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The ever-diminishing Conversion Funnel

Last week we discussed Conversion Marketing and I mentioned that I want to discuss the Conversion Funnel in more detail this week. So lets first see what Wikipedia has to say about that:
“Conversion funnel is a technical term used in e-commerce operations to describe the track a consumer takes through an Internet advertising or search system, navigating an e-commerce web site and finally converting to a sale.
The metaphor of a funnel is used to describe the decrease in numbers that occurs at each step of the process.
Typically a large number of visitors register as page view (also called reach) on a referring page that is linked to the e-commerce site by a banner ad, ad network or conventional link. Only a small proportion of those seeing the advert or link actually click the link. The metric used to describe this ratio is the click-through rate (CTR) and represents the top level of the funnel. Typical banner and advertising click-through rates are 0.02% in late 2010 and have decreased over the past three years. Click-through rates are highly sensitive to small changes such as link text, link size, link position and many others and these effects interact cumulatively. The process of understanding which creative material brings the highest click-through rate is known as ad optimisation.
Once the link is clicked and the visitor to the referring page enters the e-commerce site itself, only a small proportion of visitors typically proceed to the product pages, creating further constriction of the metaphorical funnel. Each step the visitor takes further reduces the number of visitors – typically by 30%–80% per page.
Adding the product to the shopping cart, registering or filling in contact details and payment all further reduce the numbers step-by-step cumulatively along the funnel. The more steps, the fewer visitors get through to becoming paying customers. For this reason, sites with similar pricing and products can have hugely different conversion rates of visitors to customers and therefore greatly differing profits.”
So its all about optimising the conversion funnel to ensure it is as short as possible and that as many visitors as possible take the next step. Remember my story about the 300 Million Dollar button? This is exactly such an exercise where there was a thick bottleneck in the funnel at the checkout. By removing the bottleneck many more shoppers got through to finalising the purchase.
I also mentioned click through-rates: “Click-through rate (CTR) is a way of measuring the success of an online advertising campaign. The click-through rate of an advertisement is defined as the number of clicks on an ad divided by the number of times the ad is shown (impressions), expressed as a percentage. For example, if a banner ad is delivered 100 times (100 impressions) and receives one click, then the click-through rate for the advertisement would be 1%.
Click-through rates for banner ads have fallen over time. When banner ads first started to appear, it was not uncommon to have rates above five percent. The average click-through rate of 3% in the 1990s declined to 0.1%-0.3% by 2011. Since advertisers typically pay more for a high click-through rate, getting many click-throughs with few purchases is undesirable to advertisers. Similarly, by selecting an appropriate advertising site with high affinity (e.g. a movie magazine for a movie advertisement), the same banner can achieve a substantially higher CTR. Though personalized ads, unusual formats, and more obtrusive ads typically result in higher click-through rates than standard banner ads, overly intrusive ads are often avoided by viewers.”
So I hope you have learned a bit about conversion funnels!
Until next time – happy selling!

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