Chapter 19
Knowing Your Conversion Types
In This Chapter
Understanding different types of conversion
Learning about the Customer Conversion Chain
Knowing what lead data to collect
Classifying and segmenting conversions
Working with contact and customer data
Acustomer’s path to purchase is a meandering series of steps, crowded with distractions and disturbances. As an inbound marketer, you cannot control the purchase decision but you can influence it by paving the path with stepping stones of conversions.
Upon attracting visitors to your website, you want to engage them. This requires conveying a certain degree of trust. The deeper the engagement, the deeper your need to communicate and demonstrate trust. Conveying trust in a valuable product causes a conversion. A conversion, as you may recall, is defined as an exchange in which a visitor shares his or her personal data, such as name, address, phone number, and email address, in exchange for something of perceived value.
The first conversion for each lead sets off a chain of follow-up reactions, opportunities for the inbound marketer to engage more deeply with the prospect to encourage an action such as a sale or donation. This series of conversions is called the Customer Conversion Chain. Each link in the Customer Conversion Chain is a measurable and influential factor affecting your ability to achieve your overall goal: to create customers, repeat customers, and, eventually, brand advocates known as a Lifestylers.
You can’t measure what you don’t know. In this chapter, you’ll learn about different inbound conversion types helping you identify key points along the customer purchase path. Your inbound marketing influences each of these conversion points. By understanding the importance of each conversion link in the Customer Conversion Chain, and by communicating at each of those conversion points while measuring the results, you close the reporting loop of customer attraction, conversion, action, reattraction, and reaction.
Knowing Your Conversion Types
The Customer Conversion Chain (see Figure 19-1) consists of a series of measurable, meaningful points along a customer’s conversion path to purchase. Note that the chain may appear backward to the traditional marketer because it starts at the end point, your Customer Lifetime Value (LTV). Because inbound marketing focuses on customers and on desired business outcomes, this reversal makes sense. Asking, “How do I create a customer for life?” is the inbound way. Assigning a value to the purchases over the life of your customer relationship means you’re thinking about long-term customer relationships rather than on a single transaction. Knowing your end game provides comfort and confidence when executing your inbound marketing plan. Reverse-engineering that plan based on known conversion data provides a more statistically confident marketing model. Eventually, your business outcomes become more predictable.
Figure 19-1: The Customer Conversion Chain.
Traditional marketers measure media impressions as their primary marketing campaign metric. Although this is a factor to consider in the Customer Conversion Chain, the media-impressions metric is far removed from the ultimate action, customer-creation. Its impact on the outcome may therefore have less impact than other influencing factors.
The links in the Customer Conversion Chain form a series of inter-connected conversion points, linking a person with your product. All of these points are measurable, and allow you to wield some influence over them. Here are the links in the Customer Conversion Chain:
- Customer LTV: What is the value of your average customer over the life of your typical business relationship? Multiply the number of transactions for you average customer by the average dollar amount per transaction. This is your Customer LTV. For instance, if you’re a subscription-based company with a $100/month fee and your average person remains a customer for 36 months, your LTV is $3,600. Now that you know your Customer LTV, you can ask, “What am I willing to invest to obtain one new customer?”
- Customers: The first sale creates a new customer. When a person showing demonstrated interest in your product actually makes a purchase, they are a customer. Populate your “Customers” link in the Customer Conversion Chain with the average amount of your typical first transaction. This may vary by product and product category. Knowing this number for each of your product Purchase Funnels helps determine which products to support with inbound marketing. Allocating funds to those product campaigns that are the most profitable or the highest converting generates higher ROI.
- Demonstrated Interest: The definition of “demonstrated interest” is different for every company. Demonstrated Interest is the step closest to a Customer purchase. Demonstrated Interest may be:
- Contract sent for a business-to-business company (this may also be classified as an “opportunity” because it’s so close to a purchase)
- Onsite shopping cart population for e-commerce
- Free 30-day trial
- Requests for proposals (RFP)
- Sales presentations
- Sales Qualified Leads (SQLs): SQLs are those leads who match your buyer profile model, either in demographics, location in the purchase path, or onsite activity. SQLs are higher quality leads than MQLs, primarily because they’re closer to a purchase action. SQLs may be determined by a person in your organization, through automation, or both. The basic criteria for SQL classification is a led who has demonstrated need, intent, timeline to purchase, and an established budget.
Marketing Qualified Leads (MQLs): MQLs are leads that have passed some criteria that elevates them above being an everyday lead. Perhaps they mirrored a proven customer profile or performed multiple actions further down the purchase path. You can communicate with MQLs through automated email workflows, creating opportunities for reengagement.
This means your organization may determine MQLs via a judgment call based on a prospect’s phone call with your internal team, through indicators signifying a qualified buyer as interpreted from answers in form fields, or through automated lead scoring. Collaborating with your sales team to determine your company’s definition of an MQL standardizes the procedure of delivering higher quality leads to your sales department. Close ratios and sales revenues elevate correspondingly.
- Leads: Your leads are the people who performed a first conversion by engaging with you on your website or on the phone. Some refer to leads as contacts; however, this may be confusing when you’re sharing your CRM with your sales team. Contacts are the people in your database. Leads are those who performed an action that included sharing data, thereby connecting them with your company.
- Visits: Visits are easy to track. This is your website traffic. Breaking your traffic down by sorting your website’s unique visitors from total traffic and by examining the number of first-time visitors usually provides more actionable data.
- Impressions: Your different digital media will reach different numbers of people. Impressions measure how many people saw your message. When observed alone, impressions don’t provide much value to the inbound marketer other than the relative reach of your messaging, measured as the number of impressions gained by each digital medium. The main functions of measuring impressions is to compare initial efficiencies of each digital medium in reaching your target audience by digital medium and to use impressions as a factor in the Customer Conversion Chain, looking at how many visitors you attract compared to your total impressions. Typically, the impressions metric is expressed as cost-per-thousand (CPM) to reach any given audience, with a lower number signaling a higher efficiency.
Understanding the Customer Conversion Chain
After you’ve successfully attracted people to your website, nothing meaningful occurs until the first conversion. Nothing. So, to see what’s going on, let’s walk through the purchase path in the order your customers do.
Calculating cost-per-click (CPC)
Imagine you own an online music store that sells musical instruments. Sam is a stranger searching for a guitar online and sees your cleverly written, keyword-targeted paid search ad promoting your custom-built guitar line and decides to click on it. Your cost for that click is $1. What have you learned? You’ve learned that your cost-per-click (CPC) for that visitor was $1; nothing more and nothing less. Yet …
Many digital marketers, inbound or not, use CPC as an efficiency metric and you should, too. CPC is not, however, the primary inbound marketing metric. Nor is it the sole metric. Because inbound marketing is holistic in nature, all conversion points are interconnected. Your CPC metric is relative to other factors like:
- The CPC for the keyword term clicked as compared to the CPC for other terms clicked; or as compared to the CPC for other digital media you’re using (or could be using) to attract visitors
- The profitability of the product purchase path to which the keyword is associated
- The quality of traffic attracted by that keyword term, which you can only determine further down the Customer Conversion Chain
Figuring cost-per-lead (CPL)
Measuring CPC makes sense when considering a particular digital medium’s contribution to and efficiency in attracting new website visitors. Even though CPC is an inbound attraction metric, it’s good business practice to connect that information with your conversion metrics, too. This is where cost-per-lead comes into play
After clicking on your paid search ad, Sam is now your visitor. He pokes around your site, researching electric guitars. He’s interested in guitars, but he doesn’t know much about them. Suddenly he spots an image of a slick, custom-designed electric guitar. He imagines how cool he would look wielding that musical ax. He notices your offer for a free e-book explaining the benefits of custom-built electric guitars over stock guitars. Wanting to learn more, he gives his name and email address in exchange for the download. As you now know, this is your first onsite conversion. Sam is now a lead. Your relationship has begun, and you may now begin to figure CPL.
Everything you’ve invested in time and money can be applied to your leads to determine how efficiently you’re creating first conversions. This is your cost-per-lead (CPL). Most people only use the dollars invested (not time invested) when calculating on the tactical level. You should calculate and report your CPL on a monthly, quarterly, and annual basis. Here’s the formula:
CPL = Dollars Invested / Leads
For our online music-store example, this calculation would go as follows: This month you invested $10,000 in digital media to drive traffic to your online music store’s website. Your efforts generated 10,000 visitors of which 6,000 were unique (average CPC of $1.67 based on unique visitors), one of whom was Sam. Additionally, Sam was one of the 200 visitors who became a lead this month. Your CPL for the month, then, is $50.
Monthly Digital Investment in Digital Media = $10,000
Monthly Number of Leads = 200
CPL = $10,000/200 = $50
It only cost you a dollar for Sam to become a lead so why wasn’t your CPL $1? Sam was one of 6,000 unique visitors and 200 of those people converted to lead status. Of those 6,000 unique visitors, 5,800 visited your website and did not convert. Now you can glimpse how analyzing metrics beyond CPC and CPL may create marketing efficiencies downstream while generating increased revenues: What if you can reattract some of those 5,800 visitors back to your website through retargeting? Do you think the conversion rate would be higher?
Defining an MQL
After reading your very cool e-book on custom electric guitars, Sam notices your CTA button, your onsite tool that allows people to choose the features of their ideal electric guitar. Sam clicks onto the tool’s landing page, noticing the headline: “Let’s Build Your Custom Electric Guitar, Sam!” (The headline was tailored for Sam by using the information Sam entered into your form— yes, you really can individualize the experience like this.) The onsite tool has an additional form field (optional) asking for a budget range. Sam fills in his budget of $2,000 and accesses your guitar customization tool. By submitting this information and clicking through to the tool, Sam reengaged, taking one step closer to your desired action. By sharing his budget, Sam reconverted, in this case triggering a reclassification as an MQL.
At this point, Sam has shown enough interest to increase his lead score as he migrates closer to an action. Additional actions will increase his lead score until he becomes an SQL or falls off the purchase path.
The Electric Guitar Customization tool your marketing team built is awesome, and Sam creates a left-handed six-string guitar with a rosewood body, ivory inlays up the neck, and gold tuning pegs. The problem is, the price for these features adds up to $6,000! Even though your developers created the tool so it displays the custom-built guitars three-dimensionally with the customer’s name inlaid on the face of the guitar, it’s beyond Sam’s budget. Sam has a desire to purchase but doesn’t have the budget for that product. He signs off his computer to go to sleep.
Scoring leads to create SQLs
Over the next week, Sam returns to your tool four times, each time tweaking the components of his custom-built guitar, but he’s never able to build one that’s within his budget. Each time Sam revisits, his Lead Score increases, eventually triggering an automated reengagement email asking him if he’d like to have a short, five-minute conversation with one of your in-house luthiers about guitar components and features. The payoff for Sam is a set of three personalized guitar suggestions from a pro, all of which are closer to his budget range. He clicks the link to request some suggestions, fills out a form, submitting his phone number as part of his request. He is now one step closer to purchase and, based on your predetermined classification rules, he’s now defined as an SQL.
Defining demonstrated interest
Your pro connects with Sam, conducting a discovery call, learning Sam’s guitar preferences, confirming his budget and intent. Sam is now viewed as an opportunity because he has now demonstrated interest.
After the call, Sam enters an email workflow, receiving emails displaying images of the three guitar options at or near his budget. Your promotional message is a free custom nameplate if Sam purchases in the next 30 days. The third email arrives right after Sam receives his tax refund check. He clicks on his favorite guitar’s “Purchase Now” CTA button, puts it in his shopping cart, fills out the form fields, and completes the purchase. Your email content was timely, relevant, and contextual to Sam’s needs. He bought a $2,000 guitar and is now your customer.
Figuring cost-per-acquisition (CPA)
Out of the 200 total leads, Sam’s purchase this month makes him one of 50 who completed the journey to becoming first-time customers. The average sale was $1,000.
Cost-per-Acquisition (CPA) = $200
CPA = $10,000 marketing investment/50 Customers = $200
Measuring cost-per-acquisition is very important. Knowing the acquisition cost for your average customer, for an individual product, and for key segmentations has a significant impact on choosing your future marketing tactics. Analyzing CPA by key segments helps you make smarter business decisions. For instance, what if you discovered that 5 of the 50 customers who bought from you (10 percent) averaged a $5000 purchase and represented 50 percent of your sales? You might respond by modeling those customer groups and designing campaigns geared toward attracting more of the them. If that customer market size is big enough and consistent enough, your CPA could be five times the average and still be performing.
Calculating budget and ROI
Here are a couple of other simple metrics, based on the example above:
Advertising Budget = $10,000 Budget / $50,000 Sales = 20 percent
ROI = $50,000 Sales / $10,000 Budget = 500 percent
If those ratios work for this business model — that is, if the result is an acceptable profit margin and net income — you may now begin to test opportunity budgeting. Opportunity budgeting is investing in potential based on historical data and trends until you reach an unacceptable point of diminishing returns.
So if you could invest $20,000 and generate $100,000 in profitable sales, would you do it? Yes.
If you invested $200,000 and you knew with certainty that it would generate $1 million in profitable sales? You would — unless you didn’t have the capacity to produce and fulfill that volume, or unless your cash flow after the investment wouldn’t be sufficient to bridge the purchase cycle gap. That is, unless you wouldn’t have enough funds left over to cover the non-revenue producing time between first contact and first contract. Barring either of these two circumstances, you’d proceed. The problem is nothing in business is ever certain. Rather than risking it all, you should incrementally increase your opportunity budget to test the boundaries of your ROI.
Collecting Customer Data
Collecting customer data can be tricky. Many times you’re asking for information that people don’t want to readily hand over. That’s why you create and deliver valuable content and rewards to exchange for the customer data.
Here are some inbound marketing rules-of-thumb when collecting customer data via your website conversion forms:
- Give some information away for free. It builds trust early in the customer research stage.
- Don’t give all your content away for free. Allow access to some valuable content only after a visitor exchanges data.
- Create conversion opportunities other than just “Contact Us.” You’ll connect earlier in the purchase process, creating some influence on the purchasing decision.
- Provide additional conversion access without being disruptive. You can do this with an unobtrusive customer service chat box, for example, as opposed to a giant pop-up.
- Imagine your visitors’ perceived value of the benefit gained from handing over their contact information. Design original form fields with that perceived value in mind. In other words, only ask for information that enables your marketing messaging and sales follow up to communicate effectively in satisfying a potential customer’s needs.
- If you’re a business-to-business company, it’s usually okay to ask for more contact information than a typical business-to-consumer company. Again, this may vary based on your personas’ perceived value.
- Create trust signals at the proper conversion points. This means, say, adding the Better Business Bureau logo for product requests and secure pay icons at your shopping cart checkout, but not at earlier conversion points.
- Assure consumer privacy.
- Provide opt-in/opt-out opportunities at point of form completion.
Eventually, the value gained from a product purchase makes exchanging more personal data — including credit card data, name, address, phone number, email address and so on — worthwhile for the customer. Most of us exchange personal data with companies every day. We hand over our data because we trust the company and because we believe we will derive enough value and satisfaction from the transaction to make it worth our while. Your visitors, leads, and customers act the same way.
Implementing Lead Scoring
Lead scoring is an automated method of quantifying the quality of a lead. It is performed with marketing automation software. The intent of lead scoring is to identify which leads possess the greatest propensity to buy, increase marketing focus to those prospects, and hand off higher quality leads from marketing to sales. When you perfect your lead scoring model, your close rate of new business elevates, providing self-stimulated growth. Leads are scored based on a few criteria, including the following:
- Time spent on-site
- Pages visited
- Number of online engagements
- Place in the purchase path
- Demonstrated interest
- Modeled customer types
- Modeled purchase paths
When first instituting your lead scoring, you’re scoring behavior is based on input from sales and educated guesses as to which behaviors signal buying signs. Initially, use rough estimates as to what score value associates with which behavior. Over time, refine your lead scoring system by monitoring customer conversion path trends. Note which activities seem to be more likely to result in a sale and assign a higher score for a lead who performs that action. Eventually, you may wish to analyze an aggregate of actual customer purchase paths, refining your lead scoring and possibly even create quicker conversions by directing future leads down those proven conversion paths.
Table 19-1 shows a hypothetical example. The rule here is that a lead becomes an SQL at 100 points, resulting in a follow-up call from your sales department.
Table 19-1 Hypothetical Scores for Lead Actions
Lead Action |
Score |
Completes “Contact Us” form |
100 points |
Completes “Perform Demo” form |
100 points |
Attends webinar |
60 points |
Completes “Product Specs” form |
50 points |
Completes form on high converting landing page |
50 points |
Downloads encouragement e-book |
40 points |
Downloads embrace-level e-book |
20 points |
Visits a new website page |
1 point/page |
After you’ve honed your lead scoring for new leads, you may wish to implement lead scoring for returning customers and Lifestylers, too. Be sure to continually monitor lead scoring to form associations or disassociations between behavior onsite and purchase action. Over time, customers and their purchasing considerations change. By observing changes in conversion behavior while it’s happening, you facilitate proactive lead scoring changes in real time, not only when leads are weak and sales are down.
Organizing Your Data for Future Conversions
You’ve successfully attracted visitors to your website and they’re converting into leads. What do you do with customer data? Perform lead and customer segmentation. Segment your customers by looking at:
- Products they purchase
- Persona behavior on-site
- Top 20 percent average ticket
- Top 20 percent of volume of purchases
- Highest conversion percentages for each Customer Conversion Chain metric
- Lowest 20 percent CPL
- Lowest 20 percent CPA
- Customers who bought vs. non-purchasers
- Qualified lead sources vs. unqualified lead sources
- Lifestylers behavior vs. everyone else’s
- Shortest time from first contact to first contract
Of course, you want to look at your big-picture aggregate statistics. For the most part, you’re using that data as a reference to identify overperforming segments and underperforming segments compared to the norm. Segmenting your data to identify unusually high performing traits usually pays off bigger than reporting the aggregate historical statistics. The former shows proactive insight in solving problems. The latter make everyone else’s eyes glaze over as they reach for another donut.
Knowing What To Do with Contact and Customer Data
Collecting visitor and customer information comes with great responsibility. There are two macro-issues here: Abiding by the law and respecting other human beings.
Respecting your relationships
You’re collecting visitor and customer data for a reason, and it’s not to disrespect these people. Use the Inbound Marketer’s Golden Rule: Market unto others as you would want to be marketed to … or may you suffer a torrential thunderstorm of spam to your personal email inbox for all eternity.
Using a few communication guidelines to communicate with people after a conversion goes a long way. Be respectful by:
- Not overcommunicating
- Using polite language
- Unsubscribing immediately upon request
- Using attractive marketing language instead of pushy sales language
- Being considerate in your telephone follow-ups
- Using common business etiquette when performing a webinar
- Sending communications that are relevant and targeted
Using collected data responsibly
Collecting data responsibly means:
- Providing something of real value when asking for customer data
- Adhering to laws and regulations for data collection
- Knowing the laws for data collection/cookies/privacy in the country/state/province/territory in which you’re operating
- Understanding any regulations regarding data collection/cookies/privacy for the industry in which you’re marketing (such as with U.S. healthcare and its associated HIPAA compliance)
- Knowing the laws and security standards for customer data privacy and security
I’m not a lawyer and you probably aren’t either, so seek legal counsel if you have any doubt about whether any of your inbound marketing efforts break the law, even if only unintentionally.
One last pet peeve: All those full-screen pop-ups must convert pretty well for all you SEO/CRO/PPC/content marketers out there because I ran into, I don’t know, a couple thousand of them while researching this book. Please stop it. You’re giving our industry a bad name!
Things You Can Do Now
- Estimate the number of your website pages that offer CTAs, using 90 percent as your success benchmark.
- Compare current lead data collection processes against important/optimal collection and set a minimum standard to engage with sales, establishing your criteria for a MQL.
- Check to ensure that you are using your data responsibly and legally.