this will be what will take the chunk portion of the CRO budget.
Human capital covers getting new hires to join your team to supplement existing members, outsourcing to a CRO agency, or having a bit of both (hybrid).
The truth is building an in-house team is more cost-intensive than outsourcing to an agency.
Khalid Saleh shares some insight;
‘At a minimum, you need three roles to make up the in-house team. Somebody who’s a conversion rate specialist, someone who will do design, and a front-end web developer. Location plays a critical role in the hiring process. Some regions are more expensive than others.
Irrespective of whichever location you want to hire from, you need to factor in details like timezone differences, payments, and language, etc.’
A conservative estimate of the salary structure for an in-house team falls between the range of $400k to half a million dollars (you’ll see the calculation shortly).
Expert tip from Khalid Saleh;
‘Don’t try and shortcut hiring the right developer. The fact that somebody can develop an AB test, and if it’s not well written and optimized for AB testing purposes, your AB tests become slow, begins to flicker, and a new set of problems are introduced to your experiments. I recommend setting up a test for the developer and seeing how they perform against your internal standard of operations. ‘
Brian Massey agrees with what Khalid had to say;
‘You’ll need someone who can set the tools and the CRO program up, and that’ll be a data analyst. A major part of his responsibilities is to take the data out of the tools, clean the data, and combine and present the data. You’ll also need dev support for data and dev support for A/B tests. You’ll need a designer because we’re testing things that talk to humans, a QA person to make sure everything is working well before it goes live, and an account manager to communicate with clients.’
Shedding light on this section, Johann Van Tonder had this to say;
‘ At a high level, there are two components to what makes up a CRO budget: tools and people. For tools, you’ll need insight-generating tools, analytics, and a bunch of others. Then the other component is people who will operate these tools.’
If you’re looking at hiring in-house, these are the roles you should consider and how much it costs to pay them yearly.
Conversion optimization specialist (2-3) – $85,000 and above
UX designer – $75,000 and above
Front-end developer – $77,000
Customer research specialist (part-time) – $50,000
Analytics specialist (part-time) – $86,000
Quality Assurance Specialist – $53,000
Data analyst (part-time) – $50,000
Product manager/Program manager – $70,000
Total: $546, 000
This is the amount it’ll cost you to pay an in-house team at their base salary without bonuses included.
Note: The details about these salaries were obtained from Glassdoor and ZipRecruiter.
Tip: Hiring a specialist CRO agency can be anywhere from $7,000 to $30,000 depending on their level of expertise and their service offerings, and they have a team with all of these roles.
Required Reading: Should You Choose In-house or Agency For Your Marketing Efforts?
2. Tool cost/money
Alongside the cost of hiring an internal team or onboarding an agency, the cost of tools is another major factor that takes a good amount of the CRO budget.
Hear from Brian Massey;
‘ Part of what takes a chunk of your CRO budget is the tools you’ll use. In this context, a CRO tool refers to anything that’s used to collect, process, and present data, such as Analytics, user intelligence tools (heatmaps and session recordings), onsite survey tools, A/B testing tools, user research services, data warehouses, business intelligence systems, etc.’
Khalid Saleh agreed with Brian and added a pricing angle;
‘For the AB testing software, you’ll spend anywhere from $700 – $ 3,000 monthly. This depends on your budget and the features you need. At a basic level, you’ll need a tool or suite of tools that runs tests, has heatmaps, does session recordings and polls and surveys.’
Not every tool is right for every company doing experimentation. There are basic tools that can handle AB tests and the like, and there are high-level tools that do the basic stuff but also add personalization and other features depending on the experimentation maturity of the company.
Depending on your level of CRO maturity, you can also choose a single, integrated tool like Figpii for all your optimization needs.
Johann Van Tonder shares his thoughts;
‘ Tools are different to each organization and that’s depending on the experimentation lifecycle where they are. A business can start experimentation today and start using basic tools and a year or to from now based on their experimentation needs make use of different tools.’
Conversion Optimization tools can be grouped into 3 categories;
Helps you know what’s going on in your site in terms of numbers
- Google Analytics (free)
- Heap Analytics (there’s the free option and the growth option you can try for free, then you need to contact sales for the higher tiers)
- Amplitude (there’s the free option, then you need to contact sales for a demo and price for the growth and enterprise plan)
User behavior tools;
Mainly used for qualitative research, they help you see user behavior in real-time.
- FullStory (contact for pricing)
- Hotjar (a free forever plan, then there’s the basic plan which is $32, the business plan, $80, and the scale plan, $171.)
A/B Testing tools
They help you confirm if the site changes you want to make to your site will positively or negatively impact your conversion rate.
- Figpii (there’s the forever free plan, then the small plan at $99.99, medium plan at $199.99, and large at $339.99)
- VWO (there’s the free plan, then $286 for the growth plan, $657 for the pro plan, and $1,151 for the enterprise plan
- Kameleoon (contact sales for pricing)
The fact is, under each category, some tools can do the basics and aren’t that pricey, and there are enterprise tools.
The tools you go for should be based on the maturity of your experimentation program.
Recommended Article: 10 Things To Consider When Evaluating CRO Tools For Your Shopify Store
Creating A Case For Conversion Optimization In A Business
There are two approaches to this.
- From someone working in-house and
- An external agency making contact with a business they feel is ready for CRO.
If you work in-house and want the business to start experimenting, you need to create a proposal.
You need to answer some critical questions before you can create your proposal. If you skip answering these questions, it will look like you haven’t done your homework.
- What is the current conversion rate on your website, and how is it being measured?
- How does your company currently define conversion? Which important actions is it aiming for visitors to perform?
- What is your maturity level compared to others in your segment?
- What tools do you use to manage your website and analyze its performance?
- Who are the important stakeholders, and who are the people you need to liaise with on an ongoing basis for the CRO program to work effectively?
Once you have this information in place, create a proposal that incorporates the following:
- Your explanation of what CRO means and how it will improve the business.
- Your conversion goals and how you will measure them.
- The process you will follow to achieve the goal regarding audit, action, and reporting.
- The existing resources, you will need access to; both tools and talent.
- The cost of planned CRO activities bundled in an easy-to-consume package.
- The expected outcome and ROI of the CRO program.
Before presenting to upper management about CRO, you need to know how to show them the ROI of CRO.
What upper management understands is revenue and profit. They don’t care much about CRO jargon and whatnot.
Shedding light on this section, here’s what Ben Labay had to say;
‘The ROI of a campaign or a program involves the money going through. If a journey is $1mil/month, and a 5% lift in CVR will be, say, $20,000, then it’s good to think about investing 10% to 50% to X% of this revenue towards the goal of that 5% lift. The exact % resource attribution has to do with where else you could be spending the calories.‘
Hear from Brian Massey;
‘When you first start a CRO campaign, inevitably, the measure of success would be are you finding more revenue for your efforts? Also note the first 12 months of working for a business is a fertile field for finding things that’ll improve in running the experiments.
Another measure of success would be, are you learning things about your audience that are changing how you’re doing business? This second point doesn’t negate the first one, which deals with seeking opportunities to improve revenue.
The third sign of success will be in the number of developmental projects that you didn’t allocate capital to and launch because tests you conducted told you they weren’t going to improve things.
As you’re learning more about what your audience wants, you can refine your value proposition, your email messaging, your ads, the design of your products, etc
There will always be interest in revenue, but business growth opportunities are also an ROI from doing CRO.
At this level, the best CRO programs become a data utility machine for the organization. When the organization has an idea, instead of moving to the launch phase, they collect data to validate it.
Jon Macdonald agrees with Brian Massey;
‘The reality is that CRO does cost time and money. Granted, it’s a small amount compared to the revenue it generates, but until you can demonstrate that revenue, executives will only be aware of the costs. Getting leadership on board requires that you demonstrate its value.
You need to help them see the specific and direct connection between increased conversion rates and an ever-increasing bottom line.
CRO speaks the language of the CFO. In the end, CRO is about metrics, testing, and hard data, all leading to a boost in the bottom line and a measurable return on investment (ROI).
Here’s a quick example to buttress the point;
If you have 100,000 visitors coming to your site each month and 1.5% are purchasing a $150 item, that’s about $225,000 in monthly revenue.
If you can increase your conversion rate by 33% up to 2%, that’s an additional $75,000 monthly.
Your CEO may scoff at a 33% increase, but he’ll change his tune when he sees the bottom-line results. And, when you tell him that the costs of that increase are sustained, and you don’t need to buy more traffic, it makes an even stronger case.
This is where sample A/B tests can be so powerful. You can clearly show the undeniable effects of CRO. You start with your existing data, then propose a hypothetical scenario.’
Johann Van Tonder adds a different perspective;
‘There’s a lot of methodology out there that helps with measuring the ROI of experimentation. In-house, we’ve got our methodology, and it’s based on a lot of data.
The first thing you need to do is agree with your stakeholders (senior management) about the methodlogy that’s best for your business. There are a lot of materials out there, so you can look around and draw inspiration to determine your methodology.
An example of an important parameter to look at is the timeframe to calculate your ROI. Will it be with the 6 months cycle or 12 months cycle? And there are other factors too.
So you’ve got to figure out these parameters for yourself and then come to and then decide as a team. I’m fond of this statement by Professor Stefan Thomke from Harvard Business Review.
When you ask him about the ROI on experimentation, he says, No, that’s the wrong question. The real questions should be what is the ROI of not doing experimentation? And I agree with that. Because the options are one you do nothing, you will become irrelevant over competitors. Option number two is that you do a lot of stuff, and you don’t test it; you hope and pray for the best. Option number three is you reduce that, and you test it. So talking about the ROI of Option C is not the right question. The question should be, what is the ROI of Option A and Option B?’
Jon Macdonald added these extra tips when trying to make a case for conversion optimization;
‘1. Find out who the decision maker is and build a relationship with them.
2. Understand their perspective.
3. Identify the most pressing problems CRO will help solve.
4. Emphasize the value of improving customer experience.
5. Use case studies or competitive analysis to support your case.
6. Be ready to answer common CRO objections.
7. Connect the dots between CRO and profits.’
In the event of an external agency, they’re the ones to put together the proposal answering these critical questions and showing proofs of measuring the ROI of experimentation.
NOTE: In-house generated proposals, or the ones from an agency, should focus on what the business stands to gain from implementing conversion rate optimization. Failure to do this and the proposal process falls flat on its face.
How Do You Determine The Appropriate Budget Allocation For CRO In Multi-Channel Run Organization?
Many eCommerce companies operate a multi-channel/omnichannel model. This means they sell products through multiple sales channels or platforms, such as an online store, marketplaces (e.g., Amazon, eBay), social media (e.g., Facebook, Instagram), physical retail stores, and more.
In this scenario, it’s critical to approach budget allocation with much tact.
In conversation with Brian Massey, he added this;
‘ In such organizations, we typically have a champion i.e. someone who understands what conversion optimization is about. This person could be from any department in the organization (web, design, product, etc). What we do is to establish credibility within the department we’re introduced to before expanding into other departments.
For many of these organizations, using data on the web isn’t a new idea; rather what they’re discovering is that they’ve got this giant database of customers that’s highly measurable and can be used as a super focus group for experimentation.
Instead of putting signboards outside stores and retailers, and running after customers to give them a discount to get feedback, what we’re doing for them using their web traffic is running experiments since the web traffic is a well-qualified sample of their overall audience and also this web traffic is the same people who shop onsite and retailers too several times.
So, instead of splitting a CRO budget across several channels, it’s focused online, and the growth of the budget is organic.’’
Common Problems That Can Sink Your CRO Budget.
No project is problem-proof. Know this and know peace. The best way to handle CRO budget issues is to identify areas with problems and plan against them.
Brian Massey talks about factors that can affect a CRO budget;
‘ There are two things that typically affect a CRO budget and the first is underfunding it. In trying to save costs, many businesses tend to employ one person to play several key roles. This leads to experiment velocity dropping, and they won’t have time to find the test ideas that will improve the business, and that’s because, as a one-man team in fulfilling several roles, they’re being pulled in multiple directions.
The thing with funding is this. The agencies that charge more have got more resources to do research. Since they do more research, they’re better at choosing what to test and what to take to the more expensive AB test. So when you underfund the CRO budget, you’re underfunding your team’s research, and so what they do is pick heuristic ideas and test whatever they can. That’s a recipe for disaster.
The second thing is expecting too much too soon. CRO program that’s just funded for 6 – 12 months won’t show too much success, or the program’s success won’t be seen in the business.’
Johann Van Tonder puts forth this perspective;
‘Trying to get a CRO budget from senior stakeholders who don’t understand what conversion optimization means is a mistake that makes it difficult to get a CRO budget.
The approach to take here is to view senior management just like your customers. You’ve got to investigate them to find out what their goals are and what they want to achieve, and then you show them how conversion optimization helps them to achieve those goals.
Failure to do this, and you’ll be like every other person in the organization who just wants a sign-off on their budget.
It’s not about you, and it’s not about the CRO program, it’s about what they want (senior management).’
Other mistakes that impact a CRO budget include;
1. Not re-evaluating your marketing strategy.
2. Launching tests based on hunches rather than research, thereby wasting precious monetary and human resources.
3. Going for the shiniest tool in the market that will take a good chunk of your CRO budget when they’re other tools that will fit your CRO maturity level better.
4. Choosing to build a team in-house from scratch instead of onboarding an agency while onboarding new staff overtime to be trained by the agency.
5. Not prioritizing the most impactful hypothesis first. This way, tests that won’t impact the business are launched first, thereby eating away at the budget.
The best way to avoid/manage these pitfalls is to have a clear roadmap.
In the process of conducting your tests, if an experiment doesn’t go your way, don’t rush to the next one trying to get quick wins; rather, take your time to conduct a post-test analysis because every experiment teaches you something.
How To Prepare A CRO Budget
Start with calculating your lead value. If your average lead value is $7, and you’re generating 8,000 leads monthly, you know you can set aside less than or equal to approx. $56,000 for setting up CRO tools and a team.
As your lead value increases, you can also consider increasing your CRO budget.
There could be some tools and talent already within your organization that you could maximize for CRO. It’s a good idea to scope the projected use of these in your budget.
Set conversion goals in your budget that circle back to quantifiable, profitable returns for your company. Calculate your present conversion rate to determine a baseline and set benchmarks for the tests you’re committing to in your budget.
Based on your specific reason for investing in CRO, you can create a budget and build a test case that aligns with your goals.
You need to be mindful that demonstrating value early on in your CRO journey is very important. Without that, getting a budget sanctioned in the future may not be possible. To get early results, make sure you scope for and focus on experiments that don’t require a lot of development work or occur on low-traffic pages, hence slowing down your testing velocity.
Steps To Strategically Scale A CRO Program and Budget.
From the time you start your CRO program till after the first year, second year, etc., your program is expected to grow and become more sophisticated.
I asked the experts this question, and they shared their thoughts on factors that influence a program’s growth and budget.
Hear from Ben Labay;
‘One of the ways you can scale the CRO program is by proving out the ROI. Another thing you can do is help each marketing role make decisions that lead to more money, and the role of experimentation and measurement will grow proportionally.’
Brian Massey introduces a different perspective;
‘ To scale a CRO program in an organization is all about culture, and culture comes from the top.
In several organizations, we are normally brought in by a director-level person or VP, and we see success with their web team. Still, their ability to communicate the success of the CRO program up the food chain is limited, thus making the CRO program growth to become static in the organization.
Unlike the scenario where someone from the C-suite specifically asks for certain assets, the team we’re dealing with now communicates with other teams in the organization about what they’re learning and the advances being made. This internal communication within the organization fuels the need for CRO across departments (product, design, merchandising, brick, and mortar).’
Johann Van Tonder talks about starting small;
‘Start small before increasing experimentation velocity. The idea is to view it as a marathon and not a sprint. In your experimentation, you get to the point where you hit a wall, and you now go ahead to increase your budget, add more complex tools, get more qualified staff if you’re doing this in-house, or buy a specialized package from the agency you’re working with.
Another effective way to request a budget increase is to show test losses. Show top management every test that lost, which would have been implemented otherwise without experimentation. This way you show them how much you’ve saved them from implementing ideas that won’t have added to the bottom line.
This isn’t to say that showing wins isn’t effective, but senior management and those handling the finances will greatly appreciate this approach.
Jon Macdonald says;
‘There are three stages we break ecommerce companies into. In terms of annual recurring revenue (ARR), those stages are:
- Early-stage: Just launched to making your first $1 million
- Mid-stage: $1 million to $25 million
- Late-stage: $25 million and above
For each stage, we’ve identified different systems for them to scale;
- Early-stage: collect quantitative data from GA, gather qualitative data from heatmaps, session recordings, etc; based on the qualitative and quantitative approach, you want to find opportunities for improving your site.
- Mid-stage: If you’re a mid-stage company, your #1 CRO focus is making data-based decisions. You have enough traffic to A/B test changes and receive accurate results. So, your focus is on continual testing and generating value based on the test results you see.
- When you do this, closing the gap between $1 million and $25 million in annual recurring revenue can happen quickly.
- Late-stage: At this stage, you’ve built a good picture of the customer experience, and you’ve been making data-backed decisions for a while. Now, you can start running more nuanced and complex tests. For example, executing multiple tests simultaneously (something we do for the $2-$25 million level) and running higher volume/more frequent tests.
- Something else you can do here is to lean into the scientific method (Here’s where you go all-in on hypothesizing, testing, analyzing, and iterating (see the graphic below). Where this level of process would’ve been tough beforehand, your business now has the data, team, and revenue you need to pull it off.)
- Also, consider pressing into personalization. This word keeps being thrown around, but at this stage, you have differentiated journeys for your customers, so you should improve these journeys. For example, return users coming from email might see a different banner than first-time visitors. ’
Conversion optimization doesn’t seek to replace other marketing efforts but enhance them.
Agreed, it’s cost-intensive upfront, but the long-term rewards are all worth it.
- Increase in conversion rate.
- Helps you understand your site visitors better.
- Helps with site usability and positive customer experience.