Beyond search engine optimisation and pay per click: The next generation of online marketing

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1 Beyond search engine optimisation and pay per click: The next generation of online marketing

2 Foreword Australian marketers are pumping more of their budgets into online marketing to drive higher volumes of traffic to their websites. But how effective is more visitor traffic in driving business growth? The Interactive Advertising Bureau s Online Advertising Expenditure Report states online ad spend in Australia for the 12 months ending 30 June 2010 totaled A$2.043b. This represents an increase of A$238m, or 13%, on the 12 months ended 30 June With investment in web marketing continuing to grow, it is critical that marketers use the most relevant practices to track the effectiveness of that spend. If we review the growth and development of websites, we see that the focus of web marketing is continuing to evolve. Research indicates that the current web development focus for many marketers is on traffic generation. However, we anticipate we are on the cusp of transitioning into the next phase of the website evolutionary path: performance optimisation. As marketers move to extract a greater return from online spend, the key focus will be on improving the conversion of web traffic to sales and subscribers. 2 - Beyond SEO and PPC: The next generation of online marketing

3 Conversion optimisation: The next big thing Conversion optimisation is being touted by industry experts as one of the biggest marketing focuses for 2011, so what does this new approach involve? Conversion optimisation is the process and approach of refining a website to help increase the conversion rate of sales, leads, subscribers, downloads and other conversion points. It also aims to increase the dollar amount people spend online per transaction. Conversion rates are one of the most valuable performance indicators, allowing marketers to measure the effectiveness of websites and advertising campaigns in generating sales and revenue opportunities. So are marketers missing a trick when it comes to boosting web ROI? Research by Experian in Australia shows there is a significant lack of investment into practices intended to convert web visitors into customers. Marketers are fervently engaging in traffic-generating activities in the belief that the number of visitors is the most effective means of measuring the success of their websites. Yet conversion is actually a more valid measure of success. Experian research shows conversion rates on most websites that don t engage in conversion optimisation typically run at 1-5 per cent, with variation between different industries. This means a huge proportion of traffic is not converting, yet marketers continue to focus on increasing traffic rather than reviewing site performance to help convert more visitors to web users. This misdirected energy can largely be attributed to a lack of awareness of conversion optimisation practices and lack of tracking and reporting on conversion steps. As we approach 2011, we anticipate the adoption of conversion optimisation services will accelerate as awareness of sales growth and website profitability becomes known and accepted. This research paper builds on these conversion optimisation insights to assess how Australian marketers are spending their budgets, how they measure their website s performance and marketer s awareness and adoption of conversion optimisation practices in their online marketing strategy. The paper identifies where marketers may be missing opportunities to enhance their website s performance and explores how to take advantage of this new trend and gain competitive advantage. Six signs your business should be engaging in conversion optimisation High spend on attraction activities such as radio and TV advertising that drives consumers to your website. High spend/resource on website content look and feel. Large amount of online traffic. You need to improve online profitability, but you re unsure on how to measure it. You frequently make website changes based on guesses. You re operating in a highly competitive industry. 3 - Beyond SEO and PPC: The next generation of online marketing

4 Executive Summary Experian commissioned independent research into the views of more than 300 marketing professionals across multiple industries. The research explores how Australian organisations are using online marketing channels and assesses their understanding of conversion optimisation. Overall, the research found many Australian marketers are investing significantly in activities designed to attract website visitors, but spending little on activities intended to convert online traffic into customers or subscribers. Traffic generation has become the primary focus of marketers, with almost half of those surveyed spending 40 per cent or more of their budget driving traffic to their website. The number one measurement of website performance for those surveyed is unique visitors or page views per visit, which in turn reflects the focus of their marketing efforts. Yet alarmingly almost a third of these marketers either evaluate the success of their website annually or do not evaluate it at all. A further quarter assess their website biannually, meaning over half of the marketers surveyed have a very casual approach to monitoring their website s effectiveness. This is supported by the idea that marketers are focused on levels of web activity as opposed to the result. They are not assessing how many visitors are actually being converted to customers or are completing the desired task set by the marketer. Those marketers that have engaged in conversion optimisation regard it as a critical part of their online marketing strategy, with one in two ranking conversion rates as the most effective way to measure website success. The survey found that of those marketers who are conducting conversion optimisation, 97 per cent believe they understand what factors have the greatest impact on the success of their websites. Of those that know and conduct conversion optimisation, over half have a website conversion rate of over 11 per cent. This is more than twice the number claimed by respondents who have never heard of conversion optimisation. The research findings highlight that many marketing professionals are yet to understand the benefits of conversion optimisation. Simply put, they don t know what they don t know. Most are not investing time to identify small changes to their websites that could greatly enhance performance. Organisations that are engaging in conversion optimisation today are making the most of the lag in industry knowledge. They are gaining an advantage over their competitors by increasing their return per visitor and have the opportunity to invest this increase in revenue back into their online and offline acquisition channels. Without a commitment and ongoing investment into the optimisation of visitor s conversion rates, marketers are missing a massive opportunity to maximise the return of their traditional (TV/print/radio) and online advertising investments. The survey suggests that the reticence of local marketers to engage in conversion optimisation practices is largely due to a lack of awareness. Nine out of ten Australian marketers surveyed are not carrying out any conversion optimisation and almost two thirds have either never heard of it or do not understand what it is. Nine out of ten Australian marketers surveyed are not carrying out any conversion optimisation and almost two thirds have either never heard of it or do not understand what it is. 4 - Beyond SEO and PPC: The next generation of online marketing

5 Research Results Good money after bad: Online marketing spend devoted to traffic generation The Experian research suggests that many Australian marketers are allocating significant marketing budget to attract website visitors and little or no budget to convert them into customers. Indeed, almost half of Australian marketers surveyed spend over 40 per cent of their budget driving traffic to their website. This online focus is set to continue with the research indicating the biggest increase in marketing spend over the next 12 months will be on website updates. Some 55 per cent of marketers are intending to increase or significantly increase their overall online spend during the next year. Big brands make the same mistakes It appears some of the bigger brand names are failing to engage with potential customers and continually chasing online traffic over conversion. Mass market advertising campaigns build brand awareness, and some viewers may search out the brand online. Some major consumer brands including airlines, banks and online retailers websites have high volumes of traffic and strong visitor numbers. However, they continue to compete for more online traffic by investing in expensive advertising and marketing, despite low conversion rates of sales or customers many less than 5 per cent, according to Experian s research. Chasing traffic generation Despite this ongoing investment in websites and traffic generation, almost 90 per cent of marketers surveyed spend less than 10 per cent of their current website budget on persuading existing traffic to take action on their website. According to the findings, an average of 17 per cent of annual budgets allocated to online marketing will be spent on creative and design, 14 per cent on content development and updates, and 13 per cent on hosting, software and licenses. If typically 95 per cent of your traffic is not converting, it stands to reason to address the reasons they fail to convert rather than focus on generating more traffic. When you are focused on attracting more customers to your website you are competing against your peers who often use similar tactics (e.g. pay-perclick and search engine optimisation). However when optimising your own website you are competing only against yourself...a competition you are guaranteed to win. As online marketing author Bryan Eisenberg explains, what is the point of continually driving new visitors to a website if only a tiny portion are buying anything or completing the desired task? Traffic-generating activities must be complemented by a website that provides the right experience for the visitor leading them to complete the desired action, whether it be providing their contact details, subscribing to a newsletter or purchasing a product. Having a website that is not optimised for conversion is as effective as a billboard in the desert. You continue to throw good money after bad to drive more traffic to a website that is not performing optimally. 5 - Beyond SEO and PPC: The next generation of online marketing

6 Marketers don t know what they don t know Despite the increasing investment in online marketing, the research findings indicated there is a significant lack of awareness among Australian marketers about conversion optimisation and the critical role it plays in a business online success. Eighty nine per cent of Australian marketers do not carry out any conversion optimisation and as much as 62 per cent have either never heard of it or do not understand what it is. To what extent do you understand the term Conversion Optimisation? Marketing Directors Marketing Managers Online Marketing Directors Online Marketing Managers All surveyed I have never heard of it. I have heard it used but don t understand it. I understand what it is but I don t conduct it. I know and conduct Conversion Optimisation. Website measurement mostly ineffective The research findings highlight that the majority of marketers who do not engage in conversion optimisation do not have the tools and knowledge to accurately measure the effectiveness of their online marketing investments, particularly the success of their websites. Conversely those who engage in conversion optimisation have access to quantifiable data and are actively monitoring and testing the effectiveness of different facets of their website, such as website layouts, copy and promotions - to convert visitors and ultimately generate revenue. The research found that 30 per cent of marketers either do not evaluate the success of their website, or only evaluate on an annual basis. Of these, almost 40 per cent have never heard of conversion optimisation. Awareness of how a website functions and converts sales is a key element of conversion optimisation. Of the 62 per cent of marketers that haven t heard of conversion optimisation, 26 per cent indicated they don t know what has the greatest impact on the success of their website. Almost 45 per cent of marketers that do evaluate the success of their websites believe total visits, unique visitors or page views per visit are the key indicators of success. The finding again reflects how many marketers are focused on measuring activity rather than measuring the results of that activity, such as how many visitors are purchasing product and how much they are spending per visit. 6 - Beyond SEO and PPC: The next generation of online marketing

7 How often on average do you evaluate the success of your website? Frequency All Marketing Directors Marketing Managers Online Marketing Directors Online Marketing Managers Never 13.30% 13.90% 13.30% 17.60% 10.00% Annually 16.30% 19.80% 16.80% 11.80% 7.50% Bi-Annually 25.60% 28.70% 23.80% 11.80% 30.00% Monthly 31.90% 25.70% 36.40% 35.30% 30.00% Weekly 9.00% 6.90% 7.70% 11.80% 17.50% Daily 4.00% 5.00% 2.10% 11.80% 5.00% Marketers who perform conversion optimisation gain competitive advantage The research indicates a significant disparity between how those marketers which are aware of conversion optimisation measure web effectiveness compared with those who aren t aware of conversion optimisation. It also showed a difference in how they plan to apportion and spend their online marketing budget over the next 12 months. According to the findings, 97 per cent of marketers who conduct conversion optimisation know which factors have the greatest impact on consumer actions and the success of their websites. According to Stuart McKeown, Product Director, Experian Hitwise Search Marketing, Conversion optimisation is one of the highest leverage marketing activities you can undertake online. It reduces wastage in every marketing channel that interacts with your business online. As such, it is not surprising that almost one quarter of marketers that use conversion optimisation consider the website to be the most effective generator of business leads for their organisation. The research found that marketers who use conversion optimisation are eight times more likely to know which factors impact the performance of their website compared to those that don t perform conversion optimisation. In addition, 49 per cent of marketers who use conversion optimisation rank conversion rates as the best way to measure the success of websites. And almost 60 per cent who use conversion optimisation plan to increase or significantly increase what they spend on tools to improve web conversion over the next 12 months. 97 per cent of marketers who conduct conversion optimisation know which online consumer actions have the greatest impact on the success of their websites. 7 - Beyond SEO and PPC: The next generation of online marketing

8 Successful conversion optimisation doesn t cost the earth Southern Cross Travel Insurance (SCTI) is one Australian organisation that is reaping the benefits of conversion optimisation in order to increase revenue generated by its website. It recently engaged Experian Hitwise to deliver conversion optimisation services. After researching and reviewing the habits of SCTI website visitors, Experian provided several recommendations on how SCTI could increase conversion rates across the five steps of its purchase funnel, including key content required when visitors were purchasing an insurance policy. Over a four week period, results indicated a 10% revenue increase. Conversion optimisation - the next step to maximise web sales The research shows that Australian marketers today are focused on increasing website traffic volume and lack awareness of the importance of conversion optimisation to increase web generated revenues. If marketers choose not to apply conversion optimisation practices, their efforts to drive additional traffic to websites become reliant on increasing their online advertising and search marketing spend. In contrast, those brands which are achieving success through conversion optimisation will quickly gain competitive advantage without incurring additional marketing costs. Marketers who are using conversion optimisation are maximising the engagement and sales opportunities of their sites. They have thoroughly tested and understand what impacts the performance of their website and what needs to change to increase sales and/or participation. Conversion optimisation doesn t require significant budget or a fresh online marketing strategy to be effective. The critical factors involve using expertise to research, test, measure and identify what online clients want and taking the necessary steps to build engagement. As Southern Cross Travel Insurance has shown, small changes can deliver significant benefits. 8 - Beyond SEO and PPC: The next generation of online marketing

9 Experian insights to get you started with conversion optimisation 1 Know what your customers want Website copy needs to be concise, objective and easily scannable for visitors to digest your information 1. High quality website copy that resonates with your market can have a dramatic impact on your site s ability to convert. 2 Present an appropriate call to action Presenting the user with a relevant call to action can improve your site s perceived credibility 2 and increase conversion rates. You may want customers to provide contact details or sign up to an offer. You should not, however, prompt a consumer to buy too early into the sales process. 5 Reviews, ratings & endorsements One of the most trusted sources that people look for on the internet are customer reviews and ratings 3. Ratings systems can also play an important role in decision making for some industries (e.g. hospitality) as it helps customers to sort and filter products on important characteristics. 6 Promotions & synergy Special deals and incentives to buy can and should be tested (e.g. free shipping on orders over $120 or free shipping on orders over $100 ). It is also important to ensure consistency throughout your website and its marketing channels. 3 Layouts & forms Design your pages to present the information in an easily digestible format and help users to complete their task. Marketers sometimes forget that visitors don t want to fill out forms; they want what is on the other side of it. Designing forms with the users goals in mind is critical to developing a high converting site. 7 Navigation, search & filtering The ease of finding important, decision-making information on a website can affect conversion rates. Helping visitors to narrow and refine their searches can help them find the most appropriate product (e.g. birthday gifts under $75). 4 Test your processes Even though a one page checkout may seem like a good idea, it may not perform better than a four step checkout. Whenever you re making substantial changes to processes like this, it s important to test them or risk a drop in conversion rates. Like forms, marketers sometimes forget that checkouts need to feel painless to customers. 8 Credibility The ease of finding important, decision-making information on a website can affect conversion rates. You should help your visitors find products they will like, by providing sorting and filtering options. Marketers should also consider providing tailored product recommendations based on consumers history to improve conversion rates. 1 Morkes, J., & Nielson, J. (1998). Concise, Scannable and Objective: How to Write for the Web. Retrieved January 19, 2010, from useit.com - Jakob Nielson s Website: 2 Fogg, B., Soohoo, C., Danielson, D. R., Marable, L., Stanford, J., & Tauber, E. R. (2003). How Do Users Evaluate the Credibility of Web Sites? A Study with Over 2,500 Participants. ACM, Bazaarvoice. (2010, March 20). Industry Statistics. Retrieved March 20, 2010, from Bazaarvoice: 4 Warrick, C. S., & Stinson, T. A. (2009). Increasing Online Purchasing: A Study Of Web Assurance And Web Insurance. The Review of Business Information Systems, 13 (4), Beyond SEO and PPC: The next generation of online marketing

10 Research Methodology The research was commissioned by Experian Hitwise and conducted by independent research house, PureProfile in May It questioned and examined the views of more than 300 B2B and B2C marketing professionals across a range of industries in Australia, including retail, financial services, government, technology, online/digital and travel/leisure. The respondents roles ranged from Marketing Directors, Managers, and Executives through to Digital/Online Marketers. Unless otherwise stated, all results and commentary are based on the responses of the survey participants. Experian Hitwise Australia Level 6, 580 St Kilda Road, Melbourne, VIC, 3004 T +61 (03) F +61 (03) E

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