Why increasing your conversion rate could make you less money

The basic definition of conversion rate optimization (CRO) is the method of creating an experience for a website or landing page visitor with the goal of increasing the percentage of visitors that take a desired action.
So basically getting your website visitors to do more of what it is that you want them to do, ultimately ending in them giving you money.
Where most people who split test usually fall short is they look at ONE particular element of their sales and lead generation process instead of the whole picture. They focus so much on individual conversion rates of pages that they fail to look at what is most important, customer value and earnings per click.
For example they have a landing page designed to gather leads that converts at say 30% from a particular traffic source.
They focus so much on the 30% and moving that from 30-40% than they do on how much each lead is worth to them.
Let’s break down an example to give you a better idea of how that looks.
Say you get 10,000 unique visitors to a lead generation landing page.
10,000 @ 30% = 3000 leads
At for sake of example, each lead is worth $10 to you in revenue that is… $30,000
Now let’s look at this… Maybe you dropped the number of form fields on the page down to just email instead of name and email which bumped up the conversion rate to 40%.
10,000 @ 40% = 4000
Great, awesome, you got 1000 more leads for every 10,000 clicks.
Which on the surface you are doing great. So you keep rolling, failing to realize that with that increase in leads less of them are giving you money. Your value per lead drops in half.
So 4000 leads @ $5 = $20,000
That increase in conversions lost you $10,000 in revenue.
What we are looking at here is basically a quality over quantity play here.
Starting to see why it is important to focus on the whole picture?
Same thing goes for sales conversions…
Often times when testing pricing we will test an INCREASE in price and not a decrease because we are focused more on the customer value than the actual front end conversions.
Let’s break down a sales process…
Again for sake of example… Let’s say you have a product that is selling for $40 and you have an upsell during checkout selling for $100.
On average 3% of your leads buy the $40 and 20% of those people buy the $100 upsell.
Using our 3000 leads from the previous example that looks like this…
3000 * 3% = 90
90 * $40 = $3600
90 * 20% * $100 = $1800
$5400 in total revenue.
Now for sake of example you decide to cut the price of your front end offer to $20 in hopes to bring in more conversions…
Your choice to cut the price seems like a good one as your front is now converting at 4% instead of 3%.
Only one problem now instead of 20% of your new customers taking the $100 upsell you now only have 12%.
3000 * 4% = 120
120 * $20 = $2400
120 * 12% * $100 = $1440
$3840 total.
Which basically means that you lost $1560 in revenue for each 3000 leads you generate.
Yes you increased your conversion but not only did you make less money on the front end, you also made less on the upsell.
How is that for a conversion increase.
The main point we are trying to make here is stop focusing on just ONE step of the process and instead start looking at the entire picture. It goes back to knowing your numbers.
Customer value being greater than your acquisition costs is where it is at for profitability.
If you focus on the entire picture, see where you can increase the value per customer and making the spread between that and your cost to acquire the customer as big as possible, that is where the true magic happens.
So to answer the question of can you actually lose money from increasing your conversions? The answer is yes.
These are just a couple of basic examples of course to give you an idea of what it looks like with narrow focus.
That is why here at Conversion Fanatics we try to look at the BIG picture and get a good handle on the numbers before we ever start implementing tests.
By all means don’t think that increasing conversions is a bad thing, it is just how you look at it!