e-Commerce Revenue Performance Management (eRPM) is a software product category invented with the goal of helping e-Commerce companies grow revenue. The concept of revenue growth is really simple, although an increasing number of software vendors and consultants are creating a lot of confusion about methodology.

Key Takeaways:

    • e-Commerce website optimization is essential for increasing revenue
    • Visitors do not react exactly the same to a group of elements on an e-Commerce website
    • Constantly adapting to visitor behavior can be done using a real time optimization platform

 

Here are 12 misconceptions that are commonly associated with eRPM:

Misconception #1. You should be always testing.

You should always be optimizing, rather than testing. More precisely, the best results come from continual use of a software solution that can adapt web pages to visitor behavior in real time. Visitor behavior varies from one time interval to another which makes testing results short lived and often obsolete by the time they are implemented. You can think of adaptive optimization as instant use of the best results at any point in time. 

Misconception #2: Optimization requires heavy-duty IT support.

The complexity of setting multivariate optimization experiments varies from one solution to another. HiConversion has innovated and patented a virtualization approach that uses generic integration pixels in combination with a visual designer. This enables a non-technical marketing professional to configure campaigns via a simple point-and-click interface without additional IT support. 

Misconception #3: A-B Testing is the least risky approach to personalization, and fewer tests means less risk.

Many companies think that A-B testing of a few versions of the web page creates less of a risk than testing hundreds or thousands of combination with a MVT testing solution. This is completely false reasoning because testing in general is a risk and the level of risk is similar to both A-B and MVT methods. Testing more combinations with MVT will typically reduce risk exposure. 

Example:
If your A-B test splits traffic between the baseline web page and a challenger whose performance ended up to be a momentous 20% drop in revenue you would produce a 10% drop in overall sales during the test. On the other side, if you ran a MVT experiment with 10 different challengers, perhaps only the worst challenger would show a 20% drop in sales. If the others average out to neutral results, your overall experiment will produce only a -1.8% drop in revenue.

The best way to mitigate risk during optimization campaigns is to use an adaptive algorithm that learns and adapts to visitor behavior in real time. By allocating disproportionally more traffic to a winning version of the page and filtering out the “loser,” the algorithm is able to generate a revenue lift even as it is experimenting with many inferior versions of the page. 

Misconception #4: We don’t need optimization, because we just completed usability testing.

Usability labs are helpful in streamlining the user experience and sizing up structural and functional components of a sales funnel. Usability is essential to an eCommerce site and should be considered a starting point, not a final destination. Revenue growth that can be achieved through further and very detailed site optimization is quite significant. 

Misconception # 5: It pays more to invest in traffic than in e-commerce optimization.

With the average e-Commerce conversion rate at 1.83%, a website with 53 visitors achieves one sale. There is a prevalent bias that it makes more sense to get 53 new website visitors to achieve the next sale, than to focus on getting a second customer from existing traffic. 

There is no easy and inexpensive way to get more web traffic. Moreover, we need to remember that for the average website with 53 existing visitors, while just one buys, at least 10 are ready to buy. They are the bird in your hand: these visitors are on your website willing to buy, but something in the sales funnel deters about 90 percent of this ready-to-buy group. Revenue optimization is a new untapped growth frontier that offers more than revenue growth – it helps you build a sustainable competitive advantage. 

Misconception #6: We do not have enough traffic to run optimization.

Traditional multivariate testing solutions do require large amounts of traffic to deliver reliable results and typically are appropriate only for companies that have a huge amount of traffic. HiConversion’s adaptive optimization algorithm breaks the barrier of minimum traffic requirements, making it possible to run meaningful multivariate optimization experiments for web pages that have a limited number of visitors. 

Misconception #7: Our brand team will object to any site changes.

Every organization needs “brand police.” Optimization can enhance marketing creativity while protecting brand standards. Our multivariate optimization capability allows them to try out many ideas (ie. run experiments) with very little cost or effort, all within campaign parameters they can control. By interacting with a live audience, your marketing team will gain valuable insight into visitor preferences which in turn stimulates very purposeful creativity. 

Misconception #8: We are re-platforming or re-designing our e-Commerce site. We will optimize after that project is complete.

It is counterintuitive but this is exactly the time when you should use multivariate optimization the most. MVO can reduce or eliminate the risk that your organization will spend many months and thousands of dollars, only to launch a new site that underperforms your previous site. This experience was the genesis of HiConversion: our patented optimization solutions and technologies. In a previous company, the e-Commerce site looked outdated. After a careful branding and style-definition process, the website was redesigned and relaunched. It flopped. Our customers may have been impressed with the new design, but revenue dropped significantly. With our adaptive multivariate optimization (AMVO) solution, the new design could have been pre-verified as a component of the existing e-Commerce site to identify drawbacks and to iteratively develop a new site that would have performed much better.   

Misconception #9: “We are set. We just deployed a recommendation engine.” 

A product recommendation capability will most likely produce additional revenue and is a move in right direction. However, this solution is addressing only a narrow aspect of a much larger revenue growth potential for your e-Commerce site. You have to expand and optimize every aspect of the visitor’s experience and use technology that has the ability to automatically adapt to changes in visitor behavior.

Misconception #10: Our enterprise e-Commerce already uses personalization and testing solutions. We don’t need optimization.

It is critical to understand what kind of personalization or testing solution you are using, and its strengths and shortcomings. Rules-based or traditional A-B or MVT testing solution will not be sufficient. As previously explained, time-varying visitor behavior renders the results produced by these types of tools short-lived.

Misconception #11: Algorithm-based solutions are a “black box” upon which we cannot rely.

We have seen similar types of reactions with the advent of other disruptive technologies. The “black box” argument is akin to a debate sparked by the invention of automobiles. At the turn of the 20th century, horse buggy manufacturers fought the advent of automobiles by deeming them “too hard to know and control.” Today, we know that a car driver does not need to know the inner-workings of the combustion engine. Rather, the driver needs to know the basic features to drive the car, such as a steering wheel to govern direction, a gas pedal to move forward, and brakes to slow down.

In the case of algorithm-driven eRPM, you should be able to see and measure revenue management within a few days. It will be obvious if the “black box” is unable to perform.

Misconception #12: The CFO isn’t complaining to the CEO about e-marketing spend and effectiveness.

If the CEO isn’t hearing from your CFO yet on this issue, it’s only a matter of time. One of the main drivers for the entire eRPM industry is upper management’s focus on ROI and accountability for marketing investments. Be ready, or even better, be ahead of the hard questions from the CEO and CFO, with a solution that gives clearly measured and defined results.

Conclusion

If you are new to the concept of eRPM, we would recommend you read the ABC’s of eRPM Whitepaper, a guide that provides a simple explanation along with an actionable plan that will help you get started.