I was showing my co-worker how easy wordpress blogs are and accidentally screwed up my site. Because all the ports are locked down at work I wasn’t able to login and fix it. My site went the whole day without CSS. Lesson learned.
Archive for July, 2008
Would you rather have 10 new customers each purchasing once, or 1 existing customer who has purchased 10 times?
Mike Sukmanowsky responded to my “Conversion is King, but what is a king without his minions?”post and he got me thinking about customers, recency, loyalty, etc.. Mike writes “Conversions are great at telling me what did work or what did happen, but they give me no indication on what we expect will happen in the near future.”
I am not entirely sure I agree. If I have an online store that sells paint for example and I am getting 100 sales (conversions) a day, and this continued over time then I should see a trend. If sales suddenly fell to 80 a day, 20% less, then something is wrong, but that is because I am expecting 100 sales a day.
That being said I love Mike’s definition of a customer, “anyone who has bought from you at least once AND WHO IS LIKELY TO BUY FROM YOU AGAIN.” This leads us to my original question, “Would you rather have 10 new customers each purchasing once, or 1 existing customer who has purchased 10 times?”
There are advantages to both of course. The 10 new customers is 10 new opportunities to ”WOW” someone. 10 opportunities to create a first impression. Alternatively an existing customer who has purchased 10 times may be an advocate of yours and may be spreading word of mouth.
Mike continues, “Recency is actually a “lead” measure for future conversions. If for example an e-commerce website notices that visitors are allowing more time to pass in between visits, then this is a key lead measure that their sales could potentially be off in the next period.”
I would like to point out that recency is only important in its relation to conversions. Conversions are the hub of all metrics because it is the most important metric. Mike has definitely given me stuff to think about. Thanks Mike.
So I was talking with my co-worker Patrick Glinski about my notion of conversions being the only metric that matters and he brought up an interesting problem with it. If you have a business, and your only concern is sales (conversions) then over time you will lose because you are ignoring the other parts of your business. To continue with my Rolex example, if Rolex only focused on the sale, the conversion, and not on the aspiration, eventually everyone who could buy one, would have then Rolex wouldn’t have any new potential customers.
Essentially it becomes a resourcing problem. There are only so many hours in the day to spend on optimizing the various aspects of your business, but neglect any one of them and the whole thing falls apart. Spend too much time on the rest while ignoring the purpose of your business, to make money, and you end up going bankrupt.
Also there seems to be a sort of degradation over time. So that metric you had worked so hard on tweaking to be optimal, has now changed.
I still think conversions is the key metric, and the rest are connected through, as Patrick called them “pipes”. The bigger your pipes, the more it aids conversions. the only way to increase the pipes though is by monitoring the other metrics. I have yet to map it all out, but it should be fun!
Chris Berry has a great post on his Eyes on Web Analytics blog titled, Aspiration, Temporal Analytics and Shower Curtains.
Chris is discussing the challenge of measuring aspiration and why most of us don’t do it. I think it can be measured and analyzed but first you have to be very, very clear about what counts. On the board behind my desk I have written on a white board, “There is only one metric that truly matters.”
I am referring of course to conversions, because in my opinion everything feeds into that metric. Take engagement, or click-through for example; they are metrics that feed into conversions. If you have the world’s most engaging site, or an email campaign with an astronomically good click-through rate do they matter if your customers are not converting. Of course not.
Chris poses an interesting question however, what if you could measure someone’s affinity for a brand regardless of the other metrics? He goes further when discussing a teenager’s desire to purchase a new Mac power book notes:
Currently, under most models, we’d say that her repeated visits to the site, but not converting, is somehow a failure of the site, when, in all reality, it’s a failure of her means to buy. The ads are possibly reinforcing her desire for a Mac though, and could be reinforcing the loyalty.
While I think the issue is a “wicked problem“. I don’t think it is insurmountable. There is just a certain degree of inaccuracy that needs to be taken into account when planning business rules.
Lets take a high end brand like Rolex for example. I want a Rolex, very much. But I don’t aspire to be a Rolex owner. I am not sure anyone does. I aspire to be something, not to own something. I have a Rolex catalogue at home. I visit the website. I talk and listen to others talk about their watches (WOM), I “oooh” and “ahhh” and one day I will own one of my own.
In the meantime Rolex, based on this information can communicate with me to ensure they are still top of mind when I look for my next high-end timepiece. Rolex should not however start lowering their price to get into my salary range or start marketing in the video games I play. Those would destroy the brand, and my desire to own one.
They can take a look at the ROI of advertising to individuals such as myself, people who want to own one, are yuppies and dinks (double income no kids), and see if it is worth continuing to advertise to me based on…are you ready? A CONVERSION RATE!
I am writing this from Victoria, BC. The sun is shining and the weather is sweet. I forget how nice it is here. There is a cool breeze blowing so it is not too hot out. I had a good lunch with Neil and Becky. It is funny that standard of living is higher in T.O. I think the quality of life is higher here.
I am typing this at 2:30 in the morning on day 2 of usability testing. Basically wee have a bunch of people on the other side of the planet testing a website while we monitor their progress through a variety of technologies. Matt is sleeping on a beanbag. Poor guy hasn’t slept much the past couple of weeks.
Last nights tests began at 4:00 AM. I was up at 2:30 AM after a full day. Usability is a funny thing. Making something complex is easy. Making something simple is much, much harder. Especially at 4:00 AM. Which reminds me of this great TED talk.