Drive and Convert

Announcer:
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.

Ryan:
So Jon, you and I, we're on calls a lot with people, and we get asked the same question constantly. So I think some of our podcasts are just like, "I'm sick of repeating myself," so we just need to get this out there and I'm going to be like, "I'm not even going to answer it. Here's the link. Go listen to the podcast." You've had some calls recently that must have brought this up, because today, we're talking about industry benchmarks.

Jon:
Yes.

Ryan:
Man, everybody wants to know what all their clients, their competitors are doing and if they are doing as good. It's funny because most companies I talk to, no matter where they rank in their industry, they seem to always think a competitor has something figured out and are doing better than them. Across the board, you have 70% of the market and you're like, "That company, they're beating me on that keyword, so they must know what they're doing or they must be better than me."

Jon:
I will happily tell you why. Their data is unreliable and inaccurate. We will definitely talk about that today.

Ryan:
I'm excited because I'm going to send a lot of people this podcast. What we are attacking today, is specifically, kind of across the board, but we're going to start with conversion rates. I know because CRO...

Jon:
That's a good point. We're going to talk about conversion rates because that's the question I always get, which is, what's a good conversion rate? But the reality is, I think the philosophy here should apply to almost any data metric in your business. It could apply to revenue, it could apply to your ROAS, it could apply to your customer acquisition costs, whatever it is, in marketing, generally, that's who's listening to us, but in any metric in your business. But, specifically, conversion rate is where I hear about this a lot. So that's what we'll talk about.

Ryan:
All right. So Jon, what's a good conversion rate?

Jon:
Let's just hit it on the head right off the bat, right? I love it. Look, as you said, it's one of the most common questions we get, so I think it comes up nearly every sales call. I think it comes up in nearly every discussion I have at a conference. When I'm up on stage speaking, somebody asks me, "Jon, what's a good conversion rate?" I love the question because I'm very opinionated about it, about most things, but definitely about this. People think there's a mythical number that just can be achieved with the right collection of strategies and techniques, and the reality is, it's not true. I think most people want to know how they measure success or failure. So they're saying, "Okay, if I can peg a number here, then I'll know if I'm succeeding or not." And they're looking for a growth ceiling or they're hoping to identify what is best. They just want to know what's best so that I can compare to that. I think that's human nature to want to compare.

Ryan:
Oh yeah, I agree with that.

Jon:
Yeah. I don't blame the line of thinking.

Ryan:
I like winning.

Jon:
Right. But you can't win unless you have a goal in what that number is, right? I think industry benchmarks they're the obvious starting point for anyone looking to set goals, and that's why we end up here. But unfortunately, comparing your conversion rate to the other companies or just even industries as a whole is just meaningless.

Ryan:
Well, how do you even know what their conversion rate is? Are you going to get access to their analytics as a competitor?

Jon:
Right.

Ryan:
To out fool?

Jon:
Exactly. And are they going to be accurate? They're not incentivized in any way to tell you a real number or to share that publicly. Okay, so usually I get a follow-up question. "What's a good conversion rate? Like, Jon, okay, you said all of that. It's not like... Just tell me what's a good conversion rate."
If you must have an answer, I pose the following. A good conversion rate is one that is always improving. Now, Ryan, I know you've heard me say that a hundred times.

Ryan:
Oh yeah.

Jon:
But most people I say that to and they stop and pause and like, "Yeah, that's true. It's one that's always improving." And I would say if you want to be data driven, simply having data and a goal just isn't enough. It's how you use that data that's really going to separate you. And while we all love a good goal, having a singular benchmark that has no context is the opposite of running a good business in my opinion.

Ryan:
I think that applies to almost everything you can talk to around online commerce. You always want to be getting more traffic, you always want to be improving conversion rate, you always want more lifetime value. So I guess it's like, what's that Wall Street movie? How much is enough? More.

Jon:
Right. That's fair. But also think about traffic. You want good traffic. So if you just say, "Hey, I want my traffic to be a certain number." It's like, "Well, I can go get you that number tomorrow. Let's just go get some really crappy paper click ads that aren't going to convert and get you a return." It's the same thing when people say, "Hey, how do I increase sales overnight?" Sell everything for a penny or give it all away or discount heavily. None of those things are optimization. None are sustainable. It all requires context. You need context around your own goals, and so I think the number on its own just isn't helpful anyways, even if we did have an actual number.

Ryan:
And I look at multiple conversion rates. I know that different traffic converts differently, and so if I'm expecting to drive more top of funnel traffic, my overall conversion rate's going to go down on the site. But if my core brand terms still convert at the same rate, great. I'm still capturing that effectively, but I know that I'm driving more top of funnel stuff right now to grow my brand, and I expect conversion rate to drop, even though I'm growing my business.

Jon:
100%. There are tons of cases where a falling conversion rate could be the expected outcome. Say that you're a brand that sells through a bunch of channels, your own website, Amazon, retail, big box stores, other small retails, whatever, right? But you sell these channels because increased exposure. So you're trying to get shelf space so that people see you. If you remove all of your products from those additional channels and only sell through your website, customers may seek you out online, they may not even know you exist. So they could find a similar product elsewhere, wherever they prefer to shop. Your conversion rate would decrease and your revenue would fall.
But another example is we can... Perhaps we can imagine a situation where a low conversion rate can help meet your organizational's goals. Maybe you want a low conversion rate. Yeah, it's possible...

Ryan:
Mind blown.

Jon:
Ive seen it. You know what? I'm in the business of increasing conversion rates, but sometimes it doesn't make sense. You're a new brand, you don't care about your conversion rate, you're just trying to get awareness.

Ryan:
Or if you do, you've got problems. Throw that out the window for now. You don't need to that at an early stage startup.

Jon:
Exactly. If you just try to get a massive conversion rate and nobody knows who you are, what's the point? You got to just get people to get awareness.

Ryan:
You send your mom to buy and you got one for one, 100% conversion rate.

Jon:
There you go. Yeah, that's always the trick. Yep. Just have every family member buy, your conversion rate goes up. That's what I'll tell people next time.

Ryan:
Your brand does not grow at all, but you got a really cool conversion rate and you should take that to the bank and get a loan on it because you have good conversion rate.

Jon:
There you go. I'm sure every banker would approve that loan. So here's the thing, Ryan. I think, how many brands have we worked with that are just trying to build an audience, right? And you're going to monetize it tomorrow? I mean, how many times have you and I, on this podcast, talked about how you're happy to break even on customer acquisition because you know that you can turn them into a future customer again and it won't cost you anything, and so it's that lifetime value metric.
There's a lot of things at play here that may not make sense for you or whoever you're comparing yourself to, to be thinking about conversion rate because maybe that is a new startup that's getting all the press and their conversion rate's really low because they're getting a ton of traffic, but none of it converts. If you compare yourself to their conversion rate, then you're going to be like, "Oh, we're set. We have the best conversion rate ever." Probably not the case.

Ryan:
Are there any additional helpful questions for it that a business owner or a marketing team can be thinking through when they're trying to see, "All right, conversion rates going up and down. How do I decide some of those metrics that you've thrown out, that context?" I guess.

Jon:
Yeah. The reality here is that there's a ton of reasons why you don't want to be paying attention to your competitors, but there's a ton of metrics in there. Let's talk about all of the metrics first, and then I definitely want to touch on why you shouldn't be tracking your competitor's metrics around these. We have a whole infographic up on our site that would give you a ton of context. It's about all the ways that you can influence your conversion rate and all of these benchmarks. If you go to thegood.com, search for benchmarks, and you'll find a great article with this amazing graphic that has all of the things that can influence conversion rate, which I think is important, Ryan, because if you are only focused on a singular metric in a vacuum, then you're missing so much context and you're missing all the other things that could influence that one metric.
And so there are a ton of things that influence conversion rate or provide context to somebody's conversion rate number. As you're looking out at benchmarks and competitors, you're not going to have all this information. So what am I talking about? Well, it could be product, as simple as have you found product market fit? If you're a new brand and you're sending a bunch of traffic that's not converting, maybe you don't have product market fit, right? Your price, right, are you charging more or less to your competitors? Are there fees, shipping? What else people should be thinking about there? Variations and options. Are you offering a colorway that is not very popular and your competitors have a colorway that is expanding? Shrinking product lines, right? Are you removing and calling your product lines and your competitors have a thousand SKUs when you have 10, right? That can affect conversion rates.
Market conditions. I mean, we're going through that right now with market corrections all over the place. Retail partnerships are under this, right? Do you have distribution deals? Are you in Costco? People see you there and then go online and buy. Competitors. How many competitors do you have? What kind of competitors do you have? Economic conditions as a whole? So all of these things, can people even afford your product or do they have extra money to spend? This is where a lot of e-commerce brands got themselves in trouble recently because over COVID, people had more spare money because they weren't traveling, they weren't going out, etcetera, and they would buy things online and everybody was buying online. So ads were expensive, and it was one of those things where you could get people to your site, cost a little more to do it, but you were going to break even.
Now, less people are buying online because they're back at retail and ad costs are still expensive. So your customer acquisition went up.
Which leads me to acquisition strategy context around are there paid placements? Are you doing influencers, partnerships? What's your PPC spend? So if you're doing pay per click, are you spending a ton of money and is the strategy just to get people to the site and break even? Or is the competitor strategy that they've been mandated by the CFO that they have to hit a certain metric on return on ad spend? That takes me to ta traffic quality. I mean, you can see there's a ton of these, right? What's the quality of that traffic even coming to your site?
What about the site content? Does your competitor have a lot of great content on the products that help people do research and understand if the product's the right fit for them and you don't? Or even fulfillment. What happens after the conversion? Do you take two weeks to ship and your competitors have a next day shipping option? So all of these things can really go into it and provide context, and I think most people don't look and think about it holistically, they're thinking about what's my conversion rate? And it's just missing all that context.

Ryan:
Especially if you just take a look at your analytics, any one of those columns you can focus on, but it's going to cause issues in what you're doing overall on your site. Just like, I still get questions about bounce rate for some reason. Why do you like certain pages? You can look at that and decide if you made a change, and maybe people stay on this page longer. Maybe they find exactly what they want, maybe get them to click somewhere else. But again, bounce rate can be impacted by so many various things, just like conversion rate can, and it's understanding the 30,000-foot level when you're looking at numbers, I think, which is just important to realize. If you focus on conversion rate, I'm going to show you a business that's going to get beat quite often because they're focusing on one metric that doesn't actually grow the business.

Jon:
Yeah, that's exactly it. And we could do a whole episode on why I dislike the term conversion rate optimization. It really shoehorns everybody into worrying about one metric. And, to me, it's not accurate. There's a lot of metrics that you want to influence. The industry as a whole, when people look for conversion rate optimization, they just think, "Oh, I'm going to impact conversion rate." The services that we impact at The Good are really much bigger than that. Ultimately, conversion rate is one that you want to impact, for sure, but it's on the list. It's not the only one, right?

Ryan:
Yeah.

Jon:
Average, I mean, order value...

Ryan:
Part of success.

Jon:
[inaudible 00:13:12]. Right, exactly. There's so many things there.

Ryan:
Yeah. If you double your AOV and your conversion rate only goes down by 10%, you just had a massively successful change on the site.

Jon:
Yes.

Ryan:
But your conversion rate dropped 10%.

Jon:
Yep. It's that context that really can help people understand the impact that this has.

Ryan:
So you're not a fan of looking at competitors for benchmarks. Would that be a fair statement?

Jon:
It is. I guess it is, and thank you for teeing me back up on that. Look, here's the reality, Ryan. When you try to look at a competitor, what are you trying to do? You're trying to say, "What's the ceiling? What's the maximum point that I can get to?" Or, "I'm competitive and I want to beat whatever everyone else is doing." But who's to say that your competitors have identified that peak and that there's not room to grow beyond that? So let's just do this. Let's, let's imagine for a minute that, without a shadow of a doubt, you know what the conversion rate average is of your industry. I'm just going to put it out there. If you are 100% sure you know it, more power to you. I pose, it does not matter. Here's the thing. You could know your own conversion rate is higher, and guess what?
You've won. You can stop. You never have to touch your site again. You now have a better conversion rate than your competitors. Why even continue? You've won. I mean, that's bullshit, right? The reality is you're not going to stop. Why do you care what the benchmark is? You're going to continue to get better every day anyways, ideally, right? Again, a good conversion rate is one that's always growing. So, even if it's higher than everyone elses, you still want to push it higher, so it doesn't really matter. And to me, that shows that everyone else's conversion rate is just irrelevant for your purposes because you're going to strive to just beat yourself anyways. So why do you care what a competitor has? All in all, focusing on a competitor, whether you're looking at one or the aggregate, it's just not helpful, and I think it's a distraction, personally. So I think competitive research is helpful, but it should not dictate your strategy.

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. And Ryan Garrow, of Logical Position, the digital marketing agency offering paper 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:
Now, I love looking at competitors for ideas. For me, it's a brainstorming thing. I know that I'm often not the smartest person in a room or in an industry, but if I can look at... A competitor might be like, "Damn, that's a good idea." It becomes like, what could I do that would beat that or be better for my customers or overcome that or copy it?

Jon:
The greatest source of what you should test, could be from your competitors. I think it should be an equal fit of your competitor research and your customer research. If you're talking to your customers, they're going to tell you what they want, and then you can test that. If you look at your competitors, and we've talked about this before, you have no idea if that tactic is working for them. They could be testing it, it actually could be hurting them, and they don't know. I mean, there's so many unknowns there, and you're never going to have all the answers, so it's something that you should test. But I think there's a huge, huge, huge, huge flaw of self-reporting among competitors

Ryan:
Because I mean, if you go to a conference for a specific industry, you will hear like, "Oh yeah, the average conversion rate in our industry is X."

Jon:
Great.

Ryan:
Okay, well...

Jon:
It's false.

Ryan:
In theory, you should be able to trust it, but you're telling me I can't.

Jon:
It's an outright lie, and here's why. I don't think most of the people are trying to lie, but, Ryan, I can tell you, I will never name names, but I will tell you the number of brands that have come to us, and I've heard say, "Our conversion rate is X," publicly. And then I look at that data and I'm like, "How are you calculating that?" Because there's no way I get the number to come out to that. Usually it's like, "Well, I don't know." Maybe it's some other data set that they just wanted to look better than what they actually are, or they're going to hang out with their peers and say, "Oh, our peers all say they have this conversion rate. We want to have that too." I think all in all, Ryan, my point here is that self-reporting is just ripe with incorrect data for a number of reasons.
First, your competitors, they have no incentive to offer accurate information. None. Why would they tell you what their conversion rate is? What's the benefit for them, other than ego? And so in that stance, it's not going to be accurate. In most cases. I don't think brands want to report on a conversion rate that's low. They don't want their stakeholders, investors, or employees to lose faith in the organization. If it's low, they're not going to tell you. And if it's high, they're only telling you to brag about it. And even then you don't know if it's right. And then a lot of people tell me, "Oh, well, I got this from an independent third party, a publication." Well, here's the thing. Publications, they can't just obtain conversion data. There's no online source that you could just go and to a specific website and say, "Oh, yeah, these are all 100% accurate."
These publications, they all resort to an obscure calculation to work it out for themselves based on revenue and site traffic and all these other things, again, that unless it's a public company, they're missing a lot of data. So it's an algebra equation that's just not quite going to be accurate. There's always a variable there they don't know for sure. And, lastly, even if a competitor offers their true conversion rate, you have to wonder if they calculated it correctly. You just don't know. Are they making incorrect assumptions? Are they including things that shouldn't be included? Would it be higher or lower if they used other criteria, or do they even calculate it the same way you do? So you're comparing apples and oranges. That's just not helpful. So there's too many things here that just don't add up for you to really truly be measuring against benchmarks, and hence benchmarks are bullshit.

Ryan:
Even Google, if they looked at an analytics account, they could see a conversion rate, but there's so much beyond just in an analytics conversion rate that they don't. Analytics doesn't know fraudulent orders. And I have a client in the coin space in the gold bullion space, tons of fraudulent orders that Google Analytics sees as, "Yep, those are good ones. Count that revenue."

Jon:
Yep.

Ryan:
20%.

Jon:
I have never seen a Google Analytics account that has matched a big commerce or Shopify admin.

Ryan:
That's another thing. You don't even know if it's set up correctly. So yes, their analytics may be saying this, but the number of analytics accounts that are set up correctly is probably less than 50%. [inaudible 00:20:15] talking to it.

Jon:
I can guarantee you it's less than 50%.

Ryan:
So, good luck. Even if your competitor was giving you the right answer, the analytics, it also changes. Maybe they only looked at one day. Great. Anybody can have a conversion rate from one day. But did you look at six months? Was it three months? Was it one month? Was it promotional period, non-promotional period? Stupid. That's what it is. It's bullshit.

Jon:
It's bullshit, that's exactly right. It's the only word. I love the English language because there's a word for everything, and this is one of them.

Ryan:
Well, so what did we do then? We can't benchmark competitors. So what do we do?

Jon:
Focus on your customers and your own growth. Just look inward. Focus on yourself. As the owner or manager of an e-commerce store, look beyond conversion rates. Stop comparing yourself to competitors and focus on your own customers. I'm competitive, I love sports. I will tell you, conversion rate optimization, it's not football. You're not trying to win the game by scoring more points. In fact, you know what? Your opponent scores doesn't matter at all. You're not even playing the game. Get off the field. Just worry about yourself. Go to practice every day, get better, get 1% better every day and you will improve.
So set your own goals, experiment based on your own site's data, maybe do some competitive research, but for ideas there. But focus on learning and doing that in an iterative fashion. Getting better every day is looking at your own data, how to improve yourself and your business every day and has nothing to do with your competition. So, if you really want to achieve your true, true, true success, it really is all about focusing on your conversion rate, setting your goals, running your experiments, and just keep moving it upwards and focusing just on collecting the right data.
And I think that's going to help keep you growing. And just remember that your organization is unique. There's no other e-com site that is a exact replica of yours, and if there is, you might have a lawsuit or something on your hands. But the reality is, the ones you're tracking against, they're not your same exact site. So comparing yourself to your competitors by focusing on their benchmarks is just an, it's a distraction. It's ineffective, and I think I go back to your customers, provide all the information you need to grow your brand. So that's really where you should be focusing.

Ryan:
Got it. And if you really like winning, just call Jon or I. We'll give you some number that you're beating. Just say you won. I mean, yeah, and if your benchmark, "Oh yeah, 0.2% conversion rate, good job. You're at 0.4, you're winning."

Jon:
Maybe that's why I get these calls and everyone asks me the first time, they're like, "Jon, what's a good conversion rate? Where should I be?" They just want to feel good, right? Maybe that's it.

Ryan:
Yeah. Everybody wants to think they're doing a good job, and which is, again, I'm not faulting people for having the questions. It's if you keep having that question where you've been asking an agency the same question for years, you haven't evolved or developed to grow your business, and there's a reason you're bouncing from agency to agency because you're trying to find somebody that tells what you want, but at the end of the day, it fails because they didn't actually challenge the way you're thinking. I did have a question, though, on one of your comments was, good conversion rate's one that's always increasing. But, in theory, you're not going to get to a 100% conversion rate. Even Amazon, with probably the largest CRO team on the planet, they can't have a 100% conversion rate because I shop on it. And I go on there and then don't buy something.
I promise I will always do that, Amazon, you'll never get to a 100% because of me. And you're not Amazon if you're listening to this, probably, and so I know that conversion rates are going to go up and down. It's almost like a, I think of it as like a up plateau up plateau or even down and then go back up, because as I...

Jon:
Seasonality?

Ryan:
Double more traffic in. So how are you constantly improving if it gets good enough that I can afford more non-brand traffic and I dump a bunch more in, and then my, making numbers up people, but my 2.5% Conversion on the site drops to 2.2% because I dumped a bunch more top of funnel stuff on there.

Jon:
Yeah, 100%. You're right. It's funny. The number one smart alec response I get to this is, "Well, 100% is a good conversion rate." It's like, okay, yeah, right.
Have fun. See you later. The reality is, is there's no better time to start going back to optimizing when you have new to funnel traffic. So if you were widening that funnel with branded terms, things like that, that are going to be a little more, or unbranded terms, I guess, right? Where you're going to have more people who you're reaching that aren't specifically looking for your particular products, you're going to help solve their need. But that's a great time to go back to customer research and be looking, how are these people interacting? What do I need to do to change my site up a little bit? And this is where you can't optimize once and be done. You're always continually optimizing, right? Even, there's external factors here too. I mean, the internet's always changing. Devices are always changing. Payment methods, consumer habits. I mean, just look at the changes we've been through in the cycle we've been through over the past three years.
Crazy. Everyone went online to, now it's still up there, but the reality on all of these things is, the trend line is usually heading in the right direction, and that's what you want to be looking at. Look for patterns, look for seasonality, look for that overall trend line. It doesn't matter if your conversion rate dropped week over week. It matters if it dropped year over year, month over month, maybe, depending on volume, and how quickly you move. If you're like a Shine or a H&M where you're coming out with a release of clothes every couple of months, and once that sells out, you're not restocking it.
Okay, you need to be moving more quickly looking at data real quick. But if you're somebody who has a product that you're going to keep selling for a year, two years, three years, five years, does it really matter what happened week over week? Probably not, right? Unless you're trying to run some massive sale. Even then you're going to see a blip in your conversion rate in the long term, in the cycle, you'll see some dip or a growth there. That's usually what happens every holiday. So you're right, it's a matter of continuing the trajectory and understanding that there's going to be ups and downs and plateaus, and you're going to continually try to just watch the trajectory and improve that.

Ryan:
I like it. Thank you, Jon, for getting this topic out there, because I'll probably follow up with another paid search bullshit thing that we can do one of these on.

Jon:
I love it. Yeah. Well, I'll get off my soapbox once again, but thanks for hearing me out here, Ryan. Appreciate it.

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.