What is the most effective way to measure the impact of conversion rate optimization on revenue?

1 Define your goals and KPIs

Before you start optimizing your website, you need to have a clear idea of what you want to achieve and how you will measure your progress. Your goals should be specific, measurable, achievable, relevant, and time-bound (SMART). For example, you might want to increase your sales by 10% in the next quarter, or reduce your bounce rate by 5% in the next month. Your key performance indicators (KPIs) are the metrics that reflect your goals and show how well you are performing. For example, you might use conversion rate, average order value, revenue per visitor, or customer lifetime value as your KPIs.

2 Choose your testing method and tools

Once you have your goals and KPIs, you need to decide how you will test your website changes and collect data. Depending on your budget, resources, and preferences, there are various methods and tools you can use. For example, A/B testing involves comparing two versions of a web page or element, such as a headline or button, to see which one performs better in terms of conversions. Tools like Google Optimize, Optimizely, or VWO can help with running tests and tracking results. Additionally, multivariate testing tests multiple variations of different elements on a web page at the same time to find the highest conversions. This method requires more traffic and time than A/B testing but can provide more insights and optimization opportunities. Heatmaps and user feedback tools like Hotjar, Crazy Egg, or UserTesting can help understand how visitors interact with your website, where they click, scroll, or drop off, as well as their opinions and feelings about your website.

3 Analyze your results and calculate your ROI

After you run your tests and collect your data, you need to analyze your results and calculate your return on investment (ROI). This is where you compare the revenue generated by the optimized version of your website with the revenue generated by the original version, and subtract the costs of running the tests and implementing the changes. You can use this formula to calculate your ROI:

ROI = (Revenue from optimized version - Revenue from original version - Costs) / Costs

For example, if you ran an A/B test on your product page and found that the optimized version increased your conversion rate from 2% to 2.5%, and your average order value from $50 to $55, and you had 10,000 visitors during the test period, and you spent $500 on the test and the changes, your ROI would be:

ROI = (($55 x 0.025 x 10,000) - ($50 x 0.02 x 10,000) - $500) / $500

ROI = ($13,750 - $10,000 - $500) / $500

ROI = $6,500 / $500

ROI = 13

This means that for every dollar you spent on the test and the changes, you earned $13 in revenue.

4 Repeat and refine your process

CRO is not a one-time activity, but a continuous process of testing, learning, and improving your website. You should always monitor your KPIs and look for new opportunities to optimize your website and increase your revenue. You should also keep in mind that CRO is not only about changing your website design or copy, but also about understanding your target audience, their needs, preferences, and behavior, and providing them with a better user experience and value proposition.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?