About This Episode:

Aligning your online experience with user expectations is crucial. In this episode, Jon and Ryan discuss how to leverage the priming & expectation setting heuristic to increase conversions.

Check out the full episode to learn:

1. what the priming & expectation setting heuristic is, and how it works.
2. how to determine if you are violating this heuristic.
3. examples of tactics that leverage this heuristic.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon MacDonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

Announcer: [00:00:00] You’re listening to Drive and Convert, a podcast about helping online brands to build a better ecommerce growth engine with Jon MacDonald and Ryan Garrow.

Jon MacDonald: Hey Ryan, have you ever felt frustrated by unexpected fees when shopping online.

Ryan Garrow: No, never. That’s weird. Yeah.

Jon MacDonald: It’s a weird question, right? Look, it’s such a common experience and it so quickly turns customers away that I even recently encountered this while trying to purchase concert tickets.

I went through the long process of selecting seats, looking at all the views, doing all that stuff, got the checkout, had the countdown timer, I was all stressed out about it, finally got it done, and then I got hit with exorbitant convenience fees. It almost doubled the price, needless to say, I abandoned that purchase despite the time investment, et cetera.

And I’ll put in air quotes, [00:01:00] the convenience of having gone through that process that I was paying for. But I think this really highlighted a critical aspect of digital experiences for me, and that’s priming and expectation setting. Leave it to me to have a bad experience online and bring it to a positive psychological principles and make a

Ryan Garrow: podcast out of it

Jon MacDonald: and then make a podcast out of it. Nerd central here, but

Ryan Garrow: oh man, those expectations are the worst. Like I think almost everybody listening has done the same thing. I almost bought tickets to What was it last week? My wife wanted to go to book of mormon and it’s coming to portland I was like, oh, I got an adam metaphor.

Let me go find that click the ad got to the end and then I picked the seats and then they’re like Oh, it’s not even on sale yet. And these may or may not be the seats you get, but they’ll be as good. Or I’m like, I tried to find where the real tickets were instead of these secondary site that I accidentally, I felt embarrassed because I went to a secondary site thinking it was a real, I’m like, ah, man, some [00:02:00] expectations.

Meta did that. Is that his algorithm is really good. Because I’ve been listening to my wife talk about wanting to go to Book of Mormon. Love it. I’m assuming we’re talking today about priming and expectation settings to help drive conversions, I’m guessing.

Jon MacDonald: Yes, spot on. Look at your deduction capabilities are prime right now.

I appreciate that. Yeah, look, there’s nothing more frustrating than feeling like a company is giving you that bait and switch and user experience design. We call this poor priming and expectation setting. It’s really a violation of one of the six Heuristics of digital experience optimization. As a reminder here, heuristics of those mental shortcuts, the use to solve problems quickly and effectively, that we all take these shortcuts.

I know we’ve talked about it on the show a handful of times, but knowing that our brains are wired to take shortcuts and make these quick decisions. You can imagine how heuristics play that critical role and how customers navigate and just perceive digital experiences.

Ryan Garrow: [00:03:00] Yeah, just even saying the word heuristics, I go back to that podcast.

There’s a shortcut there that takes me there. But I’m priming an expectation setting. I understand expectation, but the priming piece, I guess you’ll have to explain that piece of heuristics and how that works here.

Jon MacDonald: The concert ticket buying story tells almost everything you need to know about that.

Because it can either set people up for success or complete failure. And it does that by clarifying how the interface will perform, indicating what actions users should take, and then managing those user expectations along that journey. So digital experiences that adhere to this may apply tactics like it.

Explicitly mentioning free shipping early in the journey or reducing cart abandonment rates or sharing estimated delivery dates to manage customer expectations, or just saying, Hey, you know what, you’re going to pay double for this ticket because we want to get rich too. Just say that up front and I probably would have been okay with your,

Ryan Garrow: I expect you to charge me 150 [00:04:00] bucks.

That’s great. So convenient. But something else stuck out just now, because you said that there were six heuristics for digital experience optimization. We only mentioned one. What are the other five? You might have told me before, but you don’t have to remind me. Yeah.

Jon MacDonald: When we talked about heuristics prior, we did talk about this briefly, and I’m not expecting you to have memorized all six of these by any means.

No, that’s your job. Yeah, exactly. Yeah. That’s what I’m here for. So just call me next time you forget. But look, our team is the good has identified six of these shortcuts, right? And any site Whether it’s software as a service or ecommerce should be considering each step of these in their digital experience.

All six of those include, of course, priming and expectation setting. Easy win right there. You should get an A for getting that one because that’s what we’re talking about today, right? Trust and authority. Ease, how hard is something to do, right? Benefits and unique selling points. Making sure those are clear.

Directional guidance. Helping people through that journey. Making it easy for them to [00:05:00] get to the next step. And then six is incentives, right? So given them that little push over the edge, what that might be, I think in the future, we could probably do an episode on each, but today we’ll just focus on that primary expectation setting and we can fix those damn convenience fees while we’re at it.

Ryan Garrow: I sure hope so. Hopefully all your ticket companies listen to our podcast and then let us work on your sites.

Jon MacDonald: We have Taylor Swift on our side, I’m told. So that’s a positive. That’s

Ryan Garrow: true. Taylor, give me a call. We got to fix this. And my daughter’s won an autograph. So if I’m, if I’ve got my site, other than a convenience fee, that’s ridiculous, how do I know I’m violating this heuristic?

Is there some easy things I can see without thinking too hard?

Jon MacDonald: Yeah. Before you can start to address any of these heuristics to improve that digital experience, you have to understand if. When and where users are getting stuck and to understand if your digital experience is violating this priming and expectation heuristic, a great place to start is in user research.

You probably could have guessed that one. It seems like it comes back. [00:06:00] I think I could think of a

Ryan Garrow: jar Starbucks line. I’ve got all of that, right?

Jon MacDonald: So start talking to your users or just observing their behavior. That’s a great place to start. And as you analyze that, look for patterns. So there’s patterns like rage clicking.

I know you love that name.

Ryan Garrow: Oh, this is the first time I’ve heard rage clicking from you, I think. But I know exactly what it is because I do it.

Jon MacDonald: Everyone does it, right? And usually this signifies that experience doesn’t provide enough cues, semantics, or even timely feedback to keep you informed.

You’re clicking on something and you’re like, why is this not working? And here it’s not a link at all, maybe. Right? Low directness is the next one. This is an interesting pattern because this can be a sign of unmet expectations, meaning your systems interactions, the navigation or the language don’t match the user’s mental models of the real world or normal site conventions.

Okay? So you want your site to be direct if you think about it that way, right?

Ryan Garrow: How do I notice low [00:07:00] directness? Like I can’t see that in rage clicks.

Jon MacDonald: Yeah. So this is a very one sentence summary of the entire book. Don’t make me think. Oh, so read the book. It’s this one. Yeah. The reality here is make it easy.

Be direct in what people are supposed to do. We call it low directness because the idea is if I’m looking to do something, I should be able to go right there and directly do it because I have an expectation, right? I want your phone number. Yeah, I want your phone number. I’m going to scroll down to the footer.

I’m not going to click all over your site. And if it’s not there, I’m like, Oh God, I got to click around to find this. The worst is you want a company’s address. The hack for that every time, if they don’t show it anywhere else, it’s in their privacy policy because that has to be my law.

Ryan Garrow: Or they’ve used the Shopify template and haven’t filled it in. It’s all caps in brackets address. I’m like,

Jon MacDonald: Yes. Which case their lawyer should probably call them.

Announcer: Yeah. You’re listening to Drive and Convert, a podcast focused on ecommerce growth. [00:08:00] Your hosts are Jon MacDonald, founder of The Good, a conversion rate optimization agency that works with ecommerce brands to help convert more of their visitors into buyers. And Ryan Garrow of Logical Position, a digital marketing agency offering pay-per-click management, search engine optimization and website design services to brands of all sizes. If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you.

Jon MacDonald: The third is price sensitivity. Okay, so you’re looking for this in that feedback. It often indicates poor priming, right? Because it’s unclear or maybe missing elements in that interface that typically guide people to inform them of what to expect next around pricing. So just tell me about that darn convenience fee up front and I’ve been primed.

But the good news is once you identified all these patterns, you’re You can address them with tactics to improve priming and expectation setting. It’s not hard. And doing this is a [00:09:00] really ethical way to improve customer sentiment and increase conversions.

Ryan Garrow: Which is what we all want. Now, I obviously am a very visual person, and so in this, can you paint me a picture or give me an example you’ve worked on where this was obvious to you or became obvious to

Jon MacDonald: Yeah, I have two that come top of mind. First is with a company called eManual Online. Oh, that’s right. We share them as a client. They are the largest repair manual database online, right? Our research revealed that users were confused about how eManual Online delivers the manual. Some are digital downloads, some are physical editions. And because of this mixed delivery message throughout the entire site, customers just didn’t know what to trust when they confronted this issue on the website.

They were like do I have to wait for the mail? I’m going to get a download. I have no idea what I’m buying. And so we decided to test out highlighting the delivery methods to clarify that confusion, increase transactions, etc. Not a [00:10:00] surprise, but the clear delivery method language showed a 14 percent lift.

So definitely worth it. Now. To clarify access methods for offline downloads, this resulted in a person and a stronger purchase intent as well. So not only were people converting a higher rate, but they also went directly to purchasing as opposed to clicking around the site a lot more because they felt clear that expectation had been set.

So it’s a great example of priming and expectation setting at work. Yeah, the second is with residential furnishings company. No, you’ve probably heard of Herman Miller, Yeah. In Knoll, I think they’re now called Miller Knoll, they merged, and they also own Design Within Reach, or design not within reach, depending on your budget, your financial bracket. But I will say that Knoll has a range of uniquely crafted and handmade products that you honestly can’t find anywhere else. The care and detail that goes into each piece means a lot longer lead times. [00:11:00] Everything’s handmade and shipping and delivery just takes longer. So you don’t order something from them expect to have it tomorrow.

It can take months. So what we did is we went on the site and we wanted to prime and set that expectation. So we changed the wording from lead time. Eight weeks. Okay. So it was two months to get a product. And it said lead time, eight week consumers looking at that. Like I get what lead time means, but it’s very commercial also eight weeks.

Oh my gosh. And then we changed it to made for you ships in eight weeks. Very different. We turned a negative into a positive. We primed them with that. And we said, okay, you guys, we’re going to make this just for you. And yeah, it ships in eight weeks, but it’s made for you. That makes sense. Now, why it takes that lead time makes it think, wow, they have to just go get it from the warehouse.

It takes forever with somebody walking it to me. What’s going on here. But this change had the biggest test win of the year for them in terms of revenue. And it had the benefit of turning that challenge or really long lead time into a compelling conversion [00:12:00] booster around it being made for you or custom made.

Ryan Garrow: Transparently. It sounds like making your checkout button orange instead of blue. When you’re talking about that, those words. But is it as simple for a lot of brands to almost wordsmith some of the things on their call to action arena? Not as simple as changing a button color, but thinking through that, that seems like I could help in a lot of sites.

Jon MacDonald: Oh, without question I can. And I think the reality here is the intent behind the change. Right here. We are trying to set them up. So when they get further into checkout and they’re reminded of when this is going to ship to them that they aren’t surprised because we have clearly up front told them that it’s going to be eight weeks.

But what we did is we changed the language to prime them in a way that made it more beneficial for them, right? And set that expectation up in a positive light. So there’s a lot of psychology happening in one line here that we changed. And [00:13:00] so you can easily do something similar, I would look at all of the expectations throughout your entire site.

We mentioned the cost of no products. The reality is most of the people who are coming to know, understand that the cost is a little more. So it’s not so much about priming the price. Although when you say something is handmade for you or made for you, you expect to pay a little more. You feel like there’s more value there.

Okay. So it has that helpful effect there as well, too.

Ryan Garrow: Oh, 100%. And I think that if I could force a change to every Shopify site, it would be to leverage that, the bar above the header that you can put a message in, that almost everybody on Shopify uses it for their shipping callout. Yeah. If that was just standard, like even if you said, we charge you shipping on everything.

I’m like, okay, great. I’m here because I want to buy this. But now I know that when I get to the cart, there’s going to be a four 99 charge or whatever. Yeah. Rather than trying to figure out on the site, what am I paying for shipping? Cause I usually don’t even want to put it in the cart until I know I’m like, Oh, free shipping at 99.

Okay, great. This is a 79 product. There’s going to be something, but. I’ll probably add something to [00:14:00] get me to 99 because the shipping cost annoys me.

Jon MacDonald: Yeah. That right there is a great example of priming. You’re priming people to spend more, increase our average order value, which is a big tactic that we use shipping costs for quite honestly, right?

Free shipping above a certain amount. Look at your current average order value. There’s two ways to do this. The first is look at your current average order value, and then set the shipping rate to be slightly above that. Okay. That will help increase it. I promise you. The second is to look at what your most popular product is and set free shipping just above that.

And that will mean people buy the most popular product, but they’re also going to add something else to their cart. Another way, do a bundle. Right there. We’ve talked a lot about increasing average order value. Bundling is a huge way to do this, just tax something else on, and then it adds up that price you can offer it to them.

And then even as part of that bundle, you can advertise it as free shipping.

Ryan Garrow: And even when this comes out, we’re in the midst of holiday season, but one of [00:15:00] my, favorites, but also frustrating, but it works well for me is you discount a product to just below the free shipping threshold. Like your free shipping is a 49 and this gets discounted from 60 to 45.

That’s I have to have the deal because I’m cheap. I always shop deals in my nature, but then I’m like, Oh, I’m not paying for shipping. So I’m going to spend another 5 at least. And I ended up spending 15 and I spent 60 for two things. So I essentially bundled myself, but really creative discounting like that gets me.

It’s a product that everybody wants at a discount, even if it was, you have a lot of games you can play right now with pricing with discount and free shipping thresholds and adjusting those for new file customers. So many cool things you can do there.

Jon MacDonald: We even talked about that method in terms of Amazon.

And their prime day, I think that we did a recap episode on prime day and you brought up, what is it called? The arrow garden? I think it was something of that name where it’s like a little mini garden that they had lowered their price and sold way more and then immediately raised it back up and it [00:16:00] was like, they were playing the same sales

Ryan Garrow: velocity.

Yeah, because people saw the rank was like, Oh, this is Amazon’s choice in reviews on Amazon. Don’t stay on Amazon. Say historical pricing. So it’s super easy to do there.

Jon MacDonald: Yeah.

Ryan Garrow: Yeah. Expectations. If you just give me the right expectations, I do most thing. Most of life is setting the right expectations.

Jon MacDonald: That’s a great way to put it. If you come into something with the right expectations to been primed on it, it’s really hard to be upset. Yeah, it’s all about aligning this experience with user expectations. So companies that nail this, though, as we’ve talked about today they see improved customer satisfaction, higher conversion rates.

It’s a win for everybody. And those that aren’t doing this, they’re just damaging their reputation. Ticketmaster has made billions off of this while also damaging their reputation to the point where Taylor Swift refuses to use them whenever possible. The key is putting yourself in the user’s shoes.

And what information do they need? What might surprise them? What’s going to confuse them? And then address those proactively. It’s all you can [00:17:00] do. And you’ll create that digital experience that feels intuitive and trustworthy. And I don’t know about you, but that’s really all you want, right? You don’t want to be left guessing.

So set those clear expectations and watch your conversion soar.

Ryan Garrow: Yeah, it’s just that easy. It’s actually not complicated. So it’s easy. But also you think about you’re paying money for traffic at any time. So that company paid for your traffic to get you to the cart and then to have you leave that’s just a waste of your spend and then it makes your

Jon MacDonald: agency look bad and we didn’t do anything wrong maybe it’s a waste of the skill set that you have hired let’s put it that way

Ryan Garrow: yes a lot of waste when you need to cancel expectations right well Jon thank you for this i’m excited to hear about the next five in the heuristics lineup As we get through this process, we will

Jon MacDonald: have you memorize them. There’ll be a quiz at the end.

Ryan Garrow: I’ll fail it. I stopped taking quizzes so many years ago.

Announcer: Thanks for listening to Drive and Convert with Jon MacDonald and Ryan [00:18:00] Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert.com.

The post Drive and Convert (Ep. 122): How To Leverage Priming & Expectation Setting appeared first on The Good.

About This Episode:

The benefits of experimentation are well-researched and documented. But that doesn’t always equate to an increasing conversion rate.

In this episode, Jon and Ryan explore why experimentation results don’t always map one-to-one with the real-world outcomes you expect.

Check out the full episode to learn:

• How post-launch variables make attribution less than clear.
• Why experiment segmentation means test results aren’t summative.
• The effect of false positives.

Experimentation done right is associated with increased overall performance across a number of factors. It can be a catalyst for better decision-making and can help assure your digital property is performing at its best.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon MacDonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

Announcer: [00:00:00] You’re listening to Drive & Convert a podcast about helping online brands to build a better e commerce growth engine with Jon MacDonald and Ryan Garrow.

Ryan Garrow: All right, Jon, we know that website or apps should always benefit from experimentation. It’s been documented, you’ve written books that have mentioned this multiple times.

At this point, if you’re episode 120 in with us and you haven’t realized this, we failed miserably. All right. So we agree that experimentation is great, but we know it doesn’t always equate to increasing conversion rates. And there’s some frustration that we’ve had people come to both of us and say, Hey, I’ve been doing this Experiments.

Why are my conversion rates not going up? And so today we get to talk about some of the why behind that answer some of these questions at scale, because two to many is much more efficient. You won’t always see [00:01:00] direct correlation across the entire website. Conversion rates go up every time you do an experiment.

So question one for you today would be, Jon, does having an experiment experimentation team guarantee better overall performance?

Jon MacDonald: Yeah, that’s a great question. And I’ll say this. Selfishly, I just want to record this so I can send it to everybody who asks me this question because I think I feel like I get this every day.

Lead to come in saying, we’re doing testing. It’s not working. And we want to change providers and, or our clients who are saying, Hey, we have all these other metrics that look great, but conversion rates not increasing. What’s going on. And so I’d love to, selfishly just be able to send them a recording and say, to this, but here’s the reality

Ryan Garrow: can pull these out and we can get some LinkedIn snippets, all these fun things.

Jon MacDonald: Awesome. There we go. Let’s spread the good word. The reality, Ryan, is that all else being equal, once startups begin experimentation, they really see strong gains within the first few years, right? [00:02:00] It’s well documented, they see the gains, and they continue to see that growth for years to come.

I’m not just saying this, I’m not just blowing smoke here, this is actually according to Bloomberg, right? And they’ve done some research, and what they did is they formed a, what they call, experimentation index. So these are firms, large companies that are doing digital experimentation within their companies, generally at a high level A B testing, but lots of other validation techniques as well.

And they compared that to the S&P 500, okay? Now, we’ll put this up on our site at thegood. com along with an article around all this, but I’ll show you the chart. The growth divide is actually pretty large and it’s only getting larger over time. So the reality is, does experimentation guarantee better overall performance and, it’s really logical to expect that once experimentation engine is firing on all cylinders, you’re [00:03:00] doing an internal team, you’re running experiments often that you should really see a noticeable impact on the data. So a common question really is, if I run experiments, will my conversion rates go up? And you’ll hear this all the time, as I mentioned. So the reality is that after running thousands of experiments, we’ve learned that what happens after a release, Of what you tested is not a simple one to one outcome that mirrors the success of the experiment, but the story of why it’s not so simple.

That’s why I wanted to talk about this today.

Ryan Garrow: Fascinating that, it’s also surprising to me that people haven’t gotten to the point where they understand that there are so many moving pieces on a site that one metric doesn’t work in a vacuum yes, you’re converting your, you worked on your category pages.

Great. Okay. If you’re smart, you’re going to move up the funnel and push harder where conversion rates are lower. And so you get more traffic and your business grows, but you won’t necessarily work to expect [00:04:00] conversion rate. Wow. Okay. Sorry, I’m probably jumping ahead, but it’s, I have no, this is the reality of the

Jon MacDonald: conversations, right?

That you and I have every day where folks have become into these expectations. And this is why we’ve moved on from CRO to what we’re calling digital experience optimization, because. We’re not just impacting conversion rate, right? We are impacting the entire digital experience, which. Is we have a chart, in fact, I’ll turn it even in this article, there is this chart that we put together.

It’s a whole wheel of all the areas that experimentation can impact in time in the digital experience. And if you look at that conversion rate is a very small sliver of that by it just is. So it is one thing in a slew of metrics that provide a return on investment here. And if you just focus on conversion rate, you’re probably doing yourself a disservice in terms of the longevity, [00:05:00] it’s, et cetera.

There’s just a laundry list of reasons why it’s a bad idea.

Ryan Garrow: Okay. So why is it that we can’t see that? Cause ideally we’d like to see that. And maybe 10 years ago when somebody was. Promising results, somebody could see it in a one off, but why can’t we see that anymore?

Jon MacDonald: It’s funny you phrased it that way. And it’s funny in a good way, because if you’ve ever researched an experimentation partner, you’ve probably come across them that will guarantee conversion rate increases. And at the good, we have a phrase. Because we often have leads come in and say I talked to so and they guaranteed this lift.

If you can’t guarantee that, then we’re not going to work with you. And the phrase that we have is simply anyone who says they can guarantee an increase in your conversion rates is either really lucky. Or they’re lying. So you can choose which one do you want to be a part of the lucky crowd or do you want somebody lies to you?

I don’t know, but it’s one of those two. Okay. And there are plenty of reasons [00:06:00] why experiment results don’t map one to one with that real world outcome. that you would expect once you launch the variant that won in the testing. So let’s explore these really, I say there’s three key issues that prevent you from seeing the charts go up into the right.

Okay. There is that post launch variables. Okay. There’s experimentation, segmentation, and there’s the effect of false positives. So post launch variables, let’s just call it segmentation and the effect of false positives. Okay. So I want to talk about each of those three today.

Ryan Garrow: Got it. I love that. Jon, he simplifies things wonderfully, which I appreciate.

You’re also way more, probably political in your responses. Be like, would somebody guarantee something on my side of the equation on traffic? I’m like, if they’re guaranteeing your results on your traffic, driving on Google or Microsoft or meta, they’re idiots. I’m sorry. You can’t do that without looking at the account, understanding the nuances of a company and then guarantee [00:07:00] results like no, they’re idiots.

That’s me versus .

Jon MacDonald: And like you said earlier, it’s one metric in a vacuum, it does not work. So yeah, we’ll break these down. But yes, luckier line is as far down that, that non PC path is. Yeah, we’ll stay on the PC path

Ryan Garrow: with Jon and, he being the nicer guy in the, in this equation here.

Problem one with not getting a one to one result in your experiments would be post launch. And so what is it about post launch variables that muck up the results being extremely clear and like obvious?

Jon MacDonald: Yeah. Yeah. So post launch variables, they really make attribution less clear, right? So metrics are influenced by much more than the website or app experience.

And I hate to say that because that’s the only part that we can affect is the website or app experience, right? Like directly direct and indirect influences really impact metrics, like your conversion rate. Obvious one, revenue, maybe [00:08:00] even as broad as customer satisfaction. In fact, we’ve identified over 55 of these variables that contribute to swings in your KPIs.

And this is that pie chart I was talking about. That’s that graph. There’s 55 variables on there. That’s, and then we probably should come up with more, but honestly, after 55, we were like, I think people will get the point.

Ryan Garrow: That’s a lot. That’s a lot of variables.

Jon MacDonald: But, there’s factors like traffic quality.

If you’re just not getting the right traffic, they’re not going to convert or seasonality. Maybe you sell winter coats and it’s a hundred degrees out, God bless you with global warming. You might want to look at t shirts. There’s competitor promotions, maybe your biggest competitor ran a 50 percent off sale and it just took away all of your customers for that time frame.

Even the greater economy, I keep hearing right now from so many e com brands. That are really struggling, and it’s not because of their [00:09:00] product or their marketing or any of these other factors. It’s just the economy has shifted. The COVID years are over, folks. People aren’t going to only buy on your website anymore.

These all play a really huge role in whether or not your website visitors will convert now or in the future. And, I’m here. As we learned during the COVID pandemic, right? Even the largest experimentation wins may not eclipse the outside influences. That can either gain or hurt your conversion rates.

A really good way to emphasize this is this true story from one of our clients. That we once saw a single social media intern drive so much new traffic that conversion rates fell by a whole percentage point. And this is on a very large frame, okay? The intern was like, yes, I did my job. Amazing for their portfolio, their resume to be like, here are the metrics of, what we did, right?

The [00:10:00] problem is, it’s really bad for conversion rates. Because the problem is that they drove all this unqualified traffic. It’s probably a great meme, they got everyone there, but they weren’t going to buy, right? And we couldn’t control that, right? Once a test period is over, we generally are unable to tell whether we’ve improved a metric that was already rising or already in decline.

Which really makes post launch attribution fuzzy at best. And again, this goes back to anyone who told you otherwise is either lucky or a lie.

Ryan Garrow: Dang. Love to be that intern that screws up all your work.

Jon MacDonald: It was good for them, I’m sure.

Ryan Garrow: But, yeah. Oh man, a whole percentage point. That’s massive. That’s really cool, dawg.

Made a great problem to have. You have too much traffic and they’re, the middle, upper funnel is buzzing about your brand. Man, that’d be great.

Jon MacDonald: Yeah, it’s great, but it’s not going to significantly increase. It’s revenue right away, unless it’s really qualified traffic right now. [00:11:00] It’s great that the brand got out there, right?

It’s great that maybe the long tail of this is more revenue, but in the immediate future when we get a call and say, Hey, our conversion rate dropped 1 percent this month, what’s what gives you’re supposed to be in charge of that for us. We start digging into it. We’re like, wow, this one post got you several million visits.

Like good for that. That’s not qualified traffic.

Ryan Garrow: Got it. Okay. Then the next problem you mentioned was the test results weren’t summative. They didn’t, five plus five equals 10, except when you were doing an experiment. So tell us more about that. Like, how does that work?

Jon MacDonald: That’s just not math, right? There are many reasons that experiment results are not summative. And I just, let’s just focus on one of them today, which is segmentation. Okay. So many experiments only impact a segment of users. Can we agree on that? Like you’re not test, you’re not going to test with every single visitor that comes in.

And [00:12:00] even if you do, you need a control set who aren’t going to have it. So at the best, you have your control and your variable, and that’s the easiest possible test. It never works out that way. There’s always a sub, a segment of traffic, of sub subset, excuse me, of traffic that you’re gonna run a test with, right?

So a win with that segment or subset of users does not predict the same gains from the whole, right? It needs to be said. It’s obvious. I think a lot of brands don’t go in with that mindset. So as a practitioner you’re often running experiments that are only meant to impact that subset of an audience.

And the rest of the visitors won’t experience that same benefit. That’s just, that’s testing, that’s experimentation, right? And this is true for splits by device type, by Landing page by, I don’t know, and similar type of segments. There’s hundreds of ways you can segment, right? [00:13:00] And that’s why we generally don’t actually the results of a segment and apply them to the whole, right?

So a 5 percent gain with one audience and a 5 percent gain with another does not equal a 10 percent lift overall. That’s where the five plus five does not equal 10, right? Basically test results are not summative. They don’t add up in that way. Okay. And you need to have that on his view.

Announcer: You’re listening to Drive & Convert, a podcast focused on ecommerce growth.

Your hosts are Jon MacDonald, founder of The Good, a conversion rate optimization agency that works with ecommerce brands to help convert more of their visitors into buyers. And Ryan Garrow of Logical Position, a digital marketing agency offering pay-per-click management, search engine optimization, and website design services to brands of all sizes.

Ryan Garrow: so if I’m going to simplify it from my brain thinking about traffic, if we’re running an experiment on these [00:14:00] five product pages that we’re driving traffic to, but we’re also driving traffic to, let’s say 10, 000 other products on the site.

Just because the experiment does lift conversion rates on these five products, 5 percent each on average, doesn’t mean that the traffic on all 10, 000 product pages is going to increase at the same level.

Just because there’s so many different purchase attempts depending on the product and the price point. Okay.

Jon MacDonald: Yeah. Yeah. It’s the same thing. It applies to users, visitors as it applies to product pages. There’s so many ways to segment the testing. And so that, that’s another way to segment and definitely makes sense.

Ryan Garrow: Okay. Then the third piece of the whole issues you’re simplifying is false positives. Like you think something’s going to work and then it doesn’t.

Jon MacDonald: Yeah. That’s a great way to to think about it. It’s false positives. Everyone in experiment data indicates that. The hypothesis is true, but when it’s actually not right, so false positives may sound like an atrocious error on the part of the person writing the experiments, but [00:15:00] they’re actually just par for the course.

You just got to get used to them and understand. And that’s why even rigorous and experienced experimentation teams really expect at least a quarter. I have a false positive rate, meaning one in four winning experiments is observed as the result of chance and not a true winner. And that goes with all of science, I think the question here is to be thinking about is, does this pervasiveness of false positives mean experimentation does not work?

And I think the answer is, of course, not. I’ll take the 75 percent any day, but it just means we need to approach these wins with an informed skepticism, right? I don’t expect a one to one relationship between the results that are observed during the test period and real world experience of performance.

I think that the best way to look at this is to say, okay, I’m going to run this test. And if it wins, I expect some lift on the site. There will be gains. I don’t know what that [00:16:00] gain will be yet. But we’ve proven out, I feel very comfortable saying there is a gain to be had here and not a loss.

Ryan Garrow: No, it’s, I like that.

And I am surprised that one out of four have false positives. That’s just me not knowing enough about DxO. But that also tells me you’re playing a numbers game like just everything else in Ecom. Yeah. Instead of doing just four experiments and getting frustrated. You got to do a thousand experiments and you’ve got 750 that actually did something right and are taking your brand to a better level.

And so I guess what’s your response then? I guess running experience is not going to fix all your problems. It’s not the one single thing, right? That’s your silver bullet for all of these problems on your site.

Jon MacDonald: Yeah, look, It’s tempting to look at fuzzy post launch attribution and false positives and say experimentation is not really worth it.

I want to be clear, and I’m throwing all the negatives out here today, but I believe that it is very much worth it. And I want to be clear that, there are people much [00:17:00] smarter than myself that swear by a test everything approach, right? Because there’s simply no better or even a more rigorous way to.

Quantify the impact of changes in your bottom line. Now, I don’t think that there’s a test everything approach that is a good fit for any brand, but I do think that having that mentality can be beneficial. Now, problems, they do arise when we tout experimentation as a tool. This omnipotent growth lever, the magic bullet to success, whatever you want to call it, silver bullet, as you mentioned, right?

And that’s because like it can increase your confidence in decision making. Okay, you have great data to back up a decision. That’s really helpful in the boardroom and beyond, right? It can help you measure the discrete impact of good design. So you don’t just have a creative director, or I don’t want to pick on creative directors.

There’s a lot of great ones out there, or just some creative who says, This is beautiful. Everyone loved it, right? You’re able to put numbers to that, right? [00:18:00] And it can also settle internal debates about what’s direction to head, right? You’re able to say I love that your spouse thinks this is a great color, but our users who actually are paying us every day think this is the best color.

And here’s the data behind that, right?

Ryan Garrow: That’s a difficult battle to fight. Let me tell you,

Jon MacDonald: it’s a difficult battle, but one where I’ve had to fight before.

Ryan Garrow: Yes.

Jon MacDonald: Still have the battle scars, if you can’t tell, but I think, what experimentation won’t do is compensate for all of the external forces that are going to hamper your business.

If you’re looking for that confidence, the precision. Experimentation is just an incredible tool and it’s going to add to your toolkit. But if you’re looking for a silver bullet I’m still looking too, Ryan. So hopefully we can find it together.

Ryan Garrow: If it exists, we will eventually find it. I just have my doubts.

Jon MacDonald: Maybe episode 220 and we’ll have found it, but not by one.

Ryan Garrow: then we’ll be on a beach sipping margaritas and we won’t tell everybody because. It would ruin our margarita [00:19:00] life. Love it. I love you. What do you say then when somebody is frustrated that they’ve been running experiments? So what’s your response to your clients?

When at that’s the case Hey, we’re doing all this work. We’re paying you all this money. And my conversion rate is that’s got to be frustration.

Jon MacDonald: I totally understand the frustration if they are looking in it, just conversion and that’s why it’s really important to have this conversation up front.

And I try to make sure I set those expectations appropriately. And with every lead that comes in and every conversation I have. Because they really need to trust the process and use experimentation to its full potential. Which is not just for conversion rate increases. Look, one thing has been proven time and time again.

Experimentation, done right. Is associated with increased overall performance across so many factors. Experimentation can’t combat outsized economic and environmental factors. It can be a [00:20:00] catalyst for better decision making and it can help assure you that your digital property is going to perform at its best, despite whatever is going on the outside and.

That’s where optimization really comes in. And I think where it’s really valuable.

Ryan Garrow: Yeah. And I think that it becomes challenging, especially as we get into this, whatever this new economic time period looks like or how long it lasts. Top line shrinks, which generally shrinks bottom line, which generally shrinks experimentation budgets, which, and then it becomes a possible downward spiral that unfortunately you have to have faith that if you keep pushing forward.

You will, your product, your site will continue to get better and better, and you can better fight a shrinking pie because you can get more aggressive and capture more of it. But what I see happen often is you get, things are bad, cut marketing, cut all these costs. And I’m like, there’s probably some fat to be cut, but you can’t cut the core things that are helping drive your business because your [00:21:00] competitors are going to smoke you if they’re.

Still investing in experimentation allows them to get more aggressive on their marketing. Just

Jon MacDonald: think about the going back to one of the first points I made the experimentation index that Bloomberg put together versus the S& P 500. And that chart will show you very quickly the gains that experimentation teams are able to provide on top of a normal S& P 500.

And that gap is only widening. But if you aren’t doing experimentation, or you cut it because you feel like, hey, I need to cut the fat and you don’t see conversion rate gains immediately, understand that there are a couple things at play here, right? And it’s not the experimentation that’s causing those.

It could be the outside factors. And maybe we’re, you’re, experimentation is helping out with all these other 54 plus possible [00:22:00] metrics that are conversion rate and that those potentially are, Providing value and a good return on your investment.

Ryan Garrow: Yeah, I agree with all of that. And thank you for enlightening me.

Is there a, is there anything you can do to help guide clients to have kind of a vacuum set within their data to say we did get, yes. It’s flat, but if you look at, this data in a vacuum, which is a very small subset, it did get better. Or does that even exist?

Jon MacDonald: This is why we came out with our five factor scorecard.

And I think we’ve done an episode on that in the past, but if you go to the good. com and click through the big blue button in the top right of every page, just go click on that. You can learn about it, but there are five areas that our team has determined that really benefit from experimentation. And should be the scorecard for, are you getting a return on this investment?

And it’s not about looking at just conversion rate or a specific metric. It’s about looking at more [00:23:00] holistic gains. And so I would, we really don’t have time today to go in the entire, into the entire scorecard, but I would say that is what we’ve done. At the good. Now, there are probably other methods out there as well, and I’m sure there are this is the one we found that these five areas really matter to brands that on that experimentation index, they’ve all done these and excelled at these.

And if you aren’t doing these and aren’t excelling in those five areas. Then, an experimentation program or optimizing for your digital experience can really help improve those. And that’s everything from getting buy in from your team on, okay, we’re going to continue to do optimization, or we are going to start doing it, to resourcing it correctly.

You could run, I’ve seen brands run a lot of experimentation, but never implement anything, right? Because they can’t implement or maybe they have some custom platform that if they implement anything it’s just, it’s like a ball of [00:24:00] yarn and they’re afraid they’re going to pull the wrong string and not everything up.

So there’s a lot of these types of things you got to consider and, again, If there’s any takeaway from today’s discussion, it’s purely that measuring your optimization on one metric alone. is unlikely to get you to want to do optimization. And if you don’t do optimization, you are at a severe disadvantage to all of your competitors.

So you really need to be doing optimization and you need to be paying attention to the right way to measure that success. I

Ryan Garrow: love it. Yeah. And if you want to have one metric that improves your site, I can do it within an hour by just cutting off all your non brand traffic and your conversion rate increases, and you did no optimization.

Jon MacDonald: See?

Ryan Garrow: And your business will go in the tank. It’ll be great.

Jon MacDonald: Or, you know what? Offer everybody 99 percent off or a hundred percent off. Just give your stuff away. Your conversion rate will improve. It’ll improve. It’s great. This goes in a vacuum. There are too [00:25:00] many ways. To make yourself lucky. Let’s put it that way.

Ryan Garrow: Got it. Anybody promising you anything is an idiot. I’ll go and say it for Jon, but

Jon MacDonald: lucky you’re like, we’ll work on it, Ryan, we’ll work on it for you.

Ryan Garrow: Jon. I appreciate the education. Thank you.

Announcer: Thanks for listening to Drive & Convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert.com

The post Drive and Convert (Ep. 120): I’m Running Experiments. Why Hasn’t My Conversion Rate Gone Up? appeared first on The Good.

About This Episode:

During Q4, new channels seem to become more attractive to brands, especially if they are missing growth targets. Amazon is the largest ecommerce channel out there, but simply having your products on Amazon doesn’t mean you’re going to boost sales or profitability.  

In this episode, Jon and Ryan discuss what brands need to do in order to have success on Amazon.

Check out the full episode to learn:

1. How to determine if Amazon is right for your brand.
2. How to get started on the platform.  
3. Tips for setting realistic expectations.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon MacDonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

Announcer: [00:00:00] You’re listening to Drive and Convert, a podcast about helping online brands to build a better ecommerce growth engine with Jon MacDonald and Ryan Garrow. 

Jon MacDonald: Ryan, as we approach Q4, it seems new channels are becoming more and more attractive to brands, especially if they’re struggling this year and missing those growth targets that everybody wants to hit.

And, obviously, there’s TikTok, but Amazon is the largest ecommerce channel out there. I would say. I’ve heard 40 percent plus of online transactions.

Ryan Garrow: Kind of disgusting how big the number is. 

Jon MacDonald: That’s a lot of books to sell, right? But just having your products on Amazon over the years, I know you have had a lot of success there, but just being listed on Amazon doesn’t mean you’re going to boost sales or profitability.

So I’m interested because Logical Position is one of Amazon’s largest agencies. I know, as I just said, you have scaled brands to seven figures personally on Amazon. I [00:01:00] think you could probably shed some light on what a brand needs to do to be successful on Amazon. Am I accurate in that statement? 

Ryan Garrow: I hope.

There’s some people that have probably taken my advice and if it worked, great. Let me know if it didn’t. Nah, don’t tell me. It’ll just make me sad. 

Jon MacDonald: That’s right. When we hit episode 200, we can include that. Yeah. People 

Ryan Garrow: submit man, you really screwed my business up, Garrow. What’d you do that for?

Jon MacDonald: Love it. And we’ll just stop the show at that point, right? 

Ryan Garrow: Yeah. But it’s true with just Amazon, the sheer scale. Size of it. Brands can’t shouldn’t be ignoring it. And it does surprise me still that I come across a lot of brands that are still not leveraging the platform yet. And they’ll come at me and I’ve had a lot of questions over the last.

It’s probably two, three weeks about Amazon. I was like should I get on Amazon? When’s the right time? I don’t know what to decide. I’m like, you know what? We probably need to address Amazon. It’s probably been a little while as I scroll through some of our historical podcasts where we really dug into Amazon, what it’s doing and what people need to do to be on it.

Jon MacDonald: Well, with all of that ecommerce volume that Amazon has, and as you [00:02:00] just said, the kind of need to be on there or the questions that come up about that. I think the best place to start is should every brand be adding Amazon to their channel mix? I think it’s a valid question. 

Ryan Garrow: It for sure is. No matter who you are, you can’t ignore 40 percent of all transactions in the ecommerce.

That’s just an astounding number. Hundreds of billions of dollars being done through that platform. But I would caution if you are a sub segment of e com where you are a Sure play retailer, meaning you’re just selling other people’s products. You don’t have any of your own. I’m not confident Amazon is going to be a good place for you.

I actually look at Amazon as a retailer more than I do a channel or a marketplace necessarily, because they do take some of your margin. It’s not awesome often from a Martian standpoint. And so Amazon is not going to nurture them as a customer of yours. That is an Amazon customer, pure and simple.

What I look at as like a pure marketplace where it is your customer and you can do some things with that entity, that customer, even within that entity, then it’s a little bit different. But, it is an Amazon [00:03:00] customer. You can, you need a trademark as well. I think I would probably put that in there as, have your own products but also have a trademark.

So if you can’t go to Amazon and register something there with a trademark and get a brand, that’s Amazon. On Amazon, then I think you’re going to struggle a lot more than you would unless you have that trademark. 

Jon MacDonald: All right. That makes sense. That’s a good kind of guidepost in terms of where you should be headed.

And if it makes sense to even be on Amazon. So let’s suggest that you are have your own products. You’re not just reselling. And let’s say you have a trademark for the, for your name or products. How do you get started at Amazon? What do you recommend in terms of the first step? And if you’re already on Amazon, maybe double checking that these are done.

Ryan Garrow: Maybe you haven’t done some of these. So outline, the kind of the foundational aspects of success on Amazon would be use the Amazon brand registry. It’s not hard to find, go through the process. They basically verify that you are the trademark holder. And there are some scenarios in which you can act as the brand on Amazon.

So we have some of our [00:04:00] retailers that we work with that retail brands. They got permission to say, yeah, I’ll be the brand on Amazon because the brand just doesn’t want to do it. And so something to consider, but having a registered trademark, it does give you extra access to add inventory. You get your own storefront.

So like when I had Joyful Dirt, it was Amazon. com forward slash Joyful Dirt. I assume it still is. I haven’t been back to it, but you can brand it that way and use it. There’s a lot of value there. And then you’ve got to get your products on there. Depending on how many you have may not be easy. If you only got a few.

It’s not that hard to manually build them out, create it. It’s called an ASIN. That’s essentially Amazon’s version of a GTIN or a UPC code. It’s how they categorize a product says this is a unique identifier. Everybody that sells this particular product will reference this and we’ll collect all the reviews, that one number.

It’s a character series of alphanumeric characters. If you have a lot of products, it may make sense to leverage a feed system that can just [00:05:00] submit them all and create them in a batch and oversimplify that process. So we work with a company called Cetanomics for that. There’s a few out there that’ll do it.

Some of them more expensive, less expensive. Some have more. White glove service and others, but there’s, there are ways to get your products built at scale on there. . Occasionally you’re gonna have some struggles if you’ve had some retailers of yours that have created products on Amazon before you’ve moved in there, and you’ve gotta somehow either work with them to get it if they’re friendly, if they’re not.

And you sometimes have to work with Amazon to get that there and make it yours. 

Jon MacDonald: And that’s where having the trademark. comes in, I assume, right? Because then you can say, Hey, they shouldn’t have that. 

Ryan Garrow: Helps, but Amazon still has some things to work through in the process because Amazon is also the opinion that anybody can sell anything.

And so it’s not like what some trademarked companies have come to expect from Google, where you can say, I’m the trademark owner. Nobody gets to use my name in the ads period, unless I give them permission. If you sell iPhones and you’ve experienced that with Apple, you just can’t do [00:06:00] that. So just go in with The idea and the expectation that Amazon is not going to be easy to get to do what you think it should do.

Like it makes sense that if you own the trademark, you should own that product. That’s logic. That’s how the laws work. Amazon system is a little bit different. So just expect that. 

Jon MacDonald: I will say as a consumer, I find that really frustrating. It is one of the big usability issues I have with Amazon that it shows me that there’s several different stores selling a product.

And they all have different shipping policies and timelines and reviews of that store specifically. But also, I don’t know if I’m getting an authentic product unless I’m buying from the brand. So I always look like if I’m buying, okay, good example, I just bought a new Google Nest thermostat. That’s sitting over here, right?

They came out with a new generation. Mine’s the first one. I was like, okay, we’ll get it. And I went on Amazon to get it because they would deliver it in time for me to install this weekend. And I was looking around and there [00:07:00] were several different things, people selling that, but. I really only wanted to buy from the official Google store.

And so I had to do a little bit of digging to make sure I was doing that. And it’s not 100 percent evident when you search that’s who you’re buying it from. It’s not like 

Ryan Garrow: I’ve accidentally found that really interesting from the wrong company online better than probably the average person. And so I shouldn’t get sucked into that when I’m trying to buy from the brand, but I do.

And so it is a struggle on Amazon and there’s a reason, for example, we live in Portland, Nike, big Portland brand does not sell on Amazon. There were problems with fake products coming out of China and getting on Amazon that Nike couldn’t control and Amazon wasn’t gonna. Stop it. Cause they had no way of doing it.

There’s ways you could pay Amazon for this hieroglyphic sticker thing that you can put on every product you make and only products that have that sticker can get into Amazon. So it’s them attempting to get through that, but it’s also not cheap. It can get rather expensive when you’re adding stickers to every single product you produce.

So there are some areas there, but it is. It’s frustrating. As a brand too. [00:08:00] Like I, I prohibited my retailer from selling on Amazon in my agreement with them. The reality is they could easily go do that still. And it would be, it’s not always easy to find the retailer that’s doing it. Cause you can create up new brands.

It’s in the beauty space. It’s in particular, a very difficult one to control on marketplaces because certain beauty products are like, Hey, we’ll sell direct to consumer. But if you buy it for your store or your salon, you’re not supposed to be able to as a consumer, go buy that product, at the beauty supply store.

But I can go to Amazon or eBay or Walmart online and find it pretty easily at a big discount. 

Jon MacDonald: I have done that several times. 

Ryan Garrow: Yeah, but then, even that some of my, some of the shampoo I’d bought was fake. There’s like fake brands that are proposing is that so very big issue in the beauty space. Base and not as much probably in most other industries, but just as an example of what it takes.

Jon MacDonald: So you need a feed to be in the brand registry. Is there anything else when you’re getting started you need to make sure that you were doing?

Ryan Garrow: I would say if you’re trademarked, you need to have the a plus content, which is really [00:09:00] the section in the middle of your listing that is. The images, if you will, I find that a lot of brands get really hung up on, Oh my gosh, I’ve got to get a developer or a creative graphic designer to do all of this for me.

And Amazon made it pretty simple. Like essentially WYSIWYG editor in there. If you’ve got some pictures or you’ve got access to some images that on a system, we paid for a system to give us. Access to like kind of B roll video and just images that we can leverage for marketing and have the ownership up.

And I was able to create a plus content. And if you know me, I have very little creative genes going through me. And I was able to make a work and it’s really just there to people are used to seeing those when it’s a trademark product, if you will. And so just have it there. Don’t worry as much about making it perfect because you can always edit it and come back to it.

You’ve got to have the bullet point content and think through that at the top of the listing. You have the titles, which are important. What am I going to title my product? So that it shows well in the search results. And then a bullet points, I think you get five, maybe [00:10:00] you’re up to six now where you can say bold.

These are the five most important things about my product that you need to know. That people just skim it so that really you’re adding keywords after the initial bullet point that’s all caps or bold and I forget what you can do maybe both. It’s really just for making sure Amazon understands they could show this for.

And then images just like you would on your website. You need to have some good images. Make sure you have some lifestyle images. of your product and video, Amazon, just like everybody else on the planet, from an econ standpoint, video, people can’t get enough video. So I have something there. It doesn’t have to be really complex or professionally done.

It just has to be something because Amazon tends to reward people to have more of those images and videos when they’re, when you’re competing. 

Jon MacDonald: Okay. That’s all really helpful. It’s a lot to think about when you’re first getting started, but once you’re up there. It doesn’t get less complicated, I assume.

Ryan Garrow: Yeah. 

Jon MacDonald: I assume also since you’re a traffic guy, right? And most [00:11:00] brands have to pay for traffic. Wouldn’t be a big deal. We wouldn’t be talking about it today. Probably not. You need to pay to get traffic on Amazon. Is that. Oh yeah. Just like 

Ryan Garrow: every other plot. Like you just can’t put your products on your website and expect to start selling.

It’s just, that’s not the way it works. So you’ve got to figure out how you’re going to start driving traffic to your listings on Amazon. And for the vast majority of you listening to this, it’s going to, you’re going to be spending on Amazon ads. And I think most people should start there because it proves a couple of things.

Is there existing demand on Amazon? From the majority view there, there is, I guarantee it. There’s this area. If your competitors are there and they’re selling, you can see the reviews. So you can see Hey, they’re selling. And I can see that there’s people buying. You can see the dates of the reviews.

So you can see when they’re buying. And some of the tools I have, I can see how many things are being sold per month, which helps. Not everybody will have access to those things, but at the end of the day, you’re going to pay to get your listing sold. And hopefully over time that will be.

If you keep paying an amount, there will be some organic sales that start happening, some repeat purchases that [00:12:00] happen that, you’re rolling a snowball up a big hill with these ads that hopefully the snowball gets bigger and then starts rolling downhill. Would be the idea.

Jon MacDonald: Okay. So how do you set that initial budget then to get that boulder kind of rolling? 

Ryan Garrow: Always a fun question, Jon. It’s going to be the answer I give everybody. It’s it depends. It’s going to be different for everybody. So it’s not going to be, Oh, everybody must spend 10 grand a month on Amazon ads where you’re never getting anywhere.

But I will give you some guardrails. Like generally speaking, I think you should go to Amazon and look at it as a percentage of your Google spend. If you’re not spending on Google, you probably should go there first because on Google, you’re driving traffic to your website. And you’re buying some customers to yourself and that generally is going to be a good idea.

Now, if you’re spending on Google, I will tell you, if you’re not into the five figures on Google, you can probably keep pushing there, but I say, and it’s, I would say about 25 percent of your Google spent. Look at that on Amazon. Now, the big, but in this situation. It would be if you are launching a brand [00:13:00] on all channels at once and you’ve not been selling on your site much and you’re trying to get retail space and you’re going on meta that you’re doing all the things.

Amazon can be a good place to launch a brand. If you haven’t launched aggressively on your website yet, especially if you have less views, you’re competing against large competitors. So the example would be from my own experience with joyful dirt. We were competing against some massive companies. You may have heard of Monsanto and all of their massively large miracle grow brands, and then there’s Dr. Earth, and then there, there’s so many very large established brands selling at home Depot and retailers that I was never going to get into initially. We, I went into it. And one of the reasons we picked plant food was because the competition was not doing a very good job on ads. And so I said, Hey, I think there’s an opportunity for us to spend on ads to get some pretty quick, easy, inexpensive conversions that we can build on. So that was my threshold of I didn’t really care what I was selling as long as I could get the ads in there and get it at a cheap price. So we did it. 

Announcer: You’re listening to Drive and Convert, a [00:14:00] podcast focused on ecommerce growth.

Your hosts are Jon MacDonald, founder of The Good, a Conversion Rate Optimization agency that works with ecommerce brands to help convert more of their visitors into buyers. And Ryan Garrow of Logical Position,. A digital marketing agency offering pay-per-click management, search engine optimization, and website design services to brands of all sizes.

If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you. 

Ryan Garrow: And so we went on Amazon aggressively. First, and that was a good move because there was a ton of volume there and I didn’t have the trust on my own website from a depth of product or from a brand awareness that somebody was going to find me on Google and be like, never heard of this company.

I see Miracle Gro, heard of them, but I’ve never heard of this company. I’m going to go buy from them. We were able to do it on Amazon because people trusted Amazon that if I was a shyster in business or I was, selling a crappy product, they could go back to [00:15:00] Amazon and say, Amazon, this sucks, give me my money back.

And they would. So that’s one caveat I would bring up is you haven’t launched your brand already. Amazon can be a good place to launch it because you’re borrowing from their trust. Now. If I looked at the arena on Amazon from a plant food fertilizer standpoint, I probably wouldn’t pick that category. Miracle Gro has gotten so aggressive there and they’re going vendor to vendor means Amazon’s buying the product from them.

Massive quantity of reviews. Lots of competition. The skew depth is huge. Everybody in COVID decided they need to take care of a plant. And so there’s tons of plant food there. So I wouldn’t do it now 

Jon MacDonald: better than a dog, 

Ryan Garrow: but there’s less and less of those categories over time that you’re going to see on Amazon, where there is, some really low hanging fruit there.

So I don’t expect that to happen often anymore. You’re going to pay for traffic. So you got to have that budget. And if you’re starting with your budget you need to understand that Amazon is taking 15%. So you’re going to have your cost of the product. [00:16:00] 15 percent is going to Amazon. And then you’re going to have that cost above that.

And the vast majority of brands, let’s say you’re going to be at 50 percent or greater. there’s And then if you’re going to have a little bit of cost going in before ads, you’re going to need to adjust goals based on what you would do differently on, on Amazon, on Google, for example. 

Jon MacDonald: Are you saying 50 percent including that 15 that amazon is taking?

Ryan Garrow: I think most brands are going to have 50 percent or higher margin direct to consumer. And so the Amazon 15 percent and then you have the fulfillment cost, which if you’re starting out, you’re either going to go I would say most of you starting out are probably going to sell through your existing channels.

So you’re going to do probably seller fulfilled prime, where you just fulfill quickly and make sure you’re transparent to Amazon about what your shipping is. They have a company called Zico, which allows you to print labels very quickly and do. A self fulfilled prime, which means you fulfill it, but they still let you show that prime badge.

So it’s, I don’t necessarily like it as a consumer now, cause I think of prime, like I can get it same day or tomorrow. So it’s still prime. It still shows the badge, but it says yeah, [00:17:00] you’re going to get this in three to five days. That doesn’t feel like trying to be, but Amazon is doing it. So I can’t fight them.

I’m not going to just know that it’s there. And so as you’re figuring this process out and the value and the volume you’re going to get. You’re probably not going to ship a pallet of every skew to Amazon until you know what kind of volumes available there because you don’t want to pay warehouse fees. That’s not fun for anybody. 

Jon MacDonald: So do brands find that they’re liking Amazon better than going DTC? 

Ryan Garrow: It’s it’s kind of apples and oranges really to the day. There is so much volume on Amazon that part can be exciting and you can’t deny when you see just a bunch of sales there, the top line’s fun to see, but your margin is smaller.

And in Denner, we, as I said at the beginning, it’s not a new customer it’s Amazon’s customer. So you don’t get to email them once they buy from your company, you don’t get to send them an SMS. You don’t get to put them in your loyalty program. That’s an Amazon customer and they are doing that on their own behalf.

Cause Amazon doesn’t care if they ever buy your product again, it’s there. They don’t care that if they buy my plant food and then they [00:18:00] go buy Miracle Gro next month, Amazon doesn’t care. They’re still an Amazon customer. 

Jon MacDonald: They still make their money. And I see all of that and I understand that to me, that is the biggest reason to not be on Amazon early in a brand cycle, but I assume there are some things you can only learn by being on Amazon and perhaps by growing your brand there. Is that true? What are the things that you 

Ryan Garrow: Yeah, there is, there’s a lot to be learned on Amazon. So I like seeing quick reviews. And so the reviews that you have on Amazon, because there’s so much volume there, if you’re collecting them appropriately, usually you’re going to use a third party because manually doing all that is challenging, if not difficult or impossible based on what Amazon allows you to do, but there are some companies that let you scale review volume.

If you do it right. And seeing those responses, like at Joyful Dirt, we were able to solve certain issues within our product mix. Like we didn’t know, for example, in certain climates of us, where there’s a lot of humidity in the summer, [00:19:00] we were going to have problems with our product clumping together in those markets.

Like we’re very dry in Oregon. Most, it rains, but it’s very dry air here compared to Austin’s just down there last week with big commerce, just sweating profusely. Because it’s gross in August in Austin, but that causes certain ingredients to clump. So we had to change some things up to make sure that we weren’t experiencing that customers weren’t experiencing that because we’re like, this doesn’t clump.

What are you talking about? We’ll leave it outside for days. Yeah. That. It’s a problem in humid climates. So reviews are helpful there. And it also helps you scale. And once you start getting the volume of reviews going competing, like we were able to accelerate beyond a lot of brands bigger than us because our review collection was quicker.

I had a good partner for reviews and allowed us to appear bigger than we were because a higher percentage of our customers were reviewing us. Which helped us scale up and conversion rates, increased all the good things that come with positive reviews. Amazon has also realized that there’s a review problem on Amazon because it’s discouraging to [00:20:00] small brands to go onto Amazon when your competitors have a hundred thousand reviews, 

Jon MacDonald: That wasn’t the reviews problem I thought.

Ryan Garrow: There’s also a bunch of fake reviews, which pissed me off. And I’ve had to uncover some of those some things to competitors that were lying about my product, that they’re, they regret ever lying.

Jon MacDonald:  I was going to say if I had no morals. A great business idea would be to just set up an agency that does nothing but leave false reviews for your competitors.

Ryan Garrow: Yeah, there are. 

Jon MacDonald: I’m sure there are companies that do that. Amazon. I’ll bet you there are too, but they hide pretty well. At least I don’t play in that circle, so I have no idea. But I would say it is a challenge. I have, it’s hard as a consumer when you’re looking at reviews and some of them are like best product ever.

And some of them are like. This product is actually horrible. Don’t listen to these reviews. They have to be fake and you don’t know, okay, who do I pay attention to, right? Yeah. 

Ryan Garrow: I uncovered a lot of the nasty underbelly of Amazon reviews trying to solve for like, where are these reviews coming from that we don’t understand.

And. [00:21:00] They’re lying about the product and there’s reddits about it, about groups that say, Hey, this is how you get free product from companies. Here’s how you hold them hostage by bad reviews. There’s a Facebook group entirely dedicated to Hey, we get bad reviews here, but if you should get product, just we give good reviews here.

Here’s how we do this. It is, it’s like a mom, like a bunch of monsters under there trying to get product from Amazon. Or brands on Amazon. So Amazon’s realized that to a degree that there are fake ones, but also that there’s a high volume of reviews for a lot of products that can discourage more products from coming, which Amazon wants more products on there and needs more products to continue scaling.

And so there are tastes you’ll be there testing placements now. Where you’ll see no reviews being shown on the search pages, which is interesting because I think that reviews are important as well. I go to Amazon to see how people reviewed a product before I buy, even if I’m not going to buy from Amazon.

I will go say I see that there are 4. 6. Great. I want to look at the one star reviews. I want to look at the three star reviews. I know people are putting five stars up, I can see by the ratings, but what are they saying about the three [00:22:00] stars? Which is usually a more honest review. Somebody that had a problem, did the brand respond?

Many of the things you talk about constantly about conversion increases and responding to reviews. 

Jon MacDonald: This is so true. And I’ve argued for ages. So it certainly isn’t a change and that’s happened recently. But Amazon is one of the larger search engines for shopping. I don’t go to Google when I’m looking for a product.

I’ll start on Amazon because I know all the product information should be there. And if I can’t find it on Amazon, that’s almost a red flag to me. 

Ryan Garrow: Yeah. If your brand isn’t there, you need to be there. I think that’s, I think you’re dumb for just not even having a listing. Even if you don’t do seller fulfilled, we just do something super simple, just to have a presence, if nothing else, to keep retailers or competitors from putting products up that could take your brand identity.

So again, got to click reviews. It’s going to keep evolving and changing. I think quite quickly over the next year as Amazon tries to figure out how to deal with All the review issues, Amazon, SEO and I say SEO usually when I’m doing air quotes. So if you’re listening to it on a podcast with no video here you’re, it’s [00:23:00] Air quote SEO because there’s a lot of companies that say they do Amazon s and the reality is that’s a bunch of crap.

Amazon. SEO is based on sales velocity and how much money is Amazon making. They’re not going to give you a ranking number one on a product category because you put the right keywords and the right images and the right descriptions on your page. They don’t care. They are there to make money and they’re going to take 15 percent.

If they make 15 percent and it’s more on this product because it sells more, it’s going to rank higher than you. It’s not complicated. 

Jon MacDonald: And so focus on sales velocity. Is that where the Amazon’s choice badge comes from? 

Ryan Garrow: Yes, and that’s the holy grail on Amazon is you want the Amazon’s choice badge.

And the only way to get that is to have a lot of velocity on sales, and it’s around a keyword. So Amazon knows people search this, these are the top sellers, and this is the actual top seller, and we want to sell more of that, and if it keeps selling, great. So once you’re in that, you can really keep velocity because, I’m a sucker for that too.

Amazon’s choice okay, it sells a lot, and The reviews are pretty solid. All right. I’ll take it. And the price point’s okay. You will also [00:24:00] see, if you get that, you do have some price elasticity on there. So let me finish the Amazon SEO and then I’ll jump into price elasticity. But Amazon SEO, you want to be aware that sales velocity isn’t just from traffic on Amazon.

There’s a limited number of people searching for something on Amazon. You can drive traffic from other channels to convert on Amazon. And so I did that from Google. I took traffic from Google. They were searching for a non brand keyword. I knew they weren’t going to convert at a high rate on my website. Cause I only had four skews and I didn’t have the brand awareness to compete against a miracle. 

Ryan Garrow: But if I sent them to Amazon, I had the whole Amazon ecosystem there where they could trust okay, it’s going to work, but also here’s other options that if I wanted to go somewhere else or see something else, I could see that.

So brands will get a discount when they send traffic there and get conversions on the Amazon fees, which is helpful. TikTok is a big one. Amazon and TikTok are getting very close so you can leverage TikTok traffic and get some additional benefits there. To rank higher for a keyword, you need to tag the traffic with that keyword.[00:25:00] 

You need to have that keyword on your listing, but it’s all about, how much are you selling based on that keyword. And then when it comes to the other things that you can see on Amazon or experience on Amazon, you can’t do other places. It comes down to what’s the perception of your brand. So when you’re on Amazon, people trust you more.

And what I found out accidentally, because I, the order I did, it didn’t have a lot of consideration, but we did Amazon first. And then we went out to retailers. We found out that the physical storefront retailers, including people buying from us on fare. They weren’t going to go to our website to check us out.

They weren’t going to Google us and see what our reviews are. Our Google My Business page was going to say they went to Amazon because they knew that they could see sales velocity on Amazon. They could see reviews on Amazon. And it’s much more difficult to fake at scale on Amazon where I could upload a thousand fake reviews on my website because I own the website and I can do whatever I want to it.

And they can’t do anything about that. Most [00:26:00] retailers aren’t sophisticated enough to go use the tools I have access to, to see how big is this brand? Where’s the Google keyword planner to see how many people search for this brand. I can go on Amazon and be like, Oh, they’re advertising there. I can see these big brand pages, right?

I trust them. So that was an accidental win that I didn’t know about or expect, but I’m glad I did it and had a bunch of reviews on Amazon talking to them because they could see that I was big. retailers on fair would specifically say they don’t they only buy companies that don’t sell on Amazon i’m like you’re buying my product so I sell on Amazon and but I protected the price point so I wasn’t going to undercut them on Amazon so they respected it and they knew that they weren’t gonna have somebody at their store googling it and finding it for half price on Amazon.

Jon MacDonald: Yeah interesting, so okay so I’ve Dirted out my brand. I’m looking to move to Amazon. What expectations should I have? 

Ryan Garrow: You’re going to have some patience because new brands are I like to say you’re upsetting homeostasis. There’s a bunch of brands existing, they’re competing.

[00:27:00] And then you saw another competitor in there. It’s going to shuffle and mix things up before it settles again and everybody figures out where they are. And so have patience and expect to have to test and measure a lot. You have to test and measure your images. You’re going to have to test and measure your titles.

Description, which ad, which keywords make sense. A keyword that makes sense on Google may not make sense on Amazon. There may be lots of volume for this keyword on Amazon, or on Google, and not very much on Amazon. So you’ve got to see how people are searching Amazon a little bit differently. You can put ads on your competitors on Amazon, which is something you can’t do on Google.

If your competitor allows AdSense on Google, you should just do it, but that’s very rare now. On Amazon, you can get a listing right there on there. On their product page and take some of their brand traffic and then to go into some of your stuff. DXO or CRO is necessary on Amazon. You need to be testing these things.

Jon MacDonald: And saying, Hey, it’s interesting. We’ve been getting a lot of inquiries about that. 

Ryan Garrow: As you should. I think it’s a huge thing. I think brands similar to Google, they just aren’t usually as sophisticated on looking at the traffic patterns. [00:28:00] Again, you can manipulate conversion rates very easily, but you want to find non brand traffic.

What does it convert at? You can’t just take your conversion rate as a whole. So we had to get pretty sophisticated when looking at non brand traffic. Where’s it converting? Cause we did some math problems when we were investigating this traffic to our website would come cheaper on Google than it would on Amazon to our store.

But Amazon was converting it five to six times the rate it was on Google. So it was worth it from a business profitability standpoint to sell on Amazon, just because the conversion rates were so high, like Amazon, there was such a trust there that people will go just click buy, where the price point is very impulsive, under 20 bucks, very simple for somebody, yeah, I’ll take that, it’ll be fine.

You’re going to be doing a lot of testing and measuring on the Amazon. It’s just not, you’re not going to be able to put it up and then assume it’s going to work and run ads and be done and then go to the next channel or next marketplace. 

Jon MacDonald: Then maybe I’ll do an offshoot of the good that’s just sunk because I think it’d be interesting.

Ryan Garrow: Amazon, the good or the good Amazon. He’s probably in trouble. He’s using the Amazon name. 

Jon MacDonald: Yeah, I was just going to say, we probably can’t do that, but [00:29:00] this has been a really interesting topic regardless. And I feel like I know a lot more about Amazon now. Where to go, how to start it. I’m still cautious.

I still think that I probably, if I was starting a brand, I wouldn’t go to Amazon first, but I now know what I need to do, so thank you, Jon. 

Ryan Garrow: Let me know when you start that brand up. 

Jon MacDonald: I will.

Announcer: Thanks for listening to Drive and Convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert.com.

The post Drive and Convert (Ep. 119): Amazon Growth – What Brands Need To Do To Succeed appeared first on The Good.

While strong user acquisition metrics are traditionally the result of a blend of marketing spend, funnel optimization, and a little luck, building your user base one acquisition at a time can feel daunting—and it’s not the most sustainable way to increase user counts.

On the other end of the spectrum, traditional “sales-led” organizations don’t have to have large user counts to secure revenue. They build their roadmaps based on the needs of enterprises, let the sales team connect, and secure large contracts if all goes well. But sales motions require talent, time, and a host of mechanisms that many SaaS startups aren’t yet ready to tackle—despite the promises of high-value, multi-year contracts.

But stopping short of an enterprise motion, B2C software can struggle to find revenue. Without a way to expand existing accounts, the cost of acquisition (CAC) will remain high, finding new customers will be a pain, and your software product will never achieve the 10-15x multiples common for B2B software.

So, how do we increase revenues and lower CAC while stopping short of chasing the enterprise audience?

Enter: growth loops.

A growth loop is a compounding referral motion that leverages existing users to grow your user base through referrals. Referrals help keep marketing expenses low and increase the potential value of every new user.

In this article, we’ll explore how growth loops work and how to build them for long-term, exponential success.

The Fundamentals of Growth Loops

Growth loops (sometimes called referral loops) offer a fresh perspective on how SaaS products grow sustainably through network effects.

Growth loops work as self-sustaining systems, where the output from one cycle feeds back into the start, creating a compounding effect that drives long-term growth. It’s a repeating cycle of organic growth that creates long-term customer acquisition.

Let’s dig into what makes growth loops so effective.

What are Growth Loops?

Growth loops are self-reinforcing cycles where each action or user interaction within the product generates output that fuels the next growth cycle.

Don’t worry; it’s actually a lot less complicated than it sounds!

Think of a growth loop framework like a flywheel: Once it’s moving, it picks up speed and sustains momentum. For example, a user finds your product, interacts meaningfully, and creates content or engages in a way that attracts other users who repeat this cycle.

This is how products like Canva grow–each user has the potential to attract even more users.

Growth Loops vs. Funnels Key Differences

While marketing funnels have been a classic approach to visualizing growth, they only allow for linear growth.

Funnels break down growth into stages like acquisition, activation, and retention, but they miss reinvestment opportunities. You’re constantly pouring resources into the top, hoping that enough converts at the bottom.

In contrast, a viral growth loop leverages user actions to directly attract new users. This creates a cycle that spreads the product organically.

Let’s walk through how this works in practice with a classic example of one of the most successful growth loops: Dropbox.

1. User signs up: A user signs up for Dropbox to start storing and sharing their files.
2. Incentive to share: Dropbox offers the user an incentive – extra storage space – if they refer friends to join. This incentive not only appeals to initial users but also aligns with Dropbox’s product value (more space to store files).
3. User selects contacts: The user decides who to invite to Dropbox.
4. New user invite: Dropbox sends out referral invites via email or social media. (The platform makes this quick and easy).
5. New user signs up: The friend clicks on the invite link, creates their own Dropbox account, and gets additional storage as a sign-up reward. Now, they can share their own referral link.

Each new user has the same incentive to refer to others. Each participant drives a new cycle of user acquisition. This creates a compounding effect that leads to exponential growth.

Elena Verna, head of Growth at Dropbox, is a staunch advocate for growth loops, saying that “…failing to consider the dire need to connect [users] to a team and a company level value WILL sabotage your future growth.” To Verna, growth loops are critical for acquiring users at a scale more sustainable than selling B2C.

The beauty of a viral growth loop lies in its simplicity – it continuously fuels itself. This drastically reduces the need for costly acquisition channels like paid ads or direct marketing.

Improving Referral Rates with Growth Loops

Growth loops boost referral rates by making user acquisition part of the user journey. Each new user not only becomes a customer but also a potential referrer by making sharing a natural part of the user experience.

But this kind of experience requires three main components:

1. Incentives aligned with product value. Whatever users get in exchange for a referral must relate to the product’s primary value. Otherwise, they won’t be motivated to help.
2. Seamless sharing. Give users simple and clear buttons and links to facilitate sharing in ways that don’t interrupt their experience with the product. It must be effortless!
3. Social proof and visibility. Users need to see their friends and colleagues actively using the product. This visibility drives more referrals.

That being said, growth loops aren’t one-size-fits-all. Each growth loop serves different growth goals for your marketing strategy, and the most successful SaaS companies often identify and build around one or two loops depending on their needs. Here are some examples.

3 Examples of Growth Loops

1. Substack

Substack’s growth loop centers around content creation and subscriber engagement. It’s a highly scalable email marketing system where each subscriber is a method of attracting new subscribers.

Here’s how it works:

1. A writer creates and publishes a newsletter on Substack, either as free or paid content.
2. Active users read, engage with, share, and forward the newsletter to friends.
3. Shared content introduces new readers to the newsletter and to Substack itself. Interested readers subscribe to the newsletter. This grows the subscriber base and generates new opportunities for sharing.
4. As more subscribers engage and share, each user becomes a tool to attract new users.

2. DocuSign

DocuSign’s growth loop leverages the need for digital document signing. Every document sent for a signature serves as an introduction to the platform.

Here’s how it works:

1. A user uploads a document to DocuSign and sends it to recipients for signature.
2. Recipients receive an email with a link to the document. They review and sign without needing an account. This helps them experience the platform’s convenience.
3. Impressed, recipients often sign up for their own accounts to send and manage their own documents, especially if they frequently need to get things signed.
4. As new users send their own documents for signatures, they introduce even more users to the platform. Each document sent by a new user brings in additional recipients.

3. Canva

Here’s how it works:

1. After adding payment information, Canva asks ‘who is on your team?’
2. The user adds members to their team by entering their email address. The user is reminded they can have five users on their team for the price that they will already be paying, with the option to add extra members for $7.00 per person per month.
3. Asking for team members early in the signup increases the subscribers’ dependence on the tool and also introduces new users to Canva.

These three are just a sample of example growth loops in action, but you can see how these referral mechanisms naturally drive new users to the tool through the day-to-day actions of current users.

How to Implement Growth Loops

Building a strong growth loop that works consistently and scales with your company requires careful planning. Let’s take a high-level walk through the process.

1. Identify Your Value Proposition

Growth loops work best when they’re aligned with what makes your product compelling, so your first step is to clarify your offer.

Ask yourself: What core action do users find most valuable? What helps them realize the most value from your product?

2. Define Key User Actions and Outcomes

Next, outline the specific user actions that will drive your loop. These actions should lead to clear outcomes that benefit both the user and the growth loop. Map out each step in the loop to create a natural pathway to more engagement.

For instance, if your loop relies on collaboration, the primary action might be “inviting others to collaborate.” This action clearly benefits both the user and the potential user.

3. Build Incentives for Engagement and Sharing

Incorporate incentives that encourage users to take actions that reinforce the loop. These don’t have to be financial rewards. Sometimes, the product’s value is plenty, like in the case of Dropbox where users get more storage (the product’s primary value) for sharing. Closer alignment to the value will encourage more sharing.

4. Make Sharing Simple and Seamless

One of the most important factors in any growth loop is ease of use. If you want users to invite others or share content, it’s important to simplify the process as much as possible.

Integrate one-click invitations, social sharing options, or personalized links directly within the product. The goal is to reduce friction in the sharing process so it feels like a natural part of the customer journey.

5. Track, Measure, and Optimize

Growth loops seem simple, but they aren’t set-it-and-forget-it systems. They need to be monitored and optimized.

Start by defining your key metrics of the loop, such as referral rates or user activation. Monitor these metrics to identify bottlenecks and opportunities to improve. If a specific action isn’t driving the desired results, you may need to adjust the loop structure, incentives, or user experience.

Sustainable Growth Through Growth Loops

Growth loops aren’t just a trendy framework. They’re the key to creating a solid foundation of continuous growth. Unlike traditional funnel frameworks, growth loops turn each interaction into a chance to draw in new users. They can boost engagement and deepen retention in one continuous cycle.

Most importantly, they can fuel growth without constantly pouring money into acquisition.

Achieving the power of growth loops effectively, however, takes thoughtful planning and optimization. That’s where The Good’s Digital Experience Optimization Program comes in.

With our expertise in growth strategy and user behavior, we can help you identify, build, and fine-tune growth loops that are tailored to your product’s unique strengths and user base. Connect with us, and we’ll help you grow sustainably.

The post How to Improve Referral Rates with Growth Loops appeared first on The Good.

Well, you shouldn’t give away your entire product. It’s a strategic balance between unlocking features to engage new users and gating high-value features that warrant a paid subscription (we’ll get into how to decide what to keep in each tier later on).

This strategy is called freemium pricing, and it’s the source of growth for countless digital brands across the software industry. These brands attract millions of users with some free access and then charge for advanced features or uncapped limits.

Is the freemium pricing strategy right for your digital product? Let’s explore this technique to help you decide.

What is Freemium Pricing?

Freemium – a mix of the words “free” and “premium” – is a business model that offers basic features of a product or service for free but places richer or supplemental features behind a paywall. The fee is typically a subscription.

The free tier is usually a stripped-down version of the product, limited to only the basic functionality that users need to get a taste of the product without making a financial commitment. In some cases, upgrading from the base product to a premium version removes an unpleasant obstruction (e.g., paid Spotify accounts are ad-free).

Dropbox is a traditional example of a successful freemium model. Users can store up to 2GB of files for free, but if you need more space, you have to upgrade to a paid tier.

The goal of the freemium approach is to attract a large number of users who are happy to use a free product but unwilling to pay for something unfamiliar. Over time, some of those users decide to pay for the additional features.

The term “freemium” was coined in the early 2000s, but the concept originates with the freeware and shareware distribution models of the 1980s and 1990s that only charged users after they received some value from the product.

Examples of Freemium Pricing

The best way to understand freemium pricing is to look at some notable examples. These familiar companies are leveraging the freemium model well.

1. LinkedIn: Freemium + Free Trial

Most of us are familiar with LinkedIn’s free social networking platform with basic features, but you can also upgrade to a premium tier to get useful additional features, such as more direct messages, better searching, and insights about people and companies. The premium tier also offers a one-month free trial.

2. Google Workspace

Like most people, you probably use one or several of Google’s free products. But you can get advanced features – especially for businesses – by upgrading to one of their paid tiers. Premium plans offer higher usage limits, enhanced features, and additional services.

3. Zoom

Zoom exploded during the pandemic, largely due to its free tier that lets anyone try the basic product for free for an unlimited period of time. However, once you start using it regularly, the paid features will start to look very attractive.

4. Zapier

Zapier users are limited on the type and number of “zaps” they can run each month. Once you have a workflow setup, it’s easy to decide to pay to keep things working smoothly.

Which Features Should Be Free?

Now that you understand how the freemium pricing model works, let’s talk about your product.

Which features should be free, and which should require payment?

Before deciding which features to gate or keep free, it can be helpful to conduct a verb scoring exercise.

Verb scoring is the act of evaluating actions that users can take in your and your competitor’s products and then scoring them based on the level user of entitlements (or the amount of friction) required to perform the action.

Verbs are the core features of your product broken down into discrete actions, such as creating a ticket, editing a transcript, or sharing a document with a friend. For instance, if users can create and resize a document, create and resize are verbs.

Once you understand all your product’s verbs and how they affect the user experience, you can tweak your product strategy to optimize for user acquisition and conversion to paid accounts.

Learn more here: 9 Use Cases For Verb Scoring To Support A Successful Product Strategy

Once you understand the current state of both your and your competitors’ verbs, you can move on with adjusting to a freemium strategy.

Free Features

The free version of your product should include the core value features that a majority of your users care about the most. These are the features that solve their basic problems and help them realize the purpose of your product.

How do you determine which features users care about the most?

In some cases it will be obvious, but in most, It’s a strategic process that will depend on your product. Elena Verna, Head of Growth at Dropbox, has a decision tree to help leaders answer what should be free vs paid.

Paid Features

Once you know which features are part of your product’s core value and should be free, everything else should go into the premium tiers.

There are three ways to add gates to your product for upgrading:

• Functional limitations: Limits on the specific features users can access. Example: YouTube Music offers offline watching to paid users, but not free users.
• Quota limitations: Limits on how much users can use features. Example: DropBox offers 2GB of storage to free users but much more to paid users.
• Support limitations: Limits on the customer service users get from the company. This is usually only associated with enterprise-level products that require deep customization.

What’s important, however, is that your users clearly understand the benefits of upgrading to a paid account. In most cases, this means making your offer simple. It should be something people understand intuitively and something they can share easily with their friends.

Dropbox is the quintessential example: “Upgrade from 2GB to 2TB of storage” is as simple as it gets. (There are other benefits, but storage is the main driver.) Once a satisfied user hits the cap, they are likely to upgrade.

Finding the Balance

Admittedly, the right balance of free and paid features is tricky to find. You’ll have to start with your best guess (based on data and research, of course, not a shot in the dark) and optimize as you learn more.

Keep in mind that the main goal of the freemium pricing model is to attract new users to your product. If that isn’t happening, it could mean your free offering isn’t compelling enough. In this case, you’ll need to provide more free features or better features.

But what if you have many users but no one upgrades to a paid tier? In this case, it probably means you’re giving away too much. You’ll have to reduce your free offering so users have a reason to pay for the product.

What are the Advantages of Freemium Pricing?

So, what makes the freemium strategy so great? Why do so many digital brands use it? Let’s look at the benefits of freemium pricing.

1. Attracts a Large User Base

Freemium pricing lowers the entry barrier for many customers. They can try your product without making a commitment. Naturally, this leads to more users. Think of every free user as a “warm lead” that you can convert into a customer.

Furthermore, a large user base creates more brand visibility. You end up with more people talking about and sharing your product.

2. Provides Valuable User Feedback

With more users trying your product, you can access a broader range of feedback. This information helps your team identify ways to improve the product. It also helps you understand your product because you can distinguish between who would use it and who would pay for it.

3. Creates Opportunities for Upselling

Over time, freemium users become hooked on the core features and start to desire the rest. With the right incentives at the right time, converting them into customers is straightforward.

This is especially true for businesses that use your product as part of their workflow. Eventually, it becomes painful to switch to a new product.

4. Builds Brand Loyalty

Many people appreciate companies that allow them to try before they buy, and that positive experience can translate into long-term loyalty. Even if some users never convert, they might recommend your product to others.

What are the Disadvantages of Freemium Pricing?

Those benefits of freemium pricing sound great, right? Like all pricing models, there are some downsides. Understanding the challenges of freemium pricing will help you minimize their impact.

1. High Operational Costs with Free Users

Supporting a large base of non-paying users can get expensive. You’ll need to maintain servers, customer support, and other resources for users who may never convert to a paid plan. This is unsustainable if the cost of maintaining those users outweighs the revenue of paying customers.

2. Difficult to Monetize

In some cases, it can be challenging to find the sweet spot for monetization. Offering too few features in the free version can discourage sign-ups, while offering too many can hurt freemium conversion rates. Finding the right pricing structure requires constant testing and adjustment.

3. Potential Devaluation of Your Product

When users get something for free, they may not always perceive the product as valuable. This can make it harder to justify the price of your premium offerings. The perceived value of your product needs to be clear, or users might never consider upgrading.

Alternative Pricing Strategies

While the freemium business model is right for some organizations, it’s not the only option. Depending on your business model and goals, you may want to explore other pricing strategies.

In fact, it’s perfectly fine to use multiple pricing strategies at the same time. For instance, you might offer a free trial and then switch to usage-based pricing. Or you might go with a freemium model with premium features charged on a per-user basis.

The point here is that you have a lot of options, so it’s important to conduct thorough research to learn about your customer base and experiment with different models.

Let’s take a look at a few more of the popular pricing options.

1. Free Trial

Instead of offering a permanent free version, a free trial gives users access to all the product’s features for a limited time. The free trial period usually lasts seven to 30 days. Users feel a sense of urgency to decide whether to buy before the trial ends. Like freemium pricing, free trials let users experience the product before buying.

2. Tiered Pricing

Tiered pricing offers several plans at different price points, each with its own set of features. These additional tiers allow you to offer plans that meet the needs of different customer segments. If a user is willing to pay more, they get more value.

3. Usage-Based Pricing (Pay-as-You-Go)

In usage-based pricing, users only pay for what they use. It’s a great model to attract users who may be hesitant to commit to a flat subscription fee. For instance, a cloud services customer can’t pay much until they have users, but they also won’t use your product much.

4. Flat-Rate Pricing

Flat-rate pricing is the most basic model: users pay a single price for all features, typically on a monthly or annual basis. This pricing is easy to understand and appeals to users who want simplicity and predictability.

5. Per-User Pricing

Common in SaaS, per-user pricing charges customers based on the number of users who will access the product on the same team. It’s scalable and easy to understand, especially for businesses that want to manage costs as they grow.

Freemium Product FAQs

We dived deep into freemium pricing, but you may still have questions. These FAQs will help!

Is a Free Trial the Same as a Freemium?

No, a free trial provides temporary access to all features, while a freemium approach offers a limited feature set indefinitely. That said, free trials and premium models are often used together.

Does Freemium Pricing Increase the Number of Potential Customers?

Yes, it often attracts more users since there’s no upfront cost, which helps build a larger user base. But it only works if your free features are truly valuable for your potential customers.

Can Freemium Lead to a Loss of Income?

It can if too many users stay on the free plan without upgrading or if the cost to support them on the basic version exceeds revenue. To avoid this, it’s important to carefully select which features are free and which are paid and Implement a smart conversion strategy.

What Should You Consider Before Using Freemium Pricing?

Consider your core offering, customer acquisition costs, conversion strategies, support costs, and how to balance free versus paid features. All of these concepts work together as part of the freemium model.

How Do You Convert Free Users to a Premium Plan?

Convert users to premium plans by showing the value of premium features, using targeted messaging, and creating usage limits that encourage upgrades. Like all strategies, this requires careful research into your customer and experimentation to find the optimal balance.

What Percentage of Users Typically Convert From Free to Paid?

Conversion rates for freemium customers vary but are often between 2-5%, depending on the product and market. But that doesn’t mean that 5% is your ceiling. Some well-optimized product strategies have achieved greater conversion rates.

How Long Should You Expect Users to Stay on the Free Plan?

Many users will stay indefinitely, but successful conversion often occurs within the first few months. If you don’t see a reasonable number of conversions within the first three months, consider adjusting your conversion strategy.

Is Freemium Pricing Suitable for All SaaS Products?

Not always. It works best when there’s a clear upgrade path (basic services vs. premium services), and the free features provide value without giving away too much. Free features should also be relatively inexpensive for the SaaS to provide.

How Do You Avoid Cannibalizing Paid Sales With a Freemium Plan?

By offering enough value to free users without giving away advanced features that drive upgrades. If a majority of your users are sufficiently served by the free features, consider adding more limitations.

What Metrics Should You Track in a Freemium Model?

Track user acquisition, activation, average conversion rate, churn rate, and customer lifetime value.

Can Freemium Impact Brand Perception?

Yes, positively or negatively. A well-executed freemium can build goodwill, but a poor free offering can harm brand value. It’s a good idea to conduct some brand monitoring when you launch your freemium pricing product.

What are Some Common Mistakes SaaS Companies Make With Freemium?

Offering too many features for free, lacking a clear upgrade path, or failing to effectively monetize the user base. Alternatively, some companies leave too many features behind the premium tiers, which fails to attract enough users.

Is Freemium Pricing Right for You?

The freemium pricing strategy is a powerful technique, but that doesn’t mean it’s right for every digital product. And even if it makes sense for your product, it has to be handled carefully.

For many brands, the solution is to bring in an outside optimization team who will help you explore options and find the right path.

Our Digital Experience Optimization Program can help you unlock the full potential of your website, app, or digital product by optimizing the user experience according to your pricing strategy.

The post How To Use Freemium Pricing To Drive User Acquisition and Adoption appeared first on The Good.

About This Episode:

This week on Drive & Convert, Jon and Ryan discuss preparing for holiday 2024 and the recommended tech stack for success. 

Check out the full episode to learn:

1. What companies like Google and other industry leaders are predicting for the 2024 holiday season.
2. Why it’s critical to start planning earlier than ever.
3. Ryan’s recommendations for building a holiday tech stack.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon MacDonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

Announcer: [00:00:00] You’re listening to Drive and Convert, a podcast about helping online brands to build a better e-commerce growth engine with Jon MacDonald and Ryan Garrow.

Jon MacDonald: All right, Ryan, it seems like we just did this a couple of weeks ago, but it must mean we’re getting old. It’s a holiday prep time again, right? Every year it hits so quick, and here we are on entering Q3, it’s time to start thinking about this, and your team at LP, they’re in the thick of it, I assume, right?

Ryan Garrow: Oh yeah, it feels like it almost doesn’t end actually, because we’re so quickly into the holiday prep. Meetings with platforms and clients and yeah, 

Jon MacDonald: I know you had your, you call it a partner connect event last week, sadly, and I was super disappointed when I heard of the dates because I already had family travel scheduled.

So you got to give me the rundown. How was it? What were the highlights? Let me know. 

Ryan Garrow: It was fun. I did miss [00:01:00] having you there. The value add on our stage is always good. So we missed that for sure. We’ve always adjusted as we’ve done these things. This is, I think, our third one in this format. We’ve been doing kind of partner connect events since man, 2017, maybe, but we had a bunch of clients come in, we had some partners come in and we challenged our speakers this year, more so than in the past to really do more of a keynote, like thought leadership presentation.

And they were. Solid. We had, this person, Matt Dornfeld was on stage for feedonomics and he’s good. That guy is a phenomenal speaker. I’ve seen him on stages around the country at Ecom events, and he’s just, it was impressive. The one that he was willing to come out and do this for us, but also talk about the numbers around growth in marketplaces.

And it’s crazy. He even had some data around TikTok and the growth there and how TikTok and Amazon are working together. And it is 

Jon MacDonald: that seems lethal to have those two together. 

Ryan Garrow: It does. And that’s, we have the political thing playing out with TikTok. And so if they are forced to whenever that [00:02:00] deadline’s coming, I forget when it is.

But if that deadline ever comes up, I foresee some type of thing with Amazon happening, since Amazon’s driving so much of their off Amazon traffic from TikTok right now, if you’re driving traffic to Amazon right now, and you’re listening to this, make sure you’re doing some stuff with tick tock because that integration is getting, slash awesome from a marketing standpoint.

Jon MacDonald: I love it. 

Ryan Garrow: Yeah. So 

Jon MacDonald: speaking of very large corporations that might get split up, you had a day, you had a day at Google, right? 

Ryan Garrow: Yeah. Yes. 

Jon MacDonald: What are they saying about holidays that doom and gloom, or is it? Bigger and better. What should we be thinking about? Because the economy, depending on who you talk to, is either amazing or in a hole.

And I can’t figure out which one it is right now. 

Ryan Garrow: I can’t either. It feels like there’s issues, but then you read a lot of the data and business publications, and it doesn’t seem that bad. I think it’s been over 15 years with Google that I’ve been working with them. I have yet for them to ever say this period is going to be smaller.

Like it never in a holiday period is it ever Oh yeah, it’s going to be [00:03:00] smaller. So prepare for that. It’s always going to be bigger whether it is or not. Google’s going to tell us it’s going to be that way. So they’re painting very rosy pictures and helping the strategy, which is good. But our day at Google was pretty good.

They are really jumping in all in on YouTube. And they have been for a while. I’ve talked about this before, but every earnings call, they it’s always YouTube is not doing great from a numbers perspective from the analysts. They’re just always upset about YouTube numbers. But. They are really doing a lot.

We talked about vertical videos before. There’s a lot of really phenomenal things they’re doing to help improve tracking on YouTube and push people from the top of the funnel through. So make sure you’re doing video period. And we did see some cool data though. So 2023 holiday with Google, it was up 17 percent ad spend was up 17 percent year over year, which is a lot considering the growth of e com and online sales and even retail sales was only up I want to say 5%.

Jon MacDonald: Yeah. And so you could infer that has maintained what people were [00:04:00] spending over COVID has maintained if it was up 17%. 

Ryan Garrow: Yes. And that’s basically CPC increases. So what will, Google’s world, they’re going to be up, even if search volume is down and sales volume is down because CPCs are going up and there’s.

Some, tinfoil hat people that believe that Google’s manipulating CPCs, which, maybe in this, it is in their benefit to do so it is, so there’s probably some of that. Google’s estimating that CPC is going to be up 5 to 15 percent this year. So if we have flat search volume, You can see where the 10 to 15 percent growth in ads.

Jon MacDonald: Don’t they control that data? They know the number that they’re going to aim for, right? 

Ryan Garrow: What we are seeing is as the pie is maintaining or shrinking, you have other advertisers coming in or advertisers need to get more aggressive to hit their growth goals. And so if the pie isn’t up 10 percent in size, You’re going to have to get more aggressive with your ROAS targets, your bidding algorithm, like you’ve got to push harder.

And those that push harder will get the customer [00:05:00] because if you don’t show, you’ve got no shot. So you’re going to need to be aggressive just like every other holiday season. But I would say if you look at Google trends, which is a cool site, if you haven’t been there, go play around on that. We are seeing less search volume in a lot of our clients industries.

So if you’re seeing that. And you want to grow, you have to get a larger piece of the pie. So get aggressive. And then this year, I mentally wasn’t prepared for this. I should have been, but Cyber Monday’s in December this year. So we have, it’s actually working out to five less shopping days this year in the calendar of holiday, like Thanksgiving to Christmas.

So that’s a problem for a lot of companies. You’re going to much more condensed. Pay 

Jon MacDonald: more and have less time to, to spend. 

Ryan Garrow: I’m guessing very high. Volume sales day. So that’ll probably be the message that comes out of all the people like adobe and all the people watching Revenue online, but we say oh we have the biggest sales days ever yes, because we’re in such a condensed period of time people are going to be buying more often during this [00:06:00] condensed time period So it means your opportunity to recover from mistakes Like if you miss on this tuesday a revenue target or sales because you weren’t pushing hard enough You’re not gonna have a lot of time to make that up So you’re going to need to be watching very closely on your data.

The bigger you are from a spend standpoint, the more often your teams are gonna need to be meeting and connecting. So slack’s gonna be important. We have some clients that meet, 7:00 AM and then they’re gonna meet again at 11:00 AM and then there’s probably gonna be a post day meeting, late east coast to say, Hey what do we need to pivot for tomorrow?

And if you’re spending six figures a day or higher. We have some clients spending seven figures a day during holiday, that’s going to be important. And smaller spenders, maybe you’re meeting daily with your team. So just be aware. It’s also an election year. Yay. While that won’t impact holiday search shopping stuff, the lot of the lead up to holiday is building those lists and capturing people that are going to be, for example, Amazon prime day in October will have an impact and people will be [00:07:00] buying holiday gifts there.

And we saw that. election year, we went back to 2020, a lot of that mid to upper funnel is going to be impacted a lot. And so because those impressions on meta, YouTube, display networks, the DSPs, if you’re on the trade desk, things like that, a lot of inventory is going to be going to election ads. So even if you’re not competing directly in the election space, that ad can’t on meta can go to a candidate or it can go to you.

And the candidates have a lot of money to spend in a very condensed period of time. Local politics ads are usually Two to three weeks out where they get aggressive, we’ll see presidential campaigns, senators, those will probably be back in the late September, early October, when they start getting a little more aggressive, that’s going to be something to be aware of and watch performance max campaigns in Google do use YouTube and display ads.

And there’s a remarketing component. Those ad slots will likely get more expensive. So if you’re using your performance max outside of just shopping, It’s something to be aware of. You might have to adjust your target return on ad [00:08:00] spend because of the mid and upper funnel being more expensive. 

Jon MacDonald: Knowing all of this, what do you think is going to happen this holiday season?

Ryan Garrow: If I say it, you can almost bet on it being different than what I say. So my motto is always plan and then pivot because I think something’s going to happen and then it’s going to be different. So 

Jon MacDonald: well, look, you’re just adding fodder for our recap episode 200, where we’ll say like we did in episode 100 where we were wrong and go back and play the clips and then comment.

Oh, yeah. So 

Ryan Garrow: I’m of the opinion that many brands are going to be slower this year than 23. And we’re already seeing that happen, through Q3. I don’t expect some magical search volume to come back in Q4 to save the day. The date on the platform is going to tell us that holiday sales grew like that happens every year, but then we see the individual.

Merchants seeing not that data some of it’s going to be, inflation based like sales volume, you know They can adjust for inflation, but it’s not always there I don’t think click cost inflation on both meta google probably some TikTok increased in costs. They’re going to be there So I think the [00:09:00] smart sellers are going to get aggressive in September And there’s a real cool data point that google brought out that there are A large percentage of holiday buyers that have done all of their shopping before Thanksgiving and they start buying that 20%, I believe, start shopping in September.

I am the weird one in that none of my holiday shopping gets done before December. Like it’s just December 23rd. Yeah, I am that guy on Christmas Eve or 23rd, like at the store. It’s usually, generally speaking, a bunch of other men and we move quickly and are impulse buying. We probably all overspend. So just what I’ve seen over the years.

Yes, I am that guy. Start earlier to be successful. I think if you’re planning all your spend to start on Thanksgiving, yeah, I think you’re going to be in trouble and build lists and plan for sales. So you’re going to need to have a few different sales periods. Likely, like there’s going to be that prime day in October.

You’re going to want to layer on Halloween is a big shopping day. Not all of it is Halloween based. So you might need some promotions around that. Companies that are effectively using SMS and email are going [00:10:00] to grow a lot more. We had attentive speak on stage at our event last week. It blew me away, their numbers.

It borderline thought they were lying. If they weren’t actually pulling the data out of their system. They said that their advertisers The people using attentive email and SMS were up 58 percent year over year versus holiday 22. That’s an astounding number. I think they have some good brands, which helps, but the simple fact that they are seeing that companies that are using their technology grow much more than average, the holiday was up, I think 5.

9 percent in revenue. And you have a group of, they’re pretty large. So a very large group. We’re up 58%. That’s enough data to say something is working in email and SMS for companies. Pay attention to that. 

Announcer: You’re listening to Drive and Convert, a podcast focused on e-commerce growth. Your hosts are Jon MacDonald, founder of The Good, a conversion rate optimization agency that works with e commerce brands to help convert more of their visitors into buyers [00:11:00] and Ryan Garrow of Logical Position, a digital marketing agency offering paper click management transcribed search engine optimization and website design services to brands of all sizes.

If you find this podcast helpful, please help us out by leaving a review on Apple podcasts and sharing it with a friend or colleague. Thank you.

Jon MacDonald: And those are owned channels. They cost a lot less. To reach then that 17% rise at Google 

Ryan Garrow: for sure. As we’ve taken on more email and SMS clients over the last few months, what we’ve seen is most of these brands some of them were managing internally. Some were working with another agency. They were.

Under emailing and under sending text messages. They didn’t have a good cadence around it They didn’t have enough granularity in their audiences There is some significant room for most brands to push harder and you’re not gonna annoy you. Hopefully you don’t get to the annoyance level But you can be more consistent and probably get a little more aggressive in how often you spend, send those messages.

A cool thing that’s come up more [00:12:00] recently, and I expect there’s probably going to be some blowback, but a lot of companies are looking for that monthly reoccurring revenue that they can bank on. And so a lot of them are doing that with subscriptions, which is good. You’ve got to be looking at that. But a new one that I think has more value is paid memberships.

Kind of like that loyalty program, but. And you’re paying for access to stuff 

Jon MacDonald: like the Costco model. 

Ryan Garrow: Yeah. And the, and you could, some companies do it for free. Like I’ve seen Liquid IV has a free membership program that gives you benefits to certain things. And I think that, so it’s like a loyalty program, but they’re calling it a membership.

And there’s another company I saw the name is escaping me, but they did a, maybe was it laundry sauce? Maybe I’ll have to go back in my notes and look, but they did a paid membership where you’re paying either monthly or annually, and you’re getting access to special sales and promotions. They give you some free product, free, you’re paying for it, but they’re giving you something in return for that.

I think it was in this case, the one I saw today was a candle that they’re giving you and really big. And one of the companies in that space, I dug into their tech [00:13:00] yesterday pretty heavily with one of the people in their company. And they’re saying that of your database, they’re going to get five to 6 percent of them to Take this membership and that’s going to be a, a large percentage of, it’s going to be a large profit number when you’re charging 5 percent of your email SMS database that they’re going to message this out to between 100 and 150 a year, they think it needs to be under 150, but Every company should probably test memberships.

I think that would be the punch line. I think there’s a lot of opportunity. So I love that. Paid memberships. 

Jon MacDonald: That’s a great tip to take away. Continuing on this with the actionable stuff, I also have heard that you have assembled a recommendation for tech stack of apps for holiday success. 

Ryan Garrow: I have. So I’m moving a little bit out of my lane here and going instead of talking just traffic, I’m like, 

Jon MacDonald: You’re really selling it, right?

Ryan Garrow: There’s a group of companies that I think most e-commerce brands need to be aware of and add into their tech stack before holiday, because I think it’s really going to drive revenue. Some of [00:14:00] these won’t drive necessarily traffic, but they’re going to bring that traffic back or just help you do more.

Some of it will be conversion. But one of the coolest ones that most of you haven’t heard of is a company called Vive Recover. This company seriously kicks ass. They have a great couple of founders, super smart. And what they have figured out is how to recover abandoned carts outside of the city. Email and SMS channels.

So email and SMS, you’re going to send somebody a text. They have to be double opted in to an attentive or a Clavio or one of those systems email. They’ve got to be in your email list with permission to email. That’s very few people coming to your site for the first time. It’s a library cover actually has the ability and it’s legal to text abandoned cart people.

Because you can manually text people one time without getting in trouble. And they recover an astounding amount of revenue. Like we had a client test it. The first month they added six figures of recovered revenue on one site. That’s an insane amount of money [00:15:00] in a test. And so I highly recommend every company get this on there.

I’ve worked a deal. So if you reach out to me, all these companies, by the way, I’m talking about, I have a deal for. So just reach out to me because you can get a no setup, No contract. You only pay if you get sales from this company. Oh wow. It’s phenomenal. They were Shopify only, but by the time this recording gets to you, they will have built out BigCommerce version for me, because we have a lot of clients on BigCommerce as well.

And then soon after will be coming Woo and Magento. So reach out to me if you’re not on Shopify, but if you’re on Shopify, reach out to me. Super simple as of when we’re recording this. It’s already done. It’s just unbelievably easy. Second one would be Triple Whale. So we’ve talked about them before.

They’re a great reporting system for those of us that are just disappointed in GA4. And they just released, I think it’s called their 3. 0 version, but it got way better. So I liked it before, and now I love it because they’ve, what they’ve built into it is so awesome. And they’re on BigCommerce and WooCommerce by the time this podcast released.

And so you’ve got the three biggest [00:16:00] platforms for e commerce out there that TripleWhale now works with. And they have this really cool, I’ll highlight three things. They have an AI system built into it. It really helps you with analysis. And being able to find information so you can actually just type what you’re looking for into the system and it’ll help pull that data to you without having to go try to find a certain report because I always hate taking for reports.

They have a creative analysis so you can go into your system specifically good for meta. So if you’re not advertising on meta you probably wouldn’t use this much but you can see in this campaign here’s the five ads I had here’s the audience I’m targeting which one was winning. from an ad standpoint.

Okay. And then in the system, you can actually start iterating on it. We’re saying, Hey, we like this one. Let’s get rid of these four, put four more in a super, super cool what they’ve done there. And then they’re allowing you to build custom reports, very similar to Looker. And so if you’ve done a lot of stuff in Looker, which we have a logical position, we’ll see, we can take this report and basically build that in triple whale.

And have all these connections already built in. Anyway, if you’re on Shopify or [00:17:00] BigCommerce or WooCommerce, we’ve got a discount for all of you. If you’re small, sub 500, 000, and revenue, last 12 months, we’ve got you for 99, and that takes you to a million. That’s a super discount when you’re doing stuff like that.

I think it’s only 67 percent off or something. And if you can’t 

Jon MacDonald: spend a hundred dollars to not be flying blind, I don’t know what you’re doing in business. So please do, you gotta have some of these numbers and triple well, I agree deal, no deal, whatever. They’ve been around forever have known them from very early days when I met the founder and he was literally just building it.

There were a couple of guys that built it together, but, and they started out of Columbus, Ohio where I grew up. So there we 

Ryan Garrow: go. Hey. Something good. A couple of things good coming out of Ohio now, Jon MacDonald and Triple Whale. 

Jon MacDonald: Yeah we’ll see if Ohio says that about me. 

Ryan Garrow: I can say it for Ohio. Yes, you have to have Triple Whale.

I think you’re crazy if you don’t have it. There’s a company called No Commerce. It’s, I can’t even say they’re flying out of the radar now. Like they only, they have very few employees. They’ve done a ton. They punch way out of their weight class as far as what they’re able to impact. 

Ryan Garrow: They do post purchase surveys and post purchase surveys are so [00:18:00] simple.

But they just work. It helps you understand where’s traffic’s coming from. You can’t see in triple well as easily because there’s a lot of impression things that happen that you’re not going to be aware of, especially with all of these influencers on meta tick tock, all these things happening. And so it works on almost every platform.

It’s now free forever. Like they have a free system. That will give you two questions forever. If you start on TikTok and you like create an ad account there, it’s really simple. Just click a button and get it and it integrates with triple whale and integrates with your platform, integrates with attentive play, all the things.

Jon MacDonald: And I always love these because as a consumer, I almost always just click the button and answer the question. Part of that is I’m sympathetic to their ROAS and to try and help them understand where they’re getting the best money. But I would also say I love the. data because the analytics can tell you where people came from, probably that last touch attribution, but no comments is going to tell us what people remembered the first touch was.

And that’s really so important as a [00:19:00] brand. If you’re going to dump your marketing dollars somewhere, you might as well dump it where people remember they learned about you, whether or not that was actually the first touch or not. Yeah. Yeah. Doesn’t really matter to me. It matters. What touch does the consumer remember?

Because that’s where I should be spending the money. 

Ryan Garrow: And I think, as we know, like people are getting touched all over the place for brands to make it work. You can’t just be one channel, one channel company. You have to go all over and no commerce makes it so easy to just get the data. And so reach out to me.

I’ll make sure you get it for free. The final one is Shopify only. So this is why it’s at the end, because it doesn’t apply to all of you out there in e commerce world, but there’s probably things if you can’t get this system, then you need to be thinking about how you do it for your system. But a company called wonderment, they handle post purchase stuff.

So they’ll build, they’ll easily let you build a post purchase landing page for tracking shipments. giving information. So what they do is they proactively communicate dates that things are going to happen. Hey, we got your order. Hey, we shipped your order. Hey, it’s going to arrive tomorrow. Hey, it arrived.

That [00:20:00] proactive things that you’ve talked about often around just allowing people to have the expectations that are right. Wonderment makes it very visual and they allow easy cross sell upsells. So another thing you’ve talked about is the post purchase cross sell upsell being so important. This is somewhat of an easy button and you can start it for free.

And it’s just super cool. It works on all the devices and just they, and they talk about an ROI. So they focus on the fact that you’re going to eventually you’re going to pay for this system, but we’re going to let you do it for free to test it. And once you’re paying for it, it’s like a guaranteed ROI, like I love 

Jon MacDonald: this because yeah, this is great.

I love this because as I said, in behind the click, too many brands forget that post purchase optimization opportunity. They just neglect to do anything at all, or maybe just send one or two emails that are asking for reviews. That are ill timed, et cetera. So this is a great way to stay in front of consumers once they’ve clicked, check out them. 

Ryan Garrow: Very high open rate. They’re going to [00:21:00] send the emails through your provider, Klaviyo, attentive, whatever it happens to be, because people have bought. So they’ve given you money and permission to communicate about that order. So it’s just, there’s no reason you wouldn’t. No. 

Jon MacDonald: It’s such a good opportunity.

Ryan Garrow: Yeah. It’s going to be for you, even if you don’t get more traffic because it’s slower this year. So do it. 

Jon MacDonald: Yeah. 

Ryan Garrow: All right. It’s not hard to find me. Find me on LinkedIn. Email me at garrow at growwithgarrow.com or find me on Slack if you’re on Slack mates. I’m not hard to find. 

Jon MacDonald: Yeah. Ryan’s easy to find. So all right, buddy. This has been awesome. Thank you. Thanks for catching me up on partner day. I can’t wait to get back in the saddle and participate in that next year.

Ryan Garrow: Next year it’s going to be bigger and better than ever. 

Jon MacDonald: I heard the number 2, 000 being thrown around.

Ryan Garrow: Yeah. We’re hoping to get a few thousand people to Portland.

Jon MacDonald: If you can do that, I will happily grace the stage and share anything and everything. So let’s do it. I look forward to that. And thanks for sharing about that. Telling us where we need to be for holiday and getting us get the engines revving for that because we’re in [00:22:00] as we’re recording this in mid August and you need to start thinking about it now. 

Ryan Garrow: Yeah, it’s very timely, whether it seems like it or not, if you’re listening to this and you haven’t started your holiday prep, you’re way behind because you should already have some ads in September when this is coming out. Yeah. Preparing and your plan is already in place and you’re going to pivot when it’s wrong.

Jon MacDonald: I was trying to not be so dire, but I agree. The situation is dire. If you have not started your holiday planning, please do this is a great place to start. So thank you for that, Ryan. I appreciate it. 

Ryan Garrow: Thanks, Jon.

Announcer: Thanks for listening to Drive and Convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert. com.

The post Drive and Convert (Ep. 117): Holiday Prep & the Tech Stack for Success appeared first on The Good.

About This Episode:

This week on Drive & Convert, Jon and Ryan discuss how to convert free trial users to paying customers. 

Check out the full episode to learn:

1. The importance of optimizing the free trial experience for SaaS brands.
2. How to gain an understanding of the factors that motivate your users to buy.
3. Proven strategies to encourage your users to convert from free to paid.

The resource Jon mentions in the episode can be found on thegood.com here.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon Macdonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

[00:00:00] Announcer: You’re listening to Drive and Convert, a podcast about helping online brands to build a better e-commerce growth engine with Jon McDonald and Ryan Garrow.

[00:00:15] Ryan Garrow: All right, Jon, you have given me a topic that you want to talk about today. That is something we’ve not done a ton of on this podcast. We’re going to, we’re going to dabble in talking more in the SaaS side of the world than the[00:00:30] e-comm side of the world today. And, I mean it probably could be some e-comm stuff, I don’t know how it would work as well, but you get to give me some insight today on how to move a free trial customer to a paying customer.

[00:00:42] Ryan Garrow: Isn’t that, is that something, did I understand correctly? 

[00:00:45] Jon MacDonald: Yes. Thank you for humoring me and letting me talk about this today. today. And I do think it applies to some degree to e-commerce brands as well, because there are brands who offer free trials or, and there are different methods of doing that in e [00:01:00] com.

[00:01:00] Jon MacDonald: The ones we’ll talk about today could, with a little bit of adjustment, be used for e-comm, but. The home for these is really in SaaS. That is where most free trials have started and been utilized over the years. And some e-comm folks have taken that and run with it since. 

[00:01:18] Ryan Garrow: Yeah, I think a couple of things, like I don’t know as much about SaaS as I do e-comm.

[00:01:22] Ryan Garrow: And so I’m actually really interested in a lot of how these work, because as my brain will probably go right to how do I apply this to the [00:01:30] Thousands of e-comm customers we work with in looking at how they do trial subscriptions, how they do memberships for free that they can move into a premium price point.

[00:01:39] Ryan Garrow: So that’s how my brain’s going to be thinking through a lot of this and some of you out there maybe as well, but Jon does handle some of the largest. lead gen companies out there and helps with their conversion and optimization. So his brain is well tuned to success in this for sure. 

[00:01:55] Jon MacDonald: I appreciate that.

[00:01:56] Jon MacDonald: It is all my team’s doing here at the good. So I [00:02:00] will say that I know what’s going on. I, there are way smarter folks here than me at this point, which is a good area to be in. But yeah, let’s talk a little bit about converting these free trial users into paying customers, because I think that it’s really important.

[00:02:15] Jon MacDonald: There’s no secret that free trials are the, where the most SaaS organizations mess up in my opinion, right? And this is because no one signs up for a free trial unless, they want to learn more about your product, but these free trials get pushed [00:02:30] off to the side a little bit. It’s a great lead gen tool for them, but not necessarily something they optimize.

[00:02:36] Jon MacDonald: We’ve had a lot of success doing that because we take a unique perspective on this. And that’s that most customers are signing up to, to learn how your product benefits them. They’re not looking to just get a free trial. They couldn’t care if you offer one feature or 50 features. They want, just want the product to solve their problems and make their life easier.

[00:02:57] Jon MacDonald: So that’s very similar to [00:03:00] Ecom and a very similar problem, right? Again, it’s only two reasons people are at your website, because they have a pain or need and they think you can solve it, and then they want to convert and accomplish that as quickly and easily as possible and get on with their lives. If you want to convert these free trial users, your task is to show them how your product meets their needs.

[00:03:20] Jon MacDonald: And that’s it. If you can’t help them achieve that desired outcome, it’s They’re just simply not going to buy, doesn’t matter how much of a trial or whether it’s free or not. 

[00:03:29] Ryan Garrow: [00:03:30] Interesting. I like how that’s been put there around how you’re solving a problem rather than, it’s I feel like I get sold a lot of features on these.

[00:03:37] Ryan Garrow: So hopefully I can go back to these-commpanies and be like, no, go listen to this podcast with Jon cause he’ll solve all your problems and I’ll give you my money. Yeah. 

[00:03:43] Jon MacDonald: SaaS, even in pricing with SaaS is a traditional thing. three up table pricing, and that’s a checklist of features under each table.

[00:03:50] Ryan Garrow: Further down it goes, the more value it has to me, supposedly. The 

[00:03:53] Jon MacDonald: more features, not necessarily the benefits to the user all the time. It’s a good way to focus on that. [00:04:00] What’s the old adage in advertising that nobody’s buying the hammer? They’re buying the ability to basically nail something together, right?

[00:04:09] Jon MacDonald: That’s their goal. So it’s the same adage here with your SaaS products. 

[00:04:14] Ryan Garrow: Okay. So as we dig into the data here that we do have to look at some of the normal metrics that I think of without thinking a little bit differently, like the conversion rate is not as a SaaS company necessarily focus on the how many people sign up for a free trial.

[00:04:27] Ryan Garrow: That’s nice, but the real important metric is. [00:04:30] How do they go from my free product to a paid product? And that is a slightly different conversion rate than what analytics tracks, for example. 

[00:04:37] Jon MacDonald: Exactly. Now, if your marketing’s job is to get more people into a free trial, and that is considered a lead, then it is your job as a product owner, conversion person, to make sure that they convert from free to paid.

[00:04:51] Jon MacDonald: And so that is the conversion rate that matters, in my mind. It measures the percentage of users who transition from a free version of a product into a paid [00:05:00] version, right? And a lot, we’ll talk about different models, if you don’t convert this, it can cost your company a lot of money and not just in customer acquisition costs.

[00:05:09] Jon MacDonald: It can cost you a ton of money in server fees and everything else to service those folks. Think about All of these AI apps that are out there right now, they’re not, they didn’t build their own AI. They’re using open AI or chat GPT’s API calls, right? And those add up so quickly. And so [00:05:30] you really need to be conscious of giving people too much free runway.

[00:05:34] Jon MacDonald: without focusing on converting them. So if you want users to upgrade to these paid tiers, there’s really an important metric to track. And it’s also important for these freemium models where users can access some of these features for free and are encouraged to pay for more premium features. And we’ll get into those models, but there’s a formula that I think we need to start with just to level set.

[00:05:57] Jon MacDonald: And this is a free to paid conversion. conversion [00:06:00] rate. That is the number of users who convert to paid divided by the total number of free users times 100. Okay, so total number of users who convert to paid divided by the total number of those free users times 100. So not too dissimilar from a conversion rate.

[00:06:18] Jon MacDonald: But okay, let’s do an example. So let’s say a SaaS company has 10, 000 free users, 500 of them upgrade to a paid version. The free to paid conversion rate would be [00:06:30] 500 divided by 10, 000 times 100%. And that gives you 5%. Okay. 

[00:06:35] Ryan Garrow: So it’s interesting how you could turn off lead gen marketing and not get any new leads, but you could still be working on increasing your conversion rate, even without that new traffic, cause your free users are still 10, 000.

[00:06:47] Ryan Garrow: And then you just pick, a timeline to figure out your conversion rate. Oh, we had 200 this week convert, so our conversion rate this week was 2%. 

[00:06:55] Jon MacDonald: Exactly. And it’s interesting because so many SaaS brands [00:07:00] focus on getting more people into that funnel when really what they need to do is focus on converting the folks that are in that free trial already.

[00:07:07] Jon MacDonald: And a lot of them offer, free trials that last a very long time six weeks, a month. Three months, whatever it might be. The challenge with that is you’re now extending that window, right? So as you can imagine, you’re going to really want to push that number as high as possible as more conversions to paid account.

[00:07:26] Jon MacDonald: That’s when you get your revenue. Want to focus on the revenue and then the profit, [00:07:30] that is where you need to look. 

[00:07:31] Ryan Garrow: Yeah, I can see how a marketing team would like a really long free trial to be like, Oh no, we don’t need to change that. Just keeping the free trial. So we have a chance to sell them moving forward because I would be worried about, losing the opportunity when in reality, it’s probably not likely that person is going to convert if they’ve been a free user for so long.

[00:07:49] Jon MacDonald: Let’s talk about how to convert these free users before we do that, because I really want to level set on a couple of things. One of them I want to talk about is what I mean by a free trial. Okay. [00:08:00] And let’s come back to that point though, because I really want to talk about why that’s a misnomer for these marketing teams.

[00:08:07] Jon MacDonald: So there’s actually three different types or models around free trials. And there’s a whole bunch of tactics under each of these, but there’s three main groups and that is the freemium model, which most of us know about, right? There’s the reverse trial, which is probably new to a lot of folks. And then there’s a trial with payment, which once I tell you what it is [00:08:30] you’ll know what it is already.

[00:08:31] Jon MacDonald: But a freemium model is a two tiered model with a free tier and a premium plan. Pretty simple, right? This is the traditional SaaS model. We’ll grant you free perpetual access to a restricted version of our product, hoping that by limiting the accessible features, maybe giving you four out of six or something of that sort, and.

[00:08:53] Jon MacDonald: Placing caps on the features. Maybe you only get X number of downloads a month. This is the [00:09:00] hope that you will upgrade to a paid version to access all the full features that you’re going to hit that wall with usage. And you’re going to say, you know what I want to level up. I’m going to pay.

[00:09:08] Jon MacDonald: You can also think about this in some cases, freemium users can. get charged in a la carte for usage, meaning that you could say if you, maybe it’s the platform’s free, but every time you download it to dollar, right? Something of that sort, right? So there’s a couple of ways you could do freemium here, but this is what everybody knows.

[00:09:26] Jon MacDonald: Oh, I’m going to get your platform. You’re going to let me do a [00:09:30] limited subset of items. When I need more, I’m going to have to pay make sense. I’m paying for my usage, but this is where marketing teams can really mess up because they’re trying to get everybody into a free model. And the expectation is it’s going to perpetually be free.

[00:09:44] Jon MacDonald: That costs the -commpany a lot of money in the end, right? To service those folks. Just think about all the support alone when somebody has a challenge and they’re not paying. The second model is a reverse trial. This is one that I mentioned might be new to some folks. It’s a time based [00:10:00] approach and this was actually coined at Dropbox.

[00:10:02] Jon MacDonald: And users start with a full access to the features for a limited time during a trial phase. Okay. Why is this a reverse? They get moved to a freemium plan with limited product features after that time is up. So for a limited time, they’re getting the product’s maximum value at the beginning of that trial experience.

[00:10:21] Jon MacDonald: And if they want to regain access to those full features, at that point, they’re going to need to. Okay. purchase a paid plan. 

[00:10:27] Jon MacDonald: So I like that one.

[00:10:28] Jon MacDonald: Yeah. If you think about it, this [00:10:30] works really well at products like Dropbox because once you have all your files uploaded to the Dropbox and you want to access those later, you got to start paying.

[00:10:37] Jon MacDonald: It works really well when you have that hook, that mechanism that hooks people in and they’re not going to want to give up that access later. The third is trial with payment. Now in a trial with payment, users are required to provide their payment information upfront. You’ll see on SaaSs a lot of times, or even e-commmerce subscription products that say no credit card required.

[00:10:58] Jon MacDonald: That’s because a lot of people [00:11:00] have grown tired of trial with payment, meaning I’m going to give you my credit card. You’re going to give me 30 days or whatever limited period of time, free access. And that trial is free until specified date until agreed upon date, at which point you’re going to charge me a recurring subscription for that full suite of products.

[00:11:19] Jon MacDonald: So you’re basically. I’m giving you the authorization to charge me in the future unless I cancel beforehand. Now the number one problem with this is that brands make [00:11:30] a ton of money on this by people who forget to unsubscribe, right? We’ve talked about this before. I’m guilty 

[00:11:36] Ryan Garrow: of not unsubscribing and then being mad at myself.

[00:11:39] Jon MacDonald: And this is such a epidemic that there’s TV commercials for services that do nothing but look through all your transactions and alert you to what you have for recurring charges and then let you push a button to cancel that service. So it’s really interesting that this has become so frowned upon and it’s become such a [00:12:00] problem that people are willing to spend hundreds of millions of dollars to advertise.

[00:12:04] Jon MacDonald: To get you to use their product just to solve this problem. So it obviously works. It gets people to convert, but it also creates a down, downward effect. 

[00:12:14] Ryan Garrow: Yeah. So I know which one I don’t like the best because I fall in prey to it. Is there one of these that you think works better than the other two? 

[00:12:22] Jon MacDonald: Yeah, I think it really depends on the product itself.

[00:12:26] Jon MacDonald: Okay. So like that reverse trial I mentioned. You have to have a [00:12:30] product like Dropbox where you’re providing a lot of value that creates lock in, right? If you don’t have that lock in, at that point, you’re really gonna, just, everyone’s gonna flee you when that reverse trial happens, okay? The freemium model, great, but you better have a really good product that people are like, yeah, this is free and I want I need more access.

[00:12:50] Jon MacDonald: It’s impeding my workability or my personal life, whatever it might be. 

[00:12:54] Ryan Garrow: Yeah. And you’ve probably got to have a good enough product to get me like, so I get some value out of that, [00:13:00] but then I can, Whoa, I can see how my life gets so much better with this. That’s probably not an easy one to pull off.

[00:13:08] Jon MacDonald: It’s not, unfortunately, because. First of all, there’s always the consumers who are going to try to hack their way around it, right? I know people who use Dropbox and always are downloading their files and only uploading what they have to the maximum space just so they can share files with people.

[00:13:25] Jon MacDonald: So they’ll go in and they’ll upload whatever they need and then store it there and then when [00:13:30] they’re, done, they’ll download it and delete it off of Dropbox so they keep that space. It’s a pain in the butt for those users, but they don’t want to pay. So they’re willing to stick within that limited time frame, right?

[00:13:41] Jon MacDonald: There’s people who go out and just create another account and get a whole nother free trial or whatever it may be, right? So you, there’s a lot of ways that consumers will try to hack this and you need to understand what is the model that is going to provide so much value for your consumers that they won’t try to [00:14:00] hack it, that they’ll just pay because it’s easier to do that and keep all their, data together, their preferences, whatever it might be.

[00:14:06] Jon MacDonald: And they’ll also say, Hey, you know what? You’re giving me so much value that yeah, I’ll pay for more access. Like it’s worth it. 

[00:14:13] Announcer: You’re listening to Drive and Convert, a podcast focused on e-commmerce growth. Your hosts are Jon McDonald, founder of The Good, a conversion rate optimization agency that works with e-commmerce brands to help convert more of their visitors into buyers and Ryan Garrow of Logical Position, [00:14:30] a digital marketing agency offering pay per click management search engines optimization and website design services to brands of all sizes. If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you. 

[00:14:47] Ryan Garrow: Because certain things I am a hundred percent guilty of. Like new emails. Like I’ve done a lot of that personal hacking in business.

[00:14:55] Ryan Garrow: And so sorry for all the SaaS companies out there that you’ve got a lot of my [00:15:00] accounts in there, but for some of them, there was probably a price point that I would have assigned that value. And it was probably to me. Yes. Okay, fine. It is worth five bucks a month for me. And I don’t have to go through the hassle of.

[00:15:11] Ryan Garrow: Creating a new account, but maybe they wanted 30 bucks and I’m like that for me was a threshold that it’s better off for me to hack around it. 

[00:15:19] Jon MacDonald: Yeah pricing is a whole nother game, right? For sure. And there are commpanies that do nothing but focus on SaaS pricing. It’s that complicated of a challenge.

[00:15:29] Ryan Garrow: [00:15:30] Got it. Because I assume it’s sliding scales like, okay you could go to 5 to get Ryan, but then you’re actually making, two pennies per user and nobody wants to SaaSs with 0. 1 percent margin, 

[00:15:40] Jon MacDonald: right? Otherwise you might as well be in the agency business, right? Yeah. 

[00:15:44] Ryan Garrow: Come work with us.

[00:15:45] Ryan Garrow: It’s great. 

[00:15:46] Jon MacDonald: The reality on this too is. You have to understand that in SaaS, the less support, the less people or accounts you have to support, the better, because that is going to be a big portion of your margin, [00:16:00] is people talking to people about their problems, right? If you have someone who converts at 5, You could also charge 25, then you don’t want to deal with the extra four people, right?

[00:16:13] Jon MacDonald: Five times five is 25. So it’d be five users at 5 or one user at 25. If I’m thinking about it, the margin is going to look a lot better at that 25 probably not even because I’m getting 20 extra dollars a month out of that user has more to do with the fact that. that I’m not [00:16:30] servicing five people.

[00:16:31] Jon MacDonald: Now I don’t have to worry about five accounts. I have to worry about one, and that’s really where I think a lot of the margins will end up. 

[00:16:37] Ryan Garrow: Yeah, that’s, I love that. A great example of that is to help make it clear for me. But what we’re talking about really is not pricing. Cause that’s a different conversation.

[00:16:44] Ryan Garrow: We want to know how do we actually move these people from free to paid because that’s not a simple process. Because people like me make it difficult. 

[00:16:53] Jon MacDonald: Cheaters like, like us, right? Converting free trial users to paid users is really, goes back to just [00:17:00] demonstrating your product’s value, right?

[00:17:02] Jon MacDonald: This is what I was saying up front where, how is it benefiting your consumers that sign up for an account, not what the features are, right? So you can do this by strategically placing messaging throughout your site and or your app. But keep in mind that your free trial signups already know the product is good.

[00:17:20] Jon MacDonald: What I mean by that is. You got them to sign up in the first place. So there’s some hope of benefit there for them, right? Cause getting them to sign up, whether it’s a free trial or not still can be a [00:17:30] pain in the butt. It still takes some effort. Okay. No matter how one login you use, or if I can log in with my Google account, whatever it is that, yeah, that kind of makes it easier, but it’s not perfect.

[00:17:41] Jon MacDonald: No, no sign up is so your job is to convince them that the value they’re going to get from the product is worth the price. And there’s several ways to do this, right? So you can highlight benefits. Pretty simple, right? We’ve talked a lot about benefits. You offer social proof. You give benefits. Product tours, right?

[00:17:59] Jon MacDonald: What are [00:18:00] all the functionality and features you’re missing? I actually just onboarded for a tool that gave me a seven day free trial. But if I went to their weekly product onboarding webinar that they do, it was a live webinar, and if I got on there. registered and attended, they would double it to two weeks.

[00:18:18] Jon MacDonald: And they did that because they were confident that if I figured out how to use the product effectively within that two weeks, I would subscribe. And so I was really interested in [00:18:30] this and I started chatting in the chat during the webinar, like I didn’t know who else was on this webinar.

[00:18:35] Jon MacDonald: It turns out there were dozens of people on there, which was awesome. So the offer. Of extending the trial obviously works, but the information was great. But I also started asking them like, how’s this work for you? Does this convert? I’m really intrigued by this model. I haven’t seen someone do this before.

[00:18:51] Jon MacDonald: How’d you get this idea? And they were very cool and answered my questions. But at some point during the webinar, they’re like, look, Hey, Jon, we see your questions. That’s [00:19:00] awesome. Hit me up on LinkedIn. I want to chat about this. It sounds a lot about what we’re trying to do here, but that’s not what we’re doing.

[00:19:05] Jon MacDonald: We’re here to talk about the onboarding.

[00:19:10] Jon MacDonald: But I was also, this is how I nerd out and I thought it was interesting. So give those product tours maybe with some incentive and boost your users engagement, right? So they were doing both of those with that example. I don’t think you can invite this kind of thinking unless you know your customers right?

[00:19:26] Jon MacDonald: Once you know what triggers them to buy, then you can build [00:19:30] your user experience around that. that will convince them to convert. So you can’t just put banners up everywhere that says you’re in free trial. Click here to convert. You have to understand where the value is and then add that notification where the value might be missing for them.

[00:19:44] Jon MacDonald: But if they paid, they would get that, unlock that extra value. 

[00:19:47] Ryan Garrow: Got it. Okay. And so what are some of the strategies you leverage them when you’re trying to move these people through? Because you’ve. You’ve got to have, areas in that you can test and measure, I assume, because it’s Jon McDonald.

[00:19:59] Ryan Garrow: You’ve [00:20:00] done this. 

[00:20:00] Jon MacDonald: Always down to test it, right? We actually have this really great resource up on thegood. com. So if you go to thegood. com, click on insights. There’s a search box there. It’s the encyclopedia of our content from 15, almost 16 years. Search for free trial in that box. It’s right up there.

[00:20:18] Jon MacDonald: And the article and resource will come up. It’s got, I think, nine or so specific detailed strategies with examples that you can use. If you really want to dive in, we’ll cover a couple of those [00:20:30] today, but that resource article is way too long to talk about all nine of these on a podcast. So, I’ll highlight a couple of them.

[00:20:38] Jon MacDonald: But I highly recommend checking out that full list. Now you should use some, or you could use these in conjunction with each other, right? So you don’t have to just stick to one of these options. These are just ideas that there are several different ones and you can test and combine them and experiment really to find the ones that are going to produce the best results for your brand.

[00:20:58] Jon MacDonald: Okay. So I [00:21:00] talked a lot a minute ago about putting up notifications. You really need to remind your users to upgrade early and often, right? Don’t make the mistake of waiting until the end of the free trial to prompt users to upgrade. I can’t stand anything more than I go to log into an app, and I had no idea that the free trial was going to be up soon.

[00:21:21] Jon MacDonald: They didn’t send emails. They didn’t tell me in the app. I go to log in, and it’s Oh, your free trial is over. And I was ready, primed, trying to get work done [00:21:30] aside on my calendar. It was just a really frustrating experience. So don’t make that mistake, right? Prompt your users to upgrade from the beginning of their experience and remind them that they aren’t getting that full feature.

[00:21:42] Jon MacDonald: You can do CTAs. You can do this in app notifications, tooltips. pop up overlays, onboarding videos, support messages, right? So if they’re looking for support, you can, in the reply to that, you could mention the upgrade and just the general email marketing flows. So you have a lot of options for [00:22:00] where you can do this, but don’t wait till the end to do that.

[00:22:03] Jon MacDonald: That’s where you end up with problems. 

[00:22:04] Ryan Garrow: And I, and if I’m in a free trial, I get it. You’re going to try to convert me. So I’m not going to be mad that you’re messaging me like you can do it too often. I assume just like most things, but you probably also have to assume that not all of your emails are hitting my inbox or I automatically put them in clutter or something like that.

[00:22:22] Ryan Garrow: So test and measure likely those different calls to action and different areas to hit me 

[00:22:26] Jon MacDonald: for sure. And this is the next one, which is. It’s to present [00:22:30] gated features near free features, okay? So what I’m saying here is strategically place these prompts or highlight these premium features adjacent to free ones.

[00:22:40] Jon MacDonald: So you create this opportunity for those free trial users to envision how the paid ones We’ll enhance their experience, right? So this also has serves the benefit of consistently reminding what they’re missing. It sparks that curiosity and it demonstrates the tangible benefits of upgrading. So in the same vein that you were just talking about, I’m not going to [00:23:00] be upset that you’re reminding me I’m on the free level.

[00:23:03] Jon MacDonald: I’m also not going to be upset that you’re reminding me that there’s potentially a better world over here. If I pay, I can get access to, I know I’m not paying. Thank you. I know that I’m on the free trial, so it’s okay to remind them of what they need to do there. The next one is to offer great onboarding experience.

[00:23:20] Jon MacDonald: I gave that example a minute ago, but the onboarding process is really, it’s that first impression that they’re going to have of your product or service. And [00:23:30] a positive experience here is significantly going to influence the decision to upgrade. We have for SaaS brands, we’ve worked sometimes on nothing but that onboarding experience.

[00:23:39] Jon MacDonald: And there are actually companies out there that focus exclusively on onboarding experiences. It is that important. If you. Go in and you’re going to provide this clear, concise step-by-step guide. You can use things like tool tips, interactive tutorial, walkthroughs to highlight these key features and even demonstrations [00:24:00] on how to use everything effectively.

[00:24:01] Jon MacDonald: There is a tool out there, a sales tool, it’s called Clay, C L A Y. That’s a sales automation tool. That’s really taken off right now. They are the masters at this. They have done nothing but. On LinkedIn, they have people who are just creating one to two minute videos of how to use specific functionality that is really interesting.

[00:24:22] Jon MacDonald: And you start getting, planting that seed of, Oh, wow, you mean I can create this flow to do this specific task? [00:24:30] Specific action. That’s really cool. I bet I could combine that with these other ideas I’m now having or man, I saw this other video last week that can combine with what I’ve seen right now. So that type of onboarding and awareness can go a really long way to converting people.

[00:24:46] Jon MacDonald: This last one is to use paywalls to demonstrate these paid features. Now, we all hate paywalls. I get it. Everybody hates a paywall. Nobody wants to be hit with a paywall. It’s called a wall for a reason. Now, the value that it demonstrates, [00:25:00] though, is that it entices users to upgrade to unlock the full access because they were trying to do something that they wanted to do.

[00:25:07] Jon MacDonald: It’s a great time to tell them, you don’t have access for this, but you just pay and you get access. And if you design it really thoughtfully, they can drive conversions without causing a lot of frustration. Now, we did this, we’ve done at the good. We’ve overhauled paywalls for The Economist, for The Telegraph, and a few other publications.

[00:25:26] Jon MacDonald: And that’s been really great because [00:25:30] everybody hates hitting the paywalls. And they try to go use other browsers, incognito mode, whatever, just to continue their experience. So how can you make it really easy for them and what does that look like? Now, each paywall should clearly articulate the benefits of upgrading to a paid version.

[00:25:48] Jon MacDonald: Okay? We really want to persuade people through that messaging, highlight the key value propositions and make sure they know what they’re going to get. Now, one of the coolest paywalls I’ve ever seen that worked extremely well [00:26:00] was I hit the paywall and then it said, you know what? We will give you access, if you just give us your email address, we’ll continue to give you access to two additional articles a day.

[00:26:12] Jon MacDonald: So I got the three free that everybody gets, but if I would get up to five, if I just gave them my email address now. That felt like a great exchange of value because they now know who I am. And what that meant was every once in a while I was getting a reminder that was tailored for me, [00:26:30] right? Because it had, they knew they were able to track what I read, what I liked, and they were able to then, Taylor, the messaging, Hey, you would like more of this type of content or, Hey, this article is coming out, or did you miss this article, et cetera, to try to show me how much value, but personalize that, right?

[00:26:48] Jon MacDonald: So there are a lot of ways to handle this. And. Those were just four pretty simple paywall or excuse me, conversion strategies that were the paywall, the great onboarding experience [00:27:00] present gated features next to the free ones. And then just remind people early and often there’s five more, at least up on the good.

[00:27:07] Jon MacDonald: com if you wanted to get more of those. 

[00:27:09] Ryan Garrow: Dang, SaaS can get complicated. And trying to get people to part with their money. E-comm seems simpler many times. 

[00:27:16] Jon MacDonald: I was going to say we all thought e-comm was difficult, but the SaaS world is, can go really deep. And so it’s part of why I love it. I 

[00:27:24] Ryan Garrow: imagine it’s likely difficult to move your Strategy around [00:27:30] from, free trial to, doing the reverse trial to doing the trial with payment.

[00:27:35] Ryan Garrow: Like it doesn’t feel like that’s going to be an easy thing to move around. So you probably have to be very intentional and test small early on. Before you go 

[00:27:44] Jon MacDonald: big, once you have the wins behind a solution, it can be hard to change that because all your marketing is going to be done on it. You’re the way you’ve built your product marketing and product management teams are all going to be geared up for those specific methods.

[00:27:58] Jon MacDonald: Without question, yeah, you [00:28:00] really want to make sure you have this settled in, and then you can tweak it from there, but you probably don’t want to change the entire methodology that often. 

[00:28:08] Ryan Garrow: Jon, I appreciate the education today. Now I’ve got to go re listen to this a few times, probably try to figure out how I can apply this to some of these things I’m thinking about in Ecom.

[00:28:18] Jon MacDonald: Yeah maybe that’d make a great episode sometime we can how to convert free. Free to pay trial and how that works for e-Comm as well. 

[00:28:25] Ryan Garrow: Yeah, I’m definitely gonna come up with some stuff to test and measure. For sure. Love it. So [00:28:30] thanks for the time. 

[00:28:30] Jon MacDonald: Alright, thank you Ryan.

[00:28:38] Announcer: Thanks for listening to Drive and Convert with Jon McDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at drive and convert com.

The post Drive and Convert (Ep. 116): How to Convert Free Trial Users to Paying Customers appeared first on The Good.

All else being equal, once startups begin experimentation, they see strong gains within the first few years and continued growth in years to come.

“A/B testing significantly improves startup performance and […] this performance effect compounds with time.” — Koning, Hasan, Chatterji, Experimentation and Startup Performance: Evidence from A/B testing

Given these blockbuster outcomes for experiment-led companies, it’s obvious that experimentation correlates with success. But does having an experimentation team guarantee better overall performance?

Case studies make the connection between experimentation and KPI growth seem inevitable. So, it’s logical to expect that once your experimentation engine is firing on all cylinders, you should see a noticeable impact on the data. But is it practical? If I run experiments, will my conversion rates go up?

It depends.

After running thousands of experiments, we’ve learned that what happens after a release isn’t a simple one-to-one outcome that mirrors the success of your experiments. But the story of why is not so simple.

In this article, we explore:

• Why experiment results don’t always net out one-to-one
• Why we still believe that experimentation is a powerful tool to add to your toolkit

Why don’t we always see one-to-one results from our experiments?

If you’ve ever researched an experimentation partner, you’ve probably come across one that guarantees conversion rate increases. It’s an enticing prospect that experimentation = an automatic increase in KPIs. Industry insiders like Shiva Manjunath are generally against this “snake oil” tactic, and at The Good, we simply say anyone who guarantees they can increase your conversion rate is either lucky or lying.

There are plenty of reasons experiment results don’t map one-to-one with the real-world outcomes you expect. So, let’s explore three core issues that prevent you from seeing those charts go up and to the right:

1. Post-launch variables
2. Experiment segmentation
3. The effect of false positives

Problem 1: Post-launch variables make attribution less than clear.

Metrics are influenced by much more than a website or app experience. Direct and indirect influences impact metrics like conversion rate, revenue, and customer satisfaction.

In fact, we’ve identified over 55 variables that contribute to swings in KPIs. Factors like traffic quality, seasonality, competitor promotions, and even the economy play a huge role in whether or not website visitors will convert—now or in the future.

As we learned during the COVID-19 pandemic, even the largest experimentation wins may not eclipse outsized influences that dampen conversion rates. (True story: we once saw a single social media intern drive so much new traffic that conversion rates fell by a whole percentage point. Great for the intern’s portfolio, bad for conversion rates.)

The opposite is also true. When outside factors are working in tandem, the results can be outstanding. We worked with Alisha Runckel during her tenure at Laird Superfood, running hundreds of experiments together, contributing to their industry-high conversion rates.

But experimentation wasn’t solely responsible for her success. Alisha and her team also made good offline decisions. Their holistic approach included direct mail, bundling incentives, and even a packaging overhaul informed by sentiment testing.

“There are no silver bullets. Ecommerce success is an accumulation of good decisions made over time.” – Alisha Runckel, Laird Superfood, Humm, Hannah Andersson

If done correctly, A/B tests are a trustworthy way to estimate the effect of a treatment despite shifting external influences. But once the test period is over, you no longer have a baseline or “counterfactual” scenario to compare to.

Even if you’re capable of running precise counterfactual scenarios, there’s no easy way to understand what performance would have looked like if you hadn’t implemented the changes. As a result, once a test period is over, we’re generally ignorant of whether we’ve improved a metric that was already in decline, which makes post-launch attribution fuzzy at best.

Problem 2: Test results are not summative

5 + 5 = 10, right? Not in experimentation.

While there are many reasons that experiment results are not summative, let’s focus on one of them today—segmentation.

Many experiments only impact a segment of users, and in those cases, the observed improvement is diluted by its proportion of the larger population. Therefore, a win with a segment, or subset, of users does not predict the same gains for the whole.

Let’s run a scenario to demonstrate:

• We experiment with a punchy new landing page and checkout flow on mobile traffic only, which is 50% of our total traffic.
• The experiment shows an increase in revenue among that audience of 5%.

When we implement the changes in production, we shouldn’t expect desktop traffic to perform in an identical manner. The reasons could be many. Maybe the change isn’t as conventional for desktop devices. Or maybe the experiment hypothesis only had to do with solving for mobile users’ lack of patience and need for speed.

Whatever the reason, practitioners often run experiments that are only meant to impact a subset of their audience, and the rest of their visitors won’t experience the same benefit. That’s true for splits by device type, landing page, and similar segments, and it’s why we generally don’t extrapolate the results of a segment and apply them to the whole.

A 5% gain with one audience and a 5% gain with another does not equal a 10% lift overall. Test results are not summative.

Problem 3: False positives

The final reason (at least for today) that your overall KPIs might not match the result of your experiment is the occurrence of false positives.

False positives are what we call it when our experiment data indicates that our hypothesis is true when it actually is not.

“[False positives] appear to generate an uplift but will not actually generate any increase in revenue.” — Goodson, Most Winning A/B Tests are Illusory

False positives may sound like an atrocious error on the part of the experimenter, but they are actually par for the course. Even rigorous and experienced experimentation teams expect about a 26% false positive rate, meaning about one in four “winning” experiments is observed as the result of chance and not a true winner.

To account for false positives, some practitioners even go so far as to re-test all winning experiments that fall outside of a certain threshold, then split the difference to estimate real-world effects (more on that later).

In my experience, most practitioners aren’t so persnickety about false positives. Their approach is to accept that some “wins” are truer than others and, as a result, anticipate a slightly lower return when comparing test results to real-world outcomes. Still, those blessed with the traffic and time might consider the practice of re-running tests for improved confidence.

Does the pervasiveness of false positives mean experimentation doesn’t work? Of course not. It just means that we should approach “wins” with an informed skepticism and not expect a one-to-one relationship between the results observed during a test period and real-world performance.

Experimentation is an incredible tool, but it’s not a silver bullet

If the caveats listed above deteriorate your confidence in experimentation, let me stop you right there.

It’s tempting to look at fuzzy post-launch attribution and false positive rates and say, “Is experimentation really worth it?” We believe it is. And people much smarter than myself swear by a “test everything” approach because there is simply no better or more rigorous way to quantify the impact of changes on your bottom line.

Problems do arise when we tout experimentation as an omnipotent growth lever—a magic bullet to success. But if disappointment is the gap between expectation and reality, harnessing the power of experimentation is simply an expectation-setting exercise.

Similar to OpenDoor’s Brian Tolkin, rather than an all-powerful growth lever, we view experimentation as a confidence-generating mechanism.

“Experimentation is all about increasing your conviction in the problem or the solution.” — Brian Tolkin, Lenny’s Podcast

Experimentation can increase your confidence in your decision-making, help you measure the discreet impact of good design, and settle internal debates about which direction to head. What experimentation won’t do is compensate for all the external forces hampering your business.

If you’re looking for confidence and precision, experimentation is an incredible tool to add to your toolkit. If you’re looking for a silver bullet, we’re still looking, too.

Assure the best possible experimentation outcomes with these tactics

It might be discouraging to hear that the hailed “silver bullet” of experimentation isn’t going to solve all of your problems. But, hopefully, you’re excited to know it is still proven to help your digital property perform at its best.

If you want to push your organization towards digital excellence and get the best outcomes from experimentation efforts, a well-run program is key. Take a measured approach to incorporating it into your growth practice and consider a few tips from veteran practitioners to make sure you are maximizing the effectiveness of experimentation.

Give your A/B tests ample time + traffic—without stopping short

It’s tempting to periodically check the progress of a test to see how things are trending, but there’s a name for this kind of behavior: peeking.

Maggie Paveza of The Good defines peeking as the act of “looking at your A/B test results with the intent to take action before the test is complete.” As Evan Miller describes in his article, How Not to Run an A/B Test, “The more you peek, the more your significance levels will be off.”

Avoid peeking by calculating test traffic requirements during the planning process and not stopping tests earlier than planned.

• Use predetermined calculations to set the acceptance criteria, test duration, and minimum traffic levels
• Analyze a test’s results only after you’ve reached predefined thresholds
• Don’t stop tests earlier than planned

Following these simple steps will increase the trustworthiness of your results and reduce your rate of false positives.

Re-run some winning tests to verify your results

If you and your team decide that precision is more important than time, you may opt to re-run winning tests that have a p value above a certain threshold, say .01-.05, to gain additional assurance that the effects measured were not the result of chance.

Experimentation veterans like Ron Kohavi recommend repeating some winning tests a second time “to check that the effect is real.”

“When you replicate, you can combine the two experiments, and get a combined p value using something called Fisher’s method or Stouffer’s method, and that gives you the joint probability. — Kohavi, The Ultimate Guide to A/B Testing, Lenny’s Podcast

By running the test a second time and analyzing results across the two experiments, the newly calculated effect likely represents the truer difference between the treatment and the control. The result is that you’re less likely to implement a “winner” that was simply observed due to chance.

Get comfortable diagnosing metric decline

While we can’t define every factor impacting conversion rates, there are some factors that are easier to spot in the data than others. Factors like seasonality, fluctuating traffic from various segments, and even traffic bots are fairly easy to track down, but you have to know how to spot them.

Luckily, Elena Verna, Head of Growth at Dropbox, created a decision tree for doing just that. Elena’s if/then flowchart helps growth specialists “quickly diagnose troubling conversion rate trends within 48 hours,” according to Reforge.

Whether you’re looking to evaluate the impact of your experiments or track down wayward KPI signals, getting comfortable with defining the source of KPI changes is a valuable skill that will help you build trust and authority within your organization and help you understand those outside factors that might dampen the impact of your experimentation program.

Trust the process and use experimentation to its full potential

One thing has been proven time and time again: experimentation done right is associated with increased overall performance across a number of factors.

While experimentation can’t combat outsized economic and environmental factors, it can be a catalyst for better decision-making and help assure your digital property is performing at its best—despite what’s going on outside.

By setting proper expectations, calculating test parameters before launching, mitigating false positives, and getting comfortable with attributing metric change to specific fluctuations, you can rest assured that your test data can be trusted and you’re performing at your best.

The post I’m Running Experiments. Why Hasn’t My Conversion Rate Gone Up? appeared first on The Good.

About This Episode:

This week on Drive & Convert, Jon and Ryan discuss the July 2024 Amazon Prime Day event and its effect on the ecommerce landscape. 

Check out the full episode to learn:

1. Pricing tactics used by brands leading up to, during, and after the event.
2. Consumers’ perceptions of deals and discounts.
3. How the event may impact the upcoming holiday shopping season.

If you have questions, ideas, or feedback to share, connect with us on LinkedIn. We’re Jon Macdonald and Ryan Garrow.

• Apple Podcasts
• Google Podcasts
• Spotify
• Castbox
• Castro
• Overcast
• Pocket Casts
• Stitcher
• Subscribe via RSS

Episode Transcript:

[00:00:00] You’re listening to Drive and Convert, a podcast about helping online brands to build a better e commerce growth engine with Jon MacDonald and Ryan Garrow.

[00:00:15] Jon: Ryan, I am pretty sure both of us are sporting a lighter bank account balance this week because last week was, as we all know, Amazon Prime Day. Your notes tell me that let me know how small of a part my family [00:00:30] played in the grand scheme of Prime Day spending, but I had proof. I bought some AirPods max that were.

[00:00:35] Jon: Super cheap. So at least comparatively, I guess for headphones are still expensive, but when your wife works close enough, you could high five her half the week. You need something to cancel out the noise. So, 

[00:00:48] Ryan: yes, you’ll have to let me know what you think of those. Cause I’ve, I’ve been debating for a while, the AirPods max.

[00:00:53] Ryan: The Bose or the, I think a Sony. 

[00:00:56] Jon: Yeah. The Sonos has new ones too. So that’s right. 

[00:00:59] Ryan: Sonos came out with new ones. 

[00:01:00] Jon: I will say I did some research and for the price, they’re the same as most of the other ones. Now I’m an Apple ecosystem person. So it made sense for me. If I wasn’t in the Apple ecosystem, I may not care.

[00:01:11] Jon: But they have been amazing so far and they drowned out zoom talking. Let’s call it that. So good to go. But I am assuming the world spent more this year than last year on Amazon prime day. Should we call it days? I know they call it prime day, but I know, I don’t know why it hasn’t gotten to the 

[00:01:27] Ryan: plural yet.

[00:01:28] Ryan: Like, in fact, 

[00:01:29] Jon: it’s the following week. And I saw ads this morning for people like actually for AirPods, I got kind of upset about it, but they had AirPods for like, you know, 25 less than what I paid on Prime Day, but only the pink color, which made me think probably it was safe. It wasn’t going to buy enough 

[00:01:46] Ryan: pink ones.

[00:01:47] Jon: There you go. 

[00:01:48] Ryan: Prime days, day, days. It is all kind of interesting, especially when the reporting we can get out of Amazon is Amazon telling us. Like, okay, Amazon, I mean, it’s, we’ll probably never hear about a prime day that is down year over year just because Amazon gets to tell us whatever they want, because it doesn’t even matter in the grand scheme of their things.

[00:02:09] Jon: But 

[00:02:10] Ryan: it was a big day. They said it was up something like 200 million things were purchased on Amazon, which in two days seems astronomical. 

[00:02:21] Jon: That’s what I, 

[00:02:21] Ryan: yeah, that’s what my, my mind first went to like the logistics behind that seems crazy, especially because my wife and I each have an app on our phone.

[00:02:30] Ryan: We each buy things without telling the other and it’s not even the shared like, and so it all gets delivered individually over like, like five deliveries a day. It’s like, 

[00:02:37] Jon: yeah, 

[00:02:37] Ryan: wow. I mean, I feel sorry for logistics people at Amazon, specifically for my house. Like, I’m sorry you guys couldn’t just deliver one box, but so it goes.

[00:02:45] Jon: I tell people all the time that Amazon is not an e commerce site. They are a logistics company that happens to fulfill your orders. And the reality is they are now a delivery company. They are a back office like [00:03:00] systems company. They’re doing great things in robotics. For warehouses, not to mention that they run most of the internet or a good portion of it.

[00:03:08] Jon: Let’s just say half of their servers. Yes, exactly. So, you know, Amazon, yeah, they, they can fulfill your orders, but they’re not, they’re not an income company. They are able to do that at home. Margin and at scale, and that’s where the benefit is. 

[00:03:22] Ryan: Yeah. And so, I mean, I can’t wait till I can still get, like, see drones flying.

[00:03:26] Ryan: And I think that’s going to be cool, whether it works or not. Until one 

[00:03:29] Jon: drops on your house. Yeah, until it 

[00:03:31] Ryan: drops on my house, or it drops my package from a hundred feet. Yeah. 

[00:03:34] Jon: Yeah, let’s not talk about that. Gonna be 

[00:03:36] Ryan: issues, for sure. But the punchline is, Amazon has been handedly make it more exciting in the middle of summer for e commerce brands and sellers.

[00:03:47] Ryan: With Prime Days, because it’s not just an Amazon event anymore. People are willing and able to open up their wallet when previously this was just like, all right, people are on vacation. They’re not going to buy anything. So let’s all go on vacation as well. It’s taking away the slow months in my world.

[00:04:01] Jon: Yeah. No, no surprise there. Especially because every DTC brand now thinks that. Well, it’s prime day. I got to do something on my site as well. As I already mentioned, I found things on sale that I wanted where the deals better this year. I’ve heard a lot of people complaining that. Prices were up, meaning that a week, two weeks before Prime Day brands raised their prices and then dropped them back to the normal price for Prime Day, which is kind of shady, but I get it to a certain degree.

[00:04:30] Jon: If you have no margins already, how are you going to discount? 

[00:04:33] Ryan: Well, it also shows to a degree how dumb some of us are. We think we’re getting a deal. So we just clicked buy without actually doing more research, um, because I am in e com all day, every day. I trained myself. My wife now follows suit a little bit where you got to figure out what you’re going to buy before prime day comes around.

[00:04:49] Ryan: Like if you’re going to prime day to find what you’re going to buy, you’re probably in trouble. And so we’ll talk through it and say, okay, what do we need for back to school for birthdays coming up or things my wife and I’d like, Hey, we’d love this, but if it’s on a deal, it makes sense if it doesn’t don’t do it and things go in the cart.

[00:05:06] Ryan: Usually one to two weeks beforehand so that we can see oh did this actually go on sale or did it go from 100 to 130 to come back to 105 then it’s not a deal so be smarter about it people a lot of a lot of us and a lot of you out there listening probably weren’t well 

[00:05:24] Jon: I was not but you know that made me just think Amazon does the homework for you because when you put something in your cart and you go back to your cart later, it will tell you if the price has been adjusted.

[00:05:35] Jon: It has a little summary at the top of your cart and says, so and so went up in price, it’s now X. And that can be really helpful for me because I watch stuff all the time and I’m like, okay, I mean, my stuff always has, is in my, sitting in my cart on Amazon. You know, I’m, I’m definitely. Raising their abandoned cart rate.

[00:05:53] Jon: But I do it because of that , 

[00:05:54] Ryan: you’re hurting their conversion rates. I’m hoping that Trying to get yourself a job. 

[00:05:57] Jon: Yeah, I was gonna say, I’m hoping that just my little abandoned cart will help them to see the light and higher the good, but yes, 

[00:06:04] Ryan: yes. Well, and I do have, you know, because I’m in Amazon all the time, I do have plugins that show price changes over time.

[00:06:09] Ryan: Mm-Hmm. . So there’s some tools you can get that maybe most of you out there listening don’t have, which is fine, but it, it does seem that. Amazon, I felt anyway, and the stuff we were looking at, the deals were not as good. Like, the prices, obviously, up year over year. I needed to buy a new speaker for playing golf, because I like music when I’m golfing, because I’m one of those guys on the internet, or out on the golf course.

[00:06:32] Ryan: And we did know the price of them, so I found a hundred dollar one that was discounted to 75 and that was actually a good deal. So that got my tech purchase But we did see a lot of things that actually went up in price And in fact, one of the more surprising things that came out of the data I’ve been looking at is there’s this aero garden So if you’re a fan of growing your own herbs, if you bought the aero garden during prime days you You likely paid almost 40 more than you would have paid two weeks before.

[00:07:02] Ryan: And it’s not like 40 on a 500 product. This was, it went from on average on Amazon, 82 to 120. 

[00:07:10] Jon: So went up a third. It 

[00:07:12] Ryan: went, yeah, but a 50 percent increase on what its price was before and the sales rank went up, their sales volume. Almost quintupled. So, the question is, is 

[00:07:21] Jon: AeroGarden ever going to drop their price now?

[00:07:24] Jon: I don’t see why they would. 

[00:07:25] Ryan: I don’t either. Like, and so, I don’t know if you were, I mean, I just don’t know how that worked. Like, there was, I don’t know if you had a bunch of influencers that were pumping it, so you had external traffic that said, Hey. If people haven’t shopped this before, we’re hitting a bunch of new influencer audiences driving the traffic to Amazon.

[00:07:40] Ryan: They’re just going to buy it, or if you deflated the price on Amazon to do something to compete with a sale on your site. I don’t know, because Amazon doesn’t allow you to price something higher on Amazon than your other channels. If you were running some deals through Walmart or Target the week before, you had to match that.

[00:07:57] Ryan: That deal’s done. Everything’s back up to retail price. That can be some of it as well. But I thought that that was surprising considering that’s a decently well known brand. I think they have 21, 000 reviews on Amazon, which means they’ve sold a good amount. And volume quintupled with a 50 percent price jump.

[00:08:13] Ryan: That is insane to me. 

[00:08:14] Jon: Yeah, definitely. We would always be running that sale. That’s for sure. 

[00:08:18] Ryan: Oh yeah. And so overall though, what was tracked that we have access to, it does appear that sales were more aggressive this year. So that means the retailers and sellers were pricing things at a higher discount this year than they did last year.

[00:08:33] Ryan: It was led by televisions this year. Last year, it wasn’t the biggest discount was on televisions and it went from 5 percent off last year. During prime to 16 percent this year, as far as the biggest increase in discounts, I’ll say that. And so that tells me that I didn’t 

[00:08:49] Jon: need a television. 

[00:08:50] Ryan: Yeah. It tells me that evidently there’s been enough of a slowdown in television that they’re getting a little scared.

[00:08:56] Ryan: The main thing during 

[00:08:57] Jon: COVID everyone bought a television because they were sitting around. They’re like, I got to watch this in 4k if I’m going to watch this much TV. So yeah, that was just a few years ago. Most people don’t need a new TV by now. So that definitely makes sense. 

[00:09:10] Ryan: It does. And I think there’s not been a massive enough update in television technology to dictate that I need to have this.

[00:09:17] Ryan: Like for us, we got frame TVs when we moved into our new house. Like there’s new frame TVs that have better glare protection, but then like, is it that big of a deal? Like when it’s sunny out, I’m usually working. So there’s not a lot of need for me to watch TV without glare, but electronics overall, like you saw with the, with the Apple AirPods, AirPods Max.

[00:09:38] Ryan: That’s where the biggest discounts across the board were. In fact, it was up to 23 percent off this year across the board on electronics. Up from 14 percent last year. So, as a percentage of discount, much higher. So, people are looking to And again, those are probably higher margin products many of the time as well.

[00:09:54] Ryan: So, you can offer the more aggressive discounts. What I find interesting in these discounts though, You can’t just get into Prime Day and get more aggressive as you see the competition getting aggressive. So most of these deals are two months or more before the event decided. So right now, Amazon is now telling everybody about the fall Prime Days, which is usually in October.

[00:10:17] Ryan: You have to have your deal locked in by August 6th. Oh. So. Okay. We just finished one. Now you’ve got to set your deal for the next month. And you, I mean, that’s a decent ways in the future. You’ve got to set your discount now. 

[00:10:28] Jon: So, 

[00:10:29] Ryan: tell me. Do 

[00:10:29] Jon: you think, maybe this is an obvious question, but do you think they do that to prevent sellers from gaming the system?

[00:10:35] Ryan: I just think it’s such a high volume time and such a strain on servers with shopping, you can’t keep pushing new deals through in real time in the system and have it work. I think it’s too many opportunities for things to break and register prime deals with what’s on sale now. How many units are there going to be like, it just so many moving pieces that if you could get in there and be like, Oh, I see, you know, Bob’s herb garden just got a 40 percent off discount.

[00:11:00] Ryan: I got to jump it to 45%. Like I, I would imagine. Amazon gets there at some point. It’s just, they’re just not quite there as far as handling that. I mean, and actually Amazon’s campaign manager went down on prime day. So the first day, so there’s struggles there. Well, there’s proof. Yeah. So this tells me that even two months, three months ago, and you had to lock in your deal, retailers and sellers were, were feeling some pain and knew they needed to discount things more to get to the top of the heap to be able to sell more stuff.

[00:11:31] Ryan: Yeah. Or an AeroGardens pie, you just, who cares? I’m going to raise the price and I’m going to sell a ton more just because of their name and branding. So lots going on, lots off Amazon, actually. In fact, there was over 14 billion sold off Amazon. I was going to ask 

[00:11:45] Jon: what sellers benefited outside of Amazon this year?

[00:11:48] Jon: Because. You already mentioned there’s, there’s gotta be a spillover effect. 

You’re listening to drive and convert a podcast focused on e commerce growth. Your hosts are Jon MacDonald, founder of the good, a conversion rate optimization agency that works with e commerce brands to help convert more of their visitors into buyers and Ryan Garrow of logical position, a digital marketing agency offering pay per click management, search engine optimization, and website design services to brands of all sizes.

If you find this podcast. Please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you. 

[00:12:26] Ryan: Yeah, people just get in the mood to buy. And we saw in the week before you had Walmart and Target both doing their version of Prime Day. So trying to trump Amazon and take all of their money before, it doesn’t really work because not enough people search those or sell them.

[00:12:42] Ryan: But I think the people that were pulled and things I saw, 35 percent of them shopped the Walmart days beforehand and 34 percent shopped the Target circle thing before. And I can only speak to my household. We didn’t care about either one of those. I actually looked at, because I’m curious and always searching him.

[00:12:59] Ryan: I looked at the target stuff ’cause I was looking for headphones. My wife has the Bose ones. Mm-Hmm. of yours. And so I’ve tested those just to see. ’cause they came out and said, oh, the, I think it was the, were they looking for the AirPod? Oh yeah, it was AirPod Max. They had this great deal and they sent it to me as an exclusive before because I, we have the circle card or whatever their target card is and the discounted price.

[00:13:21] Ryan: What they did, the inflate the price, then discount price thing. And it was the same price everywhere. Like I could have got it from Apple directly for the same price as Target, and they were sending it to me like I was I think there were issues there with how they executed their sale to compete with Amazon.

[00:13:36] Jon: So, okay. So TVs, electronics, but were those the two biggest verticals people were buying or were there others? 

[00:13:43] Ryan: I mean, people are just spending money. I think those were probably the biggest. Spending verticals. I don’t know if I saw the overall spends but beauty Crazy amounts year over year. In fact, it was by Salesforce who’s obviously not Amazon But they’re just tracking all their sellers and combining that with some adobe data beauty was up dramatically over a year It looks like makeup was up 30 year over year as far as makeup sales and deals So that surprised me a lot and it also tells me because there was this big pull out pullback in beauty specifically makeup You During covid.

[00:14:17] Ryan: And so I think we’re getting back to probably a more normal time and people going out and seeing people in person. So makeup is coming back and it It also feels to me that there’s a feeling this is not real data, but it feels like there’s a lot of beauty brands that have come out just in the last couple of years.

[00:14:33] Jon: Yeah. 

[00:14:33] Ryan: So I don’t know if 

[00:14:34] Jon: There’s been a lot more influencer makeup brands that you hear about, right? From social, et cetera. Yeah. I think the Tik 

[00:14:41] Ryan: Tok ads have done quite a bit for beauty brands. I mean, getting people to discover new, I think the algorithm on Meta is better now for helping people discover new brands.

[00:14:53] Ryan: Cause I’m probably not super weird when it comes to how I consume media through Meta, but I, I am not there to post about myself or my family or like anything like that. Or really to connect with people, like I’ve got other avenues that I connect with people. And so meta and Instagram have become more of an entertainment for me.

[00:15:11] Ryan: And so scrolling in most of them is entertainment that I don’t follow. It’s just, Hey, they knew I liked this. So they put something in front of me and I’ll, you know, maybe there’s 15 minutes before bed that I’ll go laugh at comedians or just find something dumb to relax my brain. And that process of discovery means that I’m not Averse to seeing content that I’m not following and it, and their, their algorithm is pretty good at figuring out what I like and keeping that flowing through the feed as I scroll.

[00:15:38] Ryan: So I think that a beauty brands in particular have benefited from that in getting new products. And well, I’ll say that the discoverability of your video, even though if you’re not promoting it is. can be high because it’s being pushed into feeds that you’re not even trying to get into because TikTok, Instagram, Facebook want people to stay in the platform so they’ll put it in front of them if it’s an entertaining video.

[00:15:58] Jon: So 

[00:15:59] Ryan: not surprising to me that category. 

[00:16:01] Jon: Not surprising, but were there any surprises besides that AeroGarden that you mentioned? 

[00:16:06] Ryan: It’s always surprising to me the amount of volume increase. I know we’re heading into difficult economic times if we’re not already there. We’ve been in an inflation and the jobs reports are not great.

[00:16:16] Ryan: So I can see the data saying. Where is all this money coming from that’s being spent like it’s not just the 1 percent spending a lot more on stuff It’s everybody is spending money during this random week in July. Yeah, and so that just constantly surprised me 200 million things were bought like that is just a big number I wouldn’t think that should be done in this economy or where we’re at now, you know But speaking on the other side of the arrow garden Fitbit did a heavy discount.

[00:16:43] Ryan: In fact, what was the Fitbit discount on there? Fitbit went from before So Amazon or before prime days, 151 average price point on a few days or a week leading up to prime days. And then they went just under a hundred. So that’s a key price point. They went to 99, 95, which is a good price point for technology.

[00:17:02] Ryan: And they moved from pre prime day rate about a hundred in the sporting goods category to number one on the day their deal was going and their volume of units sold went from, um, I think it was averaging somewhere, let’s say. Between 600, 700 units a day to almost 6, 000 units sold in one day on Amazon at the discounted price point.

[00:17:25] Ryan: And then there’s this halo effect, which I don’t think a lot of [00:17:30] sellers think about when they’re setting a deal. But on Amazon, if you’re able to get number one on all sporting goods on Amazon, that has a cascading effect on your Amazon’s choice across all these categories and searches that are being done.

[00:17:44] Ryan: And it’s like the SEO. Um, moving to number one is massive because it’s, it’s likely, and we don’t do anything for Fitbit, so I’m not, I don’t have a horse in this game, but it’s likely they didn’t go into their Fitbit listing and do a bunch of quote unquote keyword stuffing and [00:18:00] SEO work leading up to this, 

[00:18:01] Jon: right?

[00:18:01] Ryan: Amazon, it was dependent on sales velocity. How much money are you making Amazon? The more money you make Amazon, the higher you rank. It’s not complicated. And the days after the sale, their volume stayed up extremely high. So there’s something to be said about juicing your volume with a deal to rank higher on the important categories to increase how many, how much people are buying from you.

[00:18:25] Ryan: And so that’s an example. Opposite of AeroGarden where they were saying, Hey, we’re going to juice this with some sales and then price is going to go back up. But our rank is high enough and most people are not paying attention to historical prices. So they’re going to think, Oh, people are paying 150 bucks for this.

[00:18:41] Ryan: So I’m going to go buy it. Cause it’s worth it. 

[00:18:43] Jon: Must be good. So yeah. Okay. To me, this all sounds like big numbers, but what does this mean for the rest of the year? You mentioned on one hand, large sales increases, uh, not a lot of discounts, you know, true discounts, I’ll say lots of money being spent, but also economic [00:19:00] times, inflation, et cetera, which I would tend to agree with based on our client base.

[00:19:04] Jon: We’re seeing quite a bit right now. What do you think this means for the rest of the year? 

[00:19:08] Ryan: I mean, I, I somewhat probably, I think I sound like a broken record sometimes I’m talking about, Hey, the holiday is going to start earlier, blah, blah, blah. Like, I think the normal things you’ve heard about holiday prep is going to be valid this year, but seeing the rate of increase in discounts tells me there’s a lot of brands getting aggressive, trying to get market share or just get sales to stay afloat.

[00:19:33] Ryan: So if you already had a bunch of inventory in Amazon. You’re paying warehousing fees, holding costs on that inventory, like until you sell it, you can’t go buy more stuff or buy the next model or upgrade that stuff. So if you’re sitting on old inventory, you’re just going to try to dump it and get out of it so you can buy new stuff again, or you need cash to pay employees.

[00:19:52] Ryan: So I think we’re going to see some pretty heavy discounts locked in for the Prime Day and then also for the Turkey Five. And so I would, as a seller, not want to be holding inventory, uh, heading into December. Like if you’ve got stuff December 10th this year you’re trying to sell, I mean, you’d better have a physical storefront to sell those in because you’re not going to get a lot of people online, I don’t think.

[00:20:15] Ryan: Interesting. So prepare to sell. And I would, my advice to advertisers for I think 10 years in a row has been your discount during holiday should make you a little bit uncomfortable. I think there will be a lot of people that undercut you. And so you’ve got to have strategies for how am I going to get traffic if I’m not the lowest price on google Which in the past maybe your aggressive discount was able to get you that you know and paying attention to traffic from Off Amazon to Amazon if Amazon is your main sales channel You need to be paying attention to sales rank and how you’re getting sales without using just Amazon ads because it It it is getting a lot more expensive On Amazon, as you’d expect that ROAS decreased, ACOST increased.

[00:20:58] Jon: It’s getting everywhere. It’s getting, getting tight. One term you said that stuck out to me because I’ve been in e com for a decade plus, I’ve never heard the term Turkey Five, but it makes sense. 

[00:21:08] Ryan: Yeah. What are the Turkey Five? 

[00:21:10] Jon: It’s Thanksgiving, what was traditionally Black Friday. Okay. So sales 

[00:21:15] Ryan: no longer are exclusively on Black Friday now.

[00:21:18] Ryan: So Thanksgiving’s got sales, so you got to include that day. And then you’ll have Black Friday sales extended over the weekend every time. And then Cyber Monday kicks off and that’s the turkey five, but then you’ll have an overlap on Cyber Week because almost every brand has a surprise. The demand dictates that we keep our sale on all week.

[00:21:37] Ryan: You’ve got Cyber Monday pricing like it’s not a surprise anymore. Just like, right. I know you’re going to be on sale. So it’s just targeting and I think you’re going to probably need to figure out how to get more creative and this is, you know, it goes back to a lot of things you’ve talked about a lot of times, like you can always, you can always increase your conversion rate by dropping your price, right?

[00:21:56] Ryan: Like it’s not, that’s not a complicated thing to do and it doesn’t take Jon’s brain or Ryan’s brain to win when you’re just going to race to the bottom, have fun. I think the brands that are going to survive are figuring out how do you do what AeroGarden did. Increase your price 40 percent and sell five times the amount of units.

[00:22:14] Ryan: That’s the, that’s the power of a good brand. You know, I don’t own that cause I have nine acres, so I don’t need to grow my herbs inside cause I got them outside. But a vast majority of the planet needs that if they’re going to grow their own. So focus on the brand, make sure your brand is strong and you have a reason to get people that, that will be willing to pay a premium for that product and your email lists, your loyalty programs, you have VIP customers, if you’ve been segmenting your data right, get them the value.

[00:22:42] Ryan: You know, you might not need to discount as heavily if they’ve already bought from you in the past and already like it. Give them first access, early access. They just, again, go listen to Jon’s examples in the previous hundred. So episodes where we were talking about how do you get people to buy your stuff without discounting?

[00:22:56] Ryan: So if you have to discount to win customers, it’s, it’s, uh, foresee difficult times ahead and lots of competition. 

[00:23:05] Jon: Agreed. Wow. This is a lot to take in. I think that Amazon prime day is. You know, they’re doing it more than once a year now and every time it spurs a lot of sales, but I never feel like I’m getting a big discount.

[00:23:17] Jon: I think you kind of confirmed that for me today. So I appreciate you saving me some money here because otherwise I would just go by because I saw a discount. So I’m going to do your trick. I learned today, which is to fill up my cart with everything I want and stick to those items and track the prices beforehand.

[00:23:34] Jon: So I’m on it. Yes. 

[00:23:35] Ryan: Don’t trust just because it says it’s 25 percent off. It is 

[00:23:39] Jon: because 

[00:23:39] Ryan: it 

[00:23:39] Jon: might 

[00:23:40] Ryan: be a 40 percent increase in price first. 

[00:23:42] Jon: Love it. All right, Ryan. Well, I appreciate it. We will chat again soon. 

[00:23:46] Ryan: Thanks, Jon. Appreciate it.

Thanks for listening to drive and convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert. com.

The post Drive and Convert (Ep. 115): Amazon Prime Day 2024 Insights appeared first on The Good.

It’s also doing a disservice to your users and your optimization efforts.

To no fault of digital product owners, the industry has put an unproductive emphasis on conversion rates. But based on over 15 years of experience optimizing, I promise that websites and apps won’t reach their full potential under the current industry expectations and implementations of conversion rate optimization.

I am here to propose a better solution: digital experience optimization. This evolved approach brings together all the diverse disciplines and tactics needed to build a better digital journey and get us re-centered on what really matters: the customer.

Let’s talk about digital experience optimization, how it compares to conversion rate optimization, and hopefully answer if it is the right solution for you.

What Is Digital Experience Optimization?

Digital experience optimization (DXO) is the process of making meaningful changes to your website or app to meet the needs of its users and business. This is achieved through data analysis, research, strategy, experimentation, and other disciplines.

DXO is a foundational approach that involves looking at the digital journey as a whole to see not just how customers engage with you, but why they make certain decisions. It analyzes behavior from the moment they enter your app or website through post-conversion and finds/executes on improvement opportunities.

DXO is bigger than tweaking colors, copy, or images on your website or app. Yes, digital experience optimization will improve the look and feel of your digital product, but it can also change how you think about and address your customers, improve the culture of experimentation on your team, and skyrocket buy-in from stakeholders by using data to inform decisions.

Digital experience optimization crafts comprehensive user-centered journeys that address customer needs at every stage of their journey.

What Is Conversion Rate Optimization?

Conversion rate optimization is defined as a process that increases the percentage of users who perform a desired action on a website or app.

The desired action or conversion is typically a sale or high intent signal, for example, purchasing a product, signing up for a trial, or filling out an inquiry form.

When “optimization” is tacked on to the end of “conversion rate,” the process becomes synonymous with A/B testing. You will often hear “conversion rate optimization program” and “testing program” used interchangeably.

Conversion Rate Optimization (CRO) vs Digital Experience Optimization (DXO)

When compared to DXO, CRO is very narrow and limiting. DXO practitioners are still excellent at A/B testing to validate or invalidate changes before implementation, but also:

• Pull back from conversions to understand and improve the whole digital journey
• Incorporate other research methods to supplement what can be learned from A/B testing
• Leverage an array of expertise and disciplines to build ongoing optimization practices

Like the traditional definition of CRO, DXO is a process aimed at iterative improvement. However, DXO creates large-scale, sustainable impact that conversion rate optimization can’t achieve due to inadvisable hyper-focus on conversion rates and A/B testing.

While writing this comparison, I’m tempted to go so far as to advocate that conversion rate optimization (as it is currently defined and understood in the industry) shouldn’t exist anymore. Let’s simply remove it from our vocabulary.

I say this as the founder of one of the industry’s first conversion rate optimization firms. In conjunction with the industry’s narrowing understanding of CRO, we have seen the reality of user needs and what drives engagement evolve. Technology, users, the industry, and the world have changed, making conversion rate optimization a practice of the past.

Don’t get me wrong; we should all be measuring the conversion rates of our digital products and putting in the work to make sure they are consistently improving. But how that happens can’t be boiled down into one research method. One metric can’t signal the health of your digital product.

So, I’d like to invite you to expand your approach to website and app improvements with digital experience optimization.

8 Digital Experience Optimization Use Cases & Benefits

DXO empowers ecommerce leaders and digital product owners to make smarter, more effective decisions that enhance user experience and drive business success.

The goal of the practice is to unlock the full potential of a website, app, or digital product through research, strategy, testing, and implementation. Let’s take a look at its more specific use cases and benefits so you can decide if it’s a good fit for you.

1. Improve the Look and Feel of Your Website

There’s a certain degree of trust instantly imparted whenever we see a well-designed website with attractive visuals. In fact, half of users say that they use a site’s design to form an opinion on the business.

DXO is useful here as it goes beyond superficial changes, incorporating user feedback and behavioral data to drive design decisions that not only look good but also perform well. This is a great way to build those hard-to-measure qualities like trustworthiness, reliability, and safety that customers crave.

2. Prioritize Your Ideas And Improvements Effectively

You probably have hundreds of ideas you’d like to try, but each change comes with a cost of workforce, time, and money. How do you choose the ones worth exploring?

DXO helps by providing frameworks to evaluate and rank these ideas based on their potential impact on user experience and business goals. It zeros you in on the ideas that are more likely to move the needle for your organization.

“We are much more targeted and focused on what we can actually do,” says Justin Albano, Digital Marketing Manager at IDX. “We’re not sitting there wondering what we should be doing or what’s going to make a difference. We know what we need to do now, and we’re getting after it.”

By focusing strictly on research, data, and clearly defined goals, DXO simplifies the decision-making process. You can stay laser-focused on those improvements that actually help over the long term and avoid distractions from less impactful initiatives.

3. Form a Deepened Understanding of Customers

DXO can give you a more profound comprehension of your customers’ behaviors, preferences, and needs. This insight is crucial for developing more effective strategies, creating personalized experiences that truly resonate with users, and improving overall customer engagement.

These insights come through web analytics, user flow analysis, customer surveys, session recordings, and other techniques.

4. Build a Valuable Knowledge Center of Consumer Insights

Similarly, but a more tangible potential benefit and use case, is that DXO builds a rich knowledge center filled with actionable insights on your potential customers. This repository becomes an invaluable asset for the organization as it helps you with informed decision-making and strategic planning across all levels.

This library can include hard data as well as direct customer feedback. This type of knowledge bank helps you improve your digital touchpoints and customer interactions, meet customer expectations, avoid negative experiences, and ultimately improve customer loyalty.

5. Create A Culture Of User-Centered Data-Driven Decision Making

It’s no secret that data-based decisions are better than best practices or “gut feelings.” A strong DXO program uses real-world data from your ideal audience to guide decision-making.

DXO fine-tunes your decision-making by using comprehensive analytics and key conventions to guide decisions from the beginning. This ensures that every change contributes positively to the user experience.

Data isn’t the end-all-be-all, but practicing DXO creates a culture where decisions are not just based on hunches or past experiences but are informed by your customers. It ensures that your work aligns with the actual needs and behaviors of the users.

6. Save Time and Resources by Validating Design Decisions

DXO enables you to validate or invalidate design decisions before implementing them at full scale. This process saves significant time and resources by preventing the rollout of features that may not meet user expectations or business goals.

Strategic focus helps companies achieve more with less, leveraging their existing assets efficiently. For organizations looking to stretch their resources to their fullest potential, DXO ensures that every effort and investment is optimized for maximum return.

7. Grow Your User Base and Increase Conversions

If your goal is to expand your user base or convert more visitors into customers, DXO provides a structured approach. By optimizing the user journey at every step, your digital presence can meet more visitors’ needs and convert more into loyal customers.

Think of it like pleasing more people earlier in your funnel so more potential customers march down the conversion path.

8. Improve Stakeholder Buy-In

If internal politics or too many opinions are hindering progress for you, DXO offers a neutral, data-driven perspective that focuses on what’s best for the user and the company.

Presenting roadmaps and strategies established by DXO can help drive changes that might otherwise be stalled by misaligned internal priorities or opinions.

How To Measure Digital Experience Optimization

Measuring the performance of your digital experience may seem like a tall task compared to just focusing on one number (conversion rate), but it’s sure to set you up for more success.

Luckily, there are tools in place to help you gauge improvement of your program that are proven indicators of digital health, for example, a 5-Factors Scorecard.

The 5-Factors Scorecard is based on a study of hundreds of digital leaders’ optimization challenges to reveal the five factors that the highest-performing companies have in common:

• Data Foundations: Goals, ownership, and good data form the backbone.
• User-Centered Approach: A comprehensive roadmap and a high-context approach.
• Resourcing: Resources support adequate capabilities and pace.
• Toolkit: A variety of tools for planning, measurement, and protocols.
• Impact & Buy-In: Tools and practices increase relevance and perceived efficacy.

Research shows that improvement in these areas leads to measurable business outcomes. Get a 5-Factors Scorecard to highlight the areas of your digital experience that need work and use it as the baseline for your digital experience optimization measurement. To track improvement, re-take the quiz and compare the new results every three months.

Remember, digital experience optimization is a comprehensive solution to complex and diverse digital challenges. Measuring its success should be similarly comprehensive.

Ready To Get Started With DXO?

The web and the way users experience stores, platforms, and media have changed. If you want to be successful, your thinking has to evolve as well. Digital experience optimization is a holistic approach to improving the user experience, and by extension, your goals and revenue.

If you’re ready to get started, check out our Digital Experience Optimization Program.

We start with a full-funnel analysis of your digital experience, using methods like heatmap analysis, session recordings, and usability testing to diagnose your digital challenges and prescribe a solution. The goal is to understand, thematically, the biggest barriers and opportunities.

When the audit is complete, we’ll build your custom Digital Experience Optimization Program including everything you need (and nothing you don’t) to complete an optimization puzzle, create an engaging experience for your users, and build a better digital product.

The post What Is Digital Experience Optimization? appeared first on The Good.