March 29, 2010

Optimization: FAIL!

Think about this blog for a few moments.

There's nothing that gets less traction on this blog than the catalog marketing articles I write each Monday. Traffic is awful. The articles aren't ever shared on Twitter. And yet, whenever a catalog CEO hires me, s/he mentions those articles.

There's nothing that gets more traffic on this blog than the "Point of View" articles you've seen over the past few weeks. Oh boy. Those things spread like mad. The social media folks love 'em, the web optimization folks love 'em, the marketing pundits love ''em. Best of all, according to SiteMeter (one of my web analytics tools), retailers and online pure plays and catalog brands have staffers who love to read these articles.

Nobody, based on my ability to track projects, hires me because I point out what Best Buy is doing, free of charge. These articles drive traffic and create buzz and create engagement. They don't pay the bills.

In other words, if I optimize this blog based on what is popular, I get to reap the myriad benefits of an "Optimization FAIL!".

If I optimize this blog based on what matters, I make many compromises. I sacrifice traffic and engagement and buzz and comments and all that fluffy stuff the social media community tell you must exist for you to be a success ... I trade in all of that for the ability to make a living.

This brings us to your website.

What is your optimization criteria?

Is it a mythological metric like conversion rate? If so, optimize away. Prevent drive-by visitors from even viewing your website. Offer free shipping, heck, offer 25% off plus free shipping like some of the apparel retailers are doing. Don't do paid search, those folks convert at too low a rate. Heck, lock the computer the person is using until they place an order, that'll increase conversion rate!

Now here's a metric ... do you optimize on monthly profit per unique visitor? If not, why not? Isn't that what you are trying to accomplish, don't you want to maximize monthly profit per unique visitor?

Take two visitors:
  1. Customer visits one time, is offered 25% off plus free shipping on a $100 order, customer leaves site, is targeted via a re-marketing program offering 30% off plus free shipping. Customer visits site again, spends $100. Total profit on the transaction is $10, after giving $30 of margin away and $15 of shipping revenue.
  2. Customer visits website five times in the month, purchasing on the fifth visit. Customer spends $90. Total profit on the transaction is $50.
If you are looking to "optimize" your website, you'd execute the strategy that caused customer number one to purchase.

If you are looking to optimize monthly profit per unique visitor, you'd execute the strategy that caused customer number two to purchase.

Which strategy are you executing? The first strategy is a clear "Optimization FAIL!" The second strategy, while not satisfying from a traditional promotional marketing viewpoint, is clearly more profitable when measured via monthly profit per unique visitor.

Hint: Optimize around monthly profit per unique visitor.

6 comments:

  1. Anonymous11:49 AM

    I am so glad I found you online, But at the same time you make me think too much. Love it man keep it coming

    ReplyDelete
  2. You're right that option 2 is best for the organization.

    But option 1 takes less time. And many decision makers today are so focused on the here and now that they find it difficult to pursue longer term strategies.

    It used to 5 years+, then 3 years, then 1 year and then 90 days. Now the vision horizon has shortened to 30 days or less! Too much focus on the shareholder and not other critical stakeholders like customers.

    ReplyDelete
  3. Kevin, while I enjoy and applaud your continued thinking "out of the box" on ways to analyze things - this one seems to fall short a bit. Because if you optimize around profit per unique visitor as the primary criteria, then you can just raise prices across the board, have less people buying, but hey, profit per unique visitor is way up.

    While it is an important KPI to optimize, isn't it really a counterbalance to conversion rate? If you raise one, the other seems to go down, and vice versa.

    It would seem to me, that there is an optimal ratio of conversion rate to average profit per visitor value - at which point those graphs intersect, that should really be the focus. Not just one metric or another.

    ReplyDelete
  4. A common phrase I hear when I visit folks is "... if we don't drive sales in the next 30 days, we won't be here in a year."

    That may be true. Of course, that is a conditional statement, conditional on the fact that scorching the Earth for conversion over the past five years led to a problem where if sales aren't driven in the next 30 days, then folks won't be in business.

    And Kevin @ Blue Acorn: If you are a long-time reader, then you understand the spirit of this post and why I'd encourage the masses to try another metric. It goes without saying that conversion rate and profit per unique visitor intersect, hopefully resulting in an overall increase in profit dollars, another metric that so few marketers and analysts actually measure.

    ReplyDelete
  5. Absolutely Kevin - I'm not the only one who enjoys the refreshing look on this data and the metrics behind it - and many of the overlooked ones (like this) you bring to light. Keep 'em coming =)

    ReplyDelete