# Optimizing Conversions: How To Get Maximum Impact With Minimal Effort

Assuming you’ve already spent some time optimizing your retention so that you’re not wasting money converting customers with low lifetime values, it’s time to get to work on your conversions.

Now, when it comes to conversion optimization, there are countless strategies an organization can implement, begging the question: Which ones should be prioritized?

To answer this question, you need to identify the strategies that will yield the highest returns. You’re probably thinking, “how can I find the strategy that will yield the highest returns before I actually try it?”

The key is simply finding the main problem area in your conversion process, or what we’re going to call your Area of Greatest Friction (AGF). Just as a bottleneck will slow down an entire operational process, your AGF will dramatically slow and hurt your conversions.

Once you’re able to identify your AGF, even a slight improvement at this step will result in much higher returns.

If you were to visually map out every step in your conversion process, you could see how many people make it to each step and how many people drop off at each step. This is what funnel analysis does.

In the funnel analysis above, we can see that 81.3% of people made it from step 1 to step 2, 39.7% of people made it from step 1 to step 3, and so on. We can also see the percentage of people who made it between steps. For example, we see that 48.8% of people made it from step 2 to step 3 and 3.3% of people made it from step 3 to step 4.

Mapping out our conversion process in this way makes it quite easy for us to identify our AGF, which is simply the step with the largest drop off. In this example, we can see that our AGF is at step 4, “Confirm”, where only 3.3% of people make it from the previous step.

## The Cause

Next, you have to understand why there is so much friction at this step. In many cases it will be obvious to you for one reason or another, such as:

1. The step requires greater effort than the others (e.g. setting up or implementing something technical)
2. The step requires some type of commitment from the user (e.g. adding a credit card or sharing very personal information)
3. The step involves obviously confusing UX (e.g. a lack of feedback, non-obvious button)
4. The step introduces other variables that may be problematic (e.g. sending an email confirmation that can end up in spam folders, be sent to unattended email accounts, etc.)

Other times, the cause of the drop off won’t be as apparent and will require additional analysis. At this point, you will want to set up a sub-funnel to analyze just that step which is your AGF.

For example, say your AGF is your “add shipping details” step. You will want to create a funnel that looks at every minute step required for your users to add shipping details, from button clicks to fields they must complete.

This sub-funnel allows you to take a closer look at your AGF and diagnose the cause of the friction. In the “add shipping details” example, we might find that our shipping options are unclear or that customers are taken aback by high shipping costs, causing them to abandon at that point.

Another way you might find out what is causing your AGF is by comparing how different segments move through your funnel. You may discover that each segment behaves quite differently, particularly if you have customer segments with distinct characteristics.

In the above examples, we were simply looking at averages. However, in some cases, the averages will actually hide more than they will expose, making segmentation critical. For example, say we have two segments that each perform poorly at a different stage of the funnel. If we simply average the performance of both segments, we will end up with metrics indicating that there are no issues at either of these two stages.

You will need to have a good understanding of your customer base in order to know which segment characteristics might affect conversion performance. For example, a B2B company with both small and large accounts may want to segment by company size (smaller companies will likely stumble at different steps than larger enterprises), while a social network might want to segment by student age group.

If you’ve made it to this step, congratulations! You’ve already completed the hardest part. Now that you know what is causing your AGF, you have a clear compass directing you to your top solutions. Here are just a couple examples of organizations that successfully identified their AGFs and implemented solutions that improved their conversions.

TOPS Products

RR Donnely’s TOPS Products was experiencing an underperforming product launch, despite significant marketing investment and highly positive feedback from focus groups. With some analysis, they were able to identify their AGF: a confusing product search that was preventing customers from finding the new product. As soon as they resolved this issue, their first orders started rolling in.

Woopra, Inc.

At the company where I work, we found our AGF was at the step where customers were required to add a JavaScript tracking code to their website or application. The cause of friction was quite obvious to us – although adding the tracking code requires only 5 minutes, many users who sign up do not have the energy or the ability, to add the tracking code in that moment. The first solution we implemented was quite simple. We triggered an email to be sent to users who signed up but failed to add the code within 3 days. The email offers assistance and also directs them to documentation to help them add the tracking code. After just one week, this simple email campaign improved our conversion rates by 20%.

Ultimately what both of these organizations have in common is their ability to maximize their return on investment in conversion optimization by first identifying their AGF. By focusing their efforts, they were able to achieve maximum impact with minimal effort.

# Why Retaining Customers Is More Important Than Attracting New Ones

Customer retention is the unsung hero of the successful business. Its flashier sister, customer acquisition, usually steals the spotlight, but retention is what ultimately builds the foundation of a company that is positioned for growth. After all, it’s much easier to fill a bucket than a sieve.

## So Why Exactly Is Retention Important?

1. It’s More Cost Efficient

It’s always more cost effective to re-market to existing customers rather than attract, educate, and convert new ones. The fact that these customers have already demonstrated an interest in your offerings and are engaged with your brand gives you an advantage that you’d be mistaken not to capitalize on. The rule of thumb is that it is 5 times more expensive to acquire new customers than it is to retain existing ones.

At the end of the day, what really matters isn’t how much a customer pays you today, but what their entire lifetime value is. For example, a customer may pay me \$1,000 today and then disappear, while another one pays me \$200/month for 5 years. Which one do you think is more valuable to my company?

It’s important to spend time optimizing retention before you spend on conversion. Otherwise, you will invest in converting customers and then lose a good portion of them, meaning they will have low lifetime values. Don’t waste your (or your investors’) money winning new customers who will have a low lifetime value.

In addition to cost savings, retaining customers means there will be more customers who have been using your product for longer and are therefore deeply engaged with your brand.

Building brand loyalty among existing customers really means you’re building a fanbase. And fans will evangelize for you in a very organic way, which ultimately brings you new customers. Keep your customers happy and engaged, and you’ll both benefit.

## How To Improve Retention

So now you’re convinced and ready to tackle that pesky churn. But as with most things in life, improving customer retention is much easier said than done.

I wish I could give you a single, golden rule to improve retention. But the truth is, it absolutely varies case by case. What I can tell you is that the only way to find out what you need to do is to first measure and analyze. Ninety percent of your work is identifying the problem. Once you know the issues, implementing the solution is relatively easy.

Measuring retention in the most basic way looks something like this:

In this retention report, we see that of all the customers who initially came to the website, 32.7% returned 1 week later, 23.8% returned 2 weeks later, and so on.

Now this is a good start, but frankly, it doesn’t tell you all that much. The problem with this report is that it doesn’t measure the retention of similar customer groups. That is, it doesn’t compare apples to apples.

It would be more insightful for me to look at a report that showed me for how long customers continue to use the product after they sign up.

This report will filter out all those people who visit the website and never sign up, enabling me to focus on understanding the retention of that segment of customers who actually tried the product. It also allows me to measure not just how long this segment continued to return, but for how long they actually continued to use the product, which is ultimately what I care about.

But wait, there’s more.

Where I will really start getting insight is when I look at my cohorts. Cohorts show you the retention for groups of customers who began using the product at the same time.

I can clearly see that the group of users who started using the product during the 31st week are churning at a faster rate than those who signed up before them. While previous weeks saw 30%-32% of customers returning 1 week later, the 31st week only shows about 20% of customers returning 1 week later. Perhaps I pushed a product update at that time. My guess is that the update wasn’t received well and caused customers to abandon the product.

Now I’ve finally found my problem and I’m ready to hypothesize the solution, test, and measure all over again.