Stefan Wieckowski from Discovery Communications started his presentation at HeroConf by asking the audience to raise their hands for a quick poll: “How much would you pay for this can of soda?” He held up a can of Coke and proceeds to name off prices, from Free to $2.00. The majority of the room wouldn’t pay more than $0.50, but there was still one attendee willing to pay up to $2.00.
Depending on the person, the value of goods can fluctuate dramatically. Not everyone is willing to pay the same price, but companies have to set a single price that will still appease the masses while being above or below the desired value to others.
As with the can of soda, there will be fewer people willing to pay a higher price, and a considerably greater number of people willing to pay less, but to be able to make margins and balance our costs with generating revenue, a price point that pleases the largest number of consumers must be agreed upon and advertised.
The Old CRO
This binary vision of prices (one price or bust) is a lot like the CRO we are performing on sites now:
- Did the customer take an action or not?
- Did they sign up for a contest or not?
- Did they download my app or not?
These questions do not take into consideration human behavior, values, or preferences.
With what Stefan is calling “The Old CRO” average marketing costs could not be greater than the average revenue per good sold. We’re wasting budget if we spend above that. We’re not meeting our profit margin goals; we’re wasting more time. We aren’t hitting quotas.
What if we could offer everyone what he or she was looking for and maximize total revenue?
If we follow the old ways, we are building our campaigns around averages. We’re essentially losing data (we all know how much we love to do that! ie, Enhanced Campaigns). We aren’t offering good customer service to all of our users.
Stefan challenges us to stop thinking in terms of the least common denominator and averages and to start thinking in terms of ranges of possibilities.
The New CRO
With content marketing, we create thousands of new pieces of content and all of them have different value to different types of people.
All 10 of these pieces of content are valuable. They all lead people to becoming brand loyalists and creating purchases. Some pieces will be cheaper to market and yield a lower user engagement while others are significantly more expensive in comparison but yield a highly engaged customer.
Is our solution to seek the average cost for the average number of page views? What if people who visit Content #1 are just experiencing the brand for the first time? Is that traffic still valuable?
Hypothetical Old CRO Scenario
Using the old way to review costs and set up campaigns for profit margin success per visit, we will have only a maximum of $1.78 to spend per visit (or Cost per Click).
That means that we will miss out on the higher quality users who require more marketing dollars to get them to the site. Because we are spending money on less qualified visitors, it means that our average conversion rate for expected conversions is too high (since we’re missing a lot of traffic and higher quality customers), and we will likely have significantly lower revenue and profit from these less engaged users, which means our margin is considerably less as well.
A Better CRO Approach
If we instead evaluated the distribution of the content, assuming that ROI is consistent across all content, then we would see that total revenue would be greatest for Content #3. With 3 pages per visit by 570 visitors, this content piece would result in an estimated $1710 in revenue, the maximum of any other piece of content.
But unfortunately, putting all of our eggs in one basket to generate the most revenue leaves us without the ability to scale effectively. We are operating most efficiently, but there are still more people willing to consume the content.
A Multi Tiered Approach
We should be willing to pay more to market the most engaging content, as it will result in higher revenue per visit from a smaller amount of traffic, and less revenue per visit from a larger amount of traffic.
When Stefan recently tested this method on his content, he saw a 66% increase in CPC, with an increase in pages per visit form 5 to 20 (a 4x increase!), and he saw a decrease in cost per page view by 50%.
And yet, overall they were making considerably more profit because there were more happy customers receiving the content that was most valuable to them.
About the author
Jasmine works at Distilled in their Seattle office specializing in paid search. She has managed accounts in several verticals including finance, ecommerce, non-profit, and travel. She has a fierce determination to achieve excellent growth for her clients and is a passionate people person