What Role Does Conversion Rate Optimization Play in Your Growth Strategy?
This is one of the big questions marketers and conversion rate experts are asked about creating a perfect growth strategy.
As direct as it might look, it’s not simple to answer—at first.
For starters, let’s break down CRO (conversion rate optimization) from its definition:
CRO is the practice of optimizing your website to increase the number of people who take the desired action(s).
These actions can range from clicking on a link, whitepaper downloads, sign-ups, trials, and a whole lot more.
All of which when put together, is a form of conversion technique with the goal of turning a web visitor into a full-time customer.
On the other hand, the Growth Strategy of a business is the series of plans it takes to achieve its goals by creating processes and practices that tackle present and future challenges.
CRO is among the many plans a business makes to achieve its goals.
In today’s article, we’ll cover the role conversion rate optimization plays in your business’ growth strategy and how to use it at every stage of the business.
Why You Should Implement CRO In Your Growth Strategy
CRO is in the center of every business that has grown successfully and is still functioning. It spreads far to the ends of every marketing aspect.
Due to this, it becomes difficult to pinpoint if you’re doing CRO well or if it even aligns with your growth strategy.
We get questions from our clients, such as:
- What’s a good conversion rate?
- Am I converting enough?
- Our goal is to get to X MRR, do you think we should focus on optimizing our conversions?
And a whole lot more.
All of this comes down to a simple answer: “Yes you should optimize your conversions, and CRO is only as good as it is when it keeps increasing.”
Your growth strategy is about moving from point A to B, and CRO is all about making that possible by turning ordinary web visitors into full-time customers.
For any business growth strategy, you must work on 3 core aspects
- Good Customer Acquisition
- Increased Retention Rate
- Improved Lifetime Value
These 3 aspects are important at every point in time to keep the business viable and financially sustainable.
- You need to acquire customers for your business to allow the influx of revenue.
- You have to make these customers you’ve acquired keep buying from you to help cut down the spending to acquire new customers.
- Doing the first two gives you an idea of the average revenue per customer.
Lots of businesses have a hard time fully implementing CRO at different stages of their business.
For some, they might implement a different CRO practice at the latter stage of customer interaction.
For others, it’s implementing it too early and doing it wrong.
The reason for this is the poor implementation of how both CRO and your growth strategy should work.
This leads to the next question:
At What Growth Stage Should You Do CRO?
A straightforward answer: You can do CRO at any growth stage of your business.
However, as your business grows, you need to change your CRO methodologies and practices.
When discussing businesses based on growth stage, there are 3 stages, namely:
And at each stage, the CRO methodologies used in the first cannot be used in the second or the third stage.
There is a different approach to each. Let’s go over what CRO entails for each stage.
CRO For Early-Stage Businesses
Businesses in this stage are concerned about how they can keep the business running with the inflow of consistent revenue.
Their primary goals at this point are to exceed their previous MRR or ARR of the first year or two. In the process of doing this, they cut costs to the bare minimum while trying to achieve the best they can.
CRO for businesses at this stage is considered expensive and risky —especially if it’s on a large scale.
Early-stage businesses are most concerned with getting their foot on the ground in the industry.
They are in a constant battle of:
- Minimizing churn rate
- Fighting already established competitions
- Acquiring new customers
- Going through the phase of multiple customer profile changes
- Multiple websites and workflow iterations
- Customer and Product management
Logically, it’s not feasible for them to dive straight into CRO because they are still facing lots of these challenges that won’t allow CRO campaigns to yield good results.
Instead, it’s best for businesses in this stage to focus on getting traction from their target audience.
How to do CRO For Early-Stage Businesses
In the early stage of a business, CRO can be a means to establish your business in your audience’s mind.
By doing this, you’re creating a customer base that sets you up for the next growth stage of the business.
This time, conversions are made based on the customer journey garnered from the previous stage of the business.
Two ways you can use CRO for this purpose:
1. Use Data from Customer Interactions
Heatmaps, surveys, reviews, email opens, and bounce rates, are a great way to kickstart creating a customer fan base from your website visitors.
Constant interactions, either weekly or monthly, on how customers experience your product lets you see how your business is viewed from another perspective.
This opens you up to new opportunities and ideas that impact your growth strategy —while also showing you ways to improve it.
2. Get Personal
One thing common to early-stage business is that there aren't many roles, and in most cases, it’s a solo founder making all the decisions without any chain of command.
This gives the room for customers to connect directly to who’s in charge of the product or services they’re purchasing.
A good way to do this is through emails. As a solo founder, you can email each customer and talk with them when they see your business.
Here’s a simple script:
Thank you for purchasing from me.
My name is [name], and I’m the founder of [product/service name].
I’m sending you a personal email to get to know what the experience purchasing from me was like, and what improvements would you like to see.
You can reply to this email with your thoughts and if perhaps you’d like to talk to me personally, here’s a link to my calendar.
Looking forward to hearing from you —and enjoy [product/service]!
That’s all it takes to get personal. Not all your customers will reply to you, but the ones who do will give you a headstart on what to improve.
CRO For Mid-Stage Businesses
The mid-stage growth is a big step from early-stage. Businesses in this stage are no longer looking for more traffic—rather, they’re looking to capitalize on their current traffic.
The reason for this is due to how they’ve managed to establish a foothold in the industry they wish to dominate.
The ideation process behind their growth strategy has moved from “figuring out what the market wants” to “improving on what the market already wants.”
In this stage, it’s more about having the business “growth-inclined” in the smallest way possible.
Common attributes of businesses in this stage include:
- Increase in available roles
- Data-driven decision process
- Refined customer profile with little to no further iteration
- Strict revenue management based on growth strategy
With these attributes in place, businesses here have a clearer understanding of how continuous optimization of their current process can yield results.
As such, they are open to implementing different statistical theories based on customer interactions and feedback.
How to Do CRO for Mid-Stage Businesses
With a lack of traffic out of the conversation, the next focus for the mid-stage business is data-driven conversions.
Running a CRO campaign at this stage yields better results as there’s a larger participating audience.
Continue testing and using those test results to implement decisions on the website and business overall.
If you did all you could in the early stages, you won’t need to run the test from scratch because by now, you know what they respond to.
With the information you have from the early stage, here are 3 ways to capitalize:
1. Identify Your Best Revenue Source
When it comes to revenue, not all your traffic sources will pull in the same numbers. Some will have a high traffic count for your website but convert less—for others, it’s the reverse.
It’s better to focus on the channel with less traffic but better conversions. You can do this by running more ads, and/or creating engaging content on the preferred channel.
By optimizing that channel, there’ll be an increase in conversions and the results of that extend to grow the business.
2. Improve New and Existing Customers Purchase Rate
The data from your business’s growth in the early stage kicks in again when you try to improve the AOV (Average Order Value) of new and existing customers.
This means getting customers who already have your product or services to buy more. Also, it sets up for incentivizing new customers to increase their order amount.
Some of the best ways to do this are through methods such as:
- Limited-time Offers
- Product/Service Bundles
- Up-sells and Cross-sells
These AOV methods aim to reward the customers at a discount when they buy more. As a result, they yield the best results for mid-stage businesses due to the consistent research and tests already done on the audience.
3. Increase Your Customer Lifetime Value
The amount a business spends acquiring a customer is balanced by how much the customer makes the business by purchasing its product or service.
Increasing your CLTV is important to the success and longevity of the business. A rule of thumb is having your CLTV to CAC at a ratio of 3:1.
If it takes you $5,000 to acquire a customer, then that customer is supposed to make you 3 times that —making it $15,000 per customer.
Loyalty and membership programs are the best CRO practices to help with this.
These programs give your customers a sense of exclusivity. They get early access to features or discounts of your product or services.
All that matters is for you to go above and beyond providing a good customer experience they’ll likely not get elsewhere.
The goal of this is to make them not just customers, but your biggest fans.
Note that you cannot do this to all your customers —rather, identify the top 20% of customers who generate 80% of your revenue and focus on them.
CRO For Late-Stage Businesses
The final and last stage businesses reach is the Late-Stage. Businesses here have spent decades in optimization and know how a little improvement in conversion could impact their bottom line.
In this stage, CRO is the only focus for the business, because, by now they know it’s important to their growth.
Owners of these businesses will in most cases have an entire in-house CRO team dedicated to testing different parts of the business that could in any way drive up their conversions.
Some of the common attributes to these businesses are:
- Heavy reliance on data for decision making
- Multiple teams are dedicated to a different part of the product and/or service to improve user experience and internal workflow
- Increase in testing and iterations of the customer journey
- Less focus on growth increase and more on sustainability
The growth strategy of businesses in the late-stage focuses on how they can keep the business running at its current pace. They are not in the race of trying to make a name for themselves—they did that in the early stage. Instead, they are focused on the long-term game of using CRO to achieve goals and maintain their public image. Due to this, there are more CRO-related tests conducted in this stage. And these tests can run for a long time—perhaps even become more frequent.
How to Do CRO For Late-Stage Businesses
The CRO practices at this stage are about improving past results.
Businesses at this stage have already created a mental image of their brand —it allows for more complexity in running their tests.
Different customer phases in the business’s customer acquisition funnel is the reason for this.
For every test the business runs, it must consider different types of customers and their journey pre- and post-purchase.
However, the tests done on customers before purchase, cannot be the same ones done after purchase—even if these customers share similar characteristics.
Although this leads to having enough revenue to pull it off, the ROI from these CRO practices is worth it—and should only be done by businesses that are in the late stage.
Below are 2 CRO methodologies you can use for late-stage business:
1. Improve Personalization
It’s hard to keep up with personalization at this stage due to several factors involved in the decision-making process.
Considering you’ll have different customers going through a different journey, it’s best to dedicate a team to personalizing the experience of your customers.
A quick personalization you can try is assigning a personal assistant to customers who make the most of your revenue. This way, they have first-hand access to getting their queries resolved.
2. Optimize Cold Pages
Not all of your website’s pages are going to rack in the same numbers. But there are some pages where you’ll need the most conversions—and that’s where you should start optimizing.
You have to go back to your customer journey and compare it with your current web pages. You can also run a heatmap session for better results.
On getting these results, run tests on all parts of the page, and test it all the way through concerning each customer’s experience.
Now let’s talk about the relationship between CRO and your Growth Strategy.
A common business owner misconception is thinking more traffic is growth—or perhaps more traffic will bring in more revenue.
Unfortunately, these statements don’t exactly translate.
If a business is bringing in over 100k traffic, and that still doesn’t impact its revenue, then there’s a big CRO problem.
This CRO problem is dependent on the growth strategy implemented.
CRO and Growth Strategy: The Hidden Relationship
The relationship between CRO and a business’s growth strategy doesn’t draw enough notice.
In fact, most businesses have both working hand-in-hand (as they should be) and don’t even know what they are doing.
For a growth strategy to work, there’s a need to have customers patronize a business. CRO is a means to provide for those customers. However, this relationship only works provided there’s a growth factor in place.
A growth factor in this case determines how well a business is doing in terms of viability and financial sustainability.
To understand how the growth factor works, you must answer 2 questions.
Is this business viable?
Are there enough finances to sustain it?
Your response to the first question directly impacts what becomes the second.
But you might oppose that and say—
“There’s a high chance of kicking off any business idea viable or not if the finances to support it are available.”
That’s true to an extent, but that dissipates when you consider the survival rate of businesses.
A recent report from the Bureau of Labor Statistics showed that approximately 20% of new businesses fail within the first 2 years.
It gets worse, as 45% fail during the first 5 years—and another 65% in their first 10 years.
Even with the continuous introduction of new technologies and practices aimed at prolonging a business’s survival rate, there hasn’t been much impact in the results.
The same business failure rate has been consistent—across multiple industries—from the 1990s to today.
Meanwhile, a business can also be viable but lack the finances to keep it running.
So, how do you balance these two?
To do that, let’s talk about Business Viability and Financial Sustainability.
Business Viability and Financial Sustainability
For most business owners, the struggle is less with ideas but with finances; and to those that have the latter, the former is missing.
Balancing the two creates the growth factor necessary for your CRO and growth strategy to be synergistic.
Here’s an analogy:
- You need your business to grow for it to be successful.
- You create a path to that success, hence growth strategy.
- CRO is the vehicle that takes you on that path.
- For that vehicle to work, its engines and tires need to work together, hence the growth factor.
- This growth factor depends on two things, namely, Business Viability and Financial Sustainability.
This is defined as a business’s potential to be successful based on revenue, profit sustainability, and project management.
In simpler terms, a viable business is seen or estimated to have a higher revenue to running cost margin —i.e., more revenue, less cost in running the business.
This means, for your business to remain viable, you need to always meet financial targets —if not all, but most of the time.
But having your business make enough money to run it is completely different from providing liquidity by yourself to kickstart or tie loose ends in your books.
How Business Viability Works
To create a business that’ll be considered viable, you’ll need to have or create a means by which your flow of revenue is steady for the long term.
And the only way to do that is by having an ideal market audience readily interested in the business.
For you to get them interested in your business, you’ll have to create a marketing strategy.
A marketing strategy in simple terms is your approach to an audience to convince them your product or services are better than others.
But there’s more.
For your marketing strategy to work, consider 3 aspects:
- Unique Value Proposition
- Ideal Market Base
1. Unique Value Proposition
People approach a business not because they just like it—it’s about what the business gives them when they use it.
There are hundreds, if not thousands, of businesses doing exactly what you’re doing, so it begs the question:
Why should customers choose your business and not the others?
Answering this gives you an idea of how you can stand out from the crowd.
As you figure this out, you get an idea of your marketing strategy approach to convince your audience to do business with you.
Then it’s on to the next step—your customers.
2. Ideal Market Base
The first step is how you stand out from the crowd. Research where your ideal market base is next.
The ideal market base in this scenario is where your customers are mostly located. This can be anywhere from social media to live gatherings and events.
All that matters is knowing where they are and how your product or services will be of use to them.
It's a great start to creating a good marketing strategy once you’ve figured out what you’re selling and to whom you’re selling.
For most, that’s enough to get started. But it comes crashing down when you don’t prepare for what comes next —the competition.
If you’re running a good business, there is a 100% chance that someone else will take the initiative and do better in areas where you lack.
It’s best for you to get ahead by including your competition in your marketing strategy.
Your marketing strategy should be focused on your customers, but knowing your competitors and what they do better or worse gives you a leg up.
The Relationship Between Business Viability and CRO
A close look at how business viability works shows it’s in close relation with the fundamentals of creating a successful CRO campaign.
A business remains viable as long as it continues to produce more profits compared to losses—CRO does exactly that.
CRO focuses on creating the best ways to make a customer’s interaction with the business lead to final conversion.
The final conversion is one of the stages in the customer acquisition funnel, and in this case, it’s always a purchase— hence, cash flow.
Every customer purchase initiated by the different CRO practices used leaves the business with another aspect of business viability—profit sustainability.
Profit sustainability in this case is how well the business can keep up with providing enough revenue without cutting running costs.
Now, profit sustainability still goes back to the final stage of the customer acquisition funnel called customer retention.
Customer Retention can be defined as the activities and actions businesses engage in to make ordinary customers into repeat buyers.
For a business to sustain profitability, it must retain current customers, rather than acquire new ones.
All of these make retention the perfect way for a business to sustain its profit.
But in what ways would you retain customers?
Retaining customers in a business is more about how you can make the best use of those who already purchased your product or services.
Some of the best ways to retain customers are through loyalty programs such as referrals, discounts, etc.
This makes it a conversion-related problem—hence the use of CRO practices again.
CRO at every point is the key to business viability.
Now that we’ve covered one part of the growth factor, let’s talk about the finances needed to keep a business afloat.
Another important aspect of the growth factor is financial sustainability.
The financial sustainability of a business is achieved when it has sufficient internal funds readily available to meet all resources, and expenses whether or not the business makes a profit.
The key phrase here is internal funds.
It begs the question:
How much in the way of finances are available to sustain your business without your customers?
Think about it, have you ever heard of a business close down because it was too financially sustainable?
I haven’t, and I doubt you have.
Meanwhile, not all businesses are going to make a profit all year round, and for some industries, the fluctuation in profit margin is high.
In cases like this, businesses in those industries that cannot sustain their finances will eventually crash.
This makes financial sustainability a core part of the growth factor as it focuses on estimating how a business will keep on running without external funding.
And now let’s talk about how financial sustainability works.
How The Financial Sustainability of a Business Works
A financially sustainable business is the other half of business viability—one cannot function without the other.
For a business to be viable, it has to be financially sustainable on its own—and vice-versa.
Purposefully financing a non-viable business is tantamount to failure sooner or later regardless of the amount being used to finance it.
Financial sustainability works solely on cash stability.
The concept of growth strategy comprises preparing and tackling challenges in different ways.
This makes cash stability an important aspect of how finances in a business will remain sustainable and for how long.
It goes further to cover the viability of the business and creates a guarantee of the extent of that viability.
Cash stability in this sense is an intrinsic part of financial sustainability that deals with how a business has enough assets for running daily operations.
This is often confused with profit sustainability—and it’s the opposite.
Note: Cash Stability is not the Same as Profit Sustainability
A simple difference between the two is:
- Cash stability deals with internal funding available to run the business.
- Profit sustainability deals with how much external funding from customers is generated to keep the business running.
As a business, going all-in on CRO is an investment, and like all investments, it comes with risks. However, when you think of the long-term benefits, it becomes a worthy investment.
The concept on which CRO is built is based on creating a path that leads to initial conversion.
As a result of this, the analysis of your customers’ experience while browsing through your page or sales funnel is your go-to.
Once you’re able to understand your customers, knowing why they made certain decisions at different phases allows you to implement strategies that’ll push them to the final conversion.
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