Marketing Studies

In parts 1 and 2 of Conversion Benchmarking Hell we discussed why benchmarking your conversion rates against industry figures just doesn't work, basically saying that conversion benchmarking is the one of the greatest hoaxes in internet marketing.

The key message throughout the two articles was that conversion rates tell only a small part of your internet sucess (or failure) story, but never enough to enable you to come to any concrete conclussions, at least without taking a look at all the other relevant data.

Today, to bring the final point home, we'll take a look at an example of when the conversion rate missleads you into making the wrong decision.

I Want a Lower Conversion Rate

The following data is from a real example we had a couple of months ago. When selling a DVD package, we split-tested two different price points againts eachother: $54.95 and $77.

Here are the conversion rates (CR) for both of the tests:

Price point $54.95 generated 61% more sales quantity than price point $77.

Just by looking at the CR, it would seem that $54.95 is the better way to go, right?

The results stay the same even after we add the sales quantities and other data:

Even with a bigger price tag, the $77 price point generated 13.5% less revenues. But is it better?

The CR would certainly indicate so, but not when we also add the margins:

Essentially, the $77 price tag generated more profits, even though it generated a smaller CR, smaller sales quantity and smaller revenues.

Clearly, in this case, using the CR, sales and revenues to determine the best price tag would result in lower profitability of the project. Instead it was better to opt for a smaller conversion rate, less revenues and smaller sales quantity, but better profits.

So how important the CR really is?

What do you base your optimization decisions on?

Will be discussed in future posts ...