To measure ecommerce marketing, we have to look at two separate conversion rates: the ad-to-website rate and the visitor-to-sale rate.
Websites are no longer the cliched 24/7 salesperson I used to pitch to clients in the early 2000s. Today, websites are powerful sales robots, capable of capturing, analyzing, and personalizing the experience of buying your product.
Because that shift is so recent and happening so fast, even experienced marketers are neglecting to invest in their websites like the conversion machines they can be.
I've found that most marketers I consult measure ad spend against website sales in a direct way. Like: "If I spend $100 on ads, how much will that increase sales?"
That's a dangerous way to measure ad ROI. Ads and social networks (and ads on social networks) have one job: get people to your website. That's the first of two distinct conversion rates; it's the ad-to-website conversion.
The next conversion, equally as important, is the website visitor-to-sale conversion. That conversion has very little to do with the ad itself. It's all about the website and how effective it is at converting visitors.
The only time this gets muddled is a case where ads are sending the wrong people, and there's no chance of converting them. In these cases, you have a high ad-to-website conversion, you have a low visitor-to-sale conversion, and you've done everything you possibly can to optimize your website for conversions. Is this you? Most likely it's not.
To wrap up, in ecommerce marketing, you're addressing two completely separate conversion rates that work together: the ad-to-website and the visitor-to-sale. Treating them separately, including in monthly digital marketing budgets, is the only way to ensure they work effectively together, and it's the only way you'll ultimately make money.
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