Ensuring a steady and growing stream of traffic to your e-commerce website is absolutely essential for ensuring successful business. A decline in traffic is always a bad thing – or is it?
None of us want to see our overall traffic decline, but that being said there are instances in which reduction in overall traffic is an acceptable casualty for a different type of progression.We’re so obsessed with traffic numbers that many businesses are spending huge amounts of their marketing budget to ensure those numbers stay high and ideally show some sort of ongoing increase. Too often the quality of the traffic being driven is overlooked in favour of quantity.
Consider the following scenario:
You’re driving 20,000 visitors per month to your e-commerce clothing website. You’re driving these visitors through a combination of predominantly paid media channels. Paid search and display advertising mostly. These 20,000 visitors cost you £5,000 each month in advertising fees. Effectively, this method costs £0.25 to generate a visitor.
These visitors produce an average conversion rate of 2% between them which is roughly the industry average for a good site. Your average basket value is £40.00. Thus your visitors generate on average £16,000 in revenue each month. After the removal of your advertising fees, this leaves you with an online profit of £11,000.
That’s not a bad outcome. You’re happy with these figures and even considering investing more in advertising spend to kick things up a gear, comfortable in the knowledge you should be able to maintain your ROI of 2.2.
This is a scenario many online business owners will hope to be faced with, and inevitably the majority will immediately look to up advertising spend as a result. As we have previously mentioned, the more traffic the better, right? We would urge you first though to take a slightly different view before jumping in with both feet and committing more budget.
We would argue that before pushing for an increased volume of visitors, first look to see if you can acquire more targeted visitors. This means capturing a greater quantity of visitors who are part of your ideal target audience or visitors who are further along the sales journey than others may be. In an ideal world, you’ll have a mixture of both.
Acquiring more targeted visitors for most e-commerce businesses will affect your direct advertising and site performance metrics directly. The two most important to consider here are your conversion rate (the percentage of all visits which lead to a conversion/sale) and more often than not, the AOV (average order value per transaction).
So, let’s add in a new scenario:
Your e-commerce business performance for advertising is the same as scenario 1 but instead of looking at these figures and making the decision to add more to your advertising spend, you first challenge your business to acquire more targeted traffic – with a direct focus on increasing conversion rate.
Inevitably you will find an immediate drawback in most cases. The drawback is that in order to acquire more targeted visitors you will in all likelihood need to spend more. Now this is a point of view which again we would urge you to challenge.
By cost more we’re talking a greater cost per visitor. That doesn’t mean you need to increase your monthly spend, but it does mean that if you don’t, you will need to accept that the same budget will generate less visits. That’s right, the dreaded decline in web traffic we have all naturally come to fear.
Let’s map out this scenario based on you or your agency successfully acquiring more targeted traffic, though at a higher cost per visit for your same spend.
The new targeted traffic costs 60% more. So your cost per visit has risen to £0.40. The result being that your £5,000 advertising spend now generates 12,500 visits per month.
This traffic while reduced, performs differently to your previous traffic when they reach your site. Your conversion rate increases 50% to an overall 3% average. Your average order value is also up by 20% producing a new value of £46.
When comparing the two scenarios we see some areas of what would usually be huge concern regarding e-commerce performance. Cost per visit is up, the amount of traffic is down a huge 7,500 visits (37%) and even sales are down a small amount. These would all usually be signs of disaster.
As we mentioned though, the powerful effect of increased conversion rate and AOV actually results in a greater revenue generation for the same spend. End profit is up by over 10%.
From this foundation, increasing your advertising spend can be done while simultaneously researching your audience and the best channels to invest in.
Look out for our next post: Top 5 ways to get more targeted website visitors today.
Want to achieve similar results? Speak to our expert team about evaluating your website and traffic acquisition. For us, everything is about a return on investment.