In Internet marketing, conversion rate refers to the ratio of the number of visitors completing a certain action at your website (such as subscribing to your e-newsletter or purchasing products you promote on the web) to visitors who visit without completing that action.

It is a very important measurement because it reflects the ROI of your marketing effort. For example, if it costs you $100 to acquire 1000 visitors to your website, and out of those visitors 30 purchase your product, the conversion rate is 3%. Suppose you know the profit of each product sold is $10, then you can calculate that for every $100 (marketing cost) spent, you have a return of $300 (revenue), making your net profit $200. This seems like a good deal, doesn’t it?

Let’s take another example: If out of those same 1000 visitors, 50 of them subscribe to your newsletter, your conversion rate is 50:1000, or 5%, and the cost of acquiring each subscriber is $2. That is a very important metric if you need to plan the budget for acquiring a certain number of subscribers.

For this reason, Internet marketers like to talk about conversion rate. And they like to show off by claiming how high the conversion rate of their websites is.

However, when we talk about conversation rate, there is one important factor we cannot neglect. It is about the source of traffic.

Let’s say you have a web site focusing on physical fitness. And currently, there are two websites referring new visitors to your website by hyperlink. One of those is about healthy foods. This website consistently refers customers to land at your website, and the conversion rate of those visitors is x%.

The other website is related to computer equipment. And the conversion rate of the visitors from that website is y%. Even if you do not tell me the exact value of x and y, I can be quite sure that x is bigger than y. Why? Because the first website has a theme more closely related to yours, so it is referring potential subscribers who have a higher tendency to feel interest in your website’s information and are more likely to subscribe to your newsletter or buy your products.

Therefore, you can easily have higher conversion rate for your website if you manage to obtain highly relevant sources of traffic. For instance, if you have a joint promotion with another marketer who has a closely related subscriber list that has similar interests to what you offer at your website, chances are you will gain a high conversion rate by the traffic generated from that newsletter owner’s list.

Therefore, without mention of the source type of the traffic, it is meaningless to talk about conversion rate. Next time, if someone tells you about the high conversion rate of his/her website, ask about the source of the traffic. This will give you the information you really need to make sound decisions.

Tags: traffic source

This article combines two reports written by my students after going over the Standard/Poynter Eye-Tracking Project’s results posted here: http://www.poynterextra.org/et/i.htm

Stanford/Poynter Eye-Tracking Project

In 2000, Marion Lewenstein (Professor of Communication, at Stanford University) and the Poynter Institute researchers initiated the Stanford/Poynter Eye-Tracking project on online news reading behavior. It was the first project to introduce the idea of using eye-tracking equipment (SMI Eyelink system) to measure the eye movement over areas on a computer screen in conjunction with the application software for collection and analysis of observational data, which was written by the Advanced Eye Interpretation Project at Stanford University.

There were 67 subjects (with only 66 subjects’ data used, one was discarded because of unreadability) enrolled from two cities, from the states of Florida and Illinois. All participants were set up with head gear that recorded eye movement data while they read online news web pages. The research team collected images 60 times per second, and recorded each fixation point, the length of time for each fixation, and the order in which each fixation was generated.

The results of this study surprised many people in the industry. In fact, one of the findings was that a large percentage of the study participants look first to text, especially for news briefs and captions, which was just the opposite of the generally accepted notion that graphics and photos represent the first entry point for readers.

Other findings of the study are highlighted here:

Text Attracts Attention Before Graphics:
Of users’ first three eye-fixations on a page, only 22% were on graphics, and 78% were on text. In general, users were first drawn to headlines, article summaries, and captions.

Banner ads fared quite well.
Banner ads indeed did catch online readers’ attention — a notion that went against current thinking. 45 percent of banner ads were viewed by test subjects and the average fixation period was 1 second. This time is long enough for readers to perceive the banner’s message.

Online news users “do know how to scroll”
For articles on a news site, if a Web user has clicked to get to the page, chances are high that the article will be read, because the headline or blurb that led the user to click to the page gives enough information to the user that he/she knows in advance it’s something worth reading.

Visitors do have the habit of Interlaced Browsing
Users frequently alternated between multiple sites:

• they would read something in one window

• then switch to another window and visit another site

• and then return to the first window and read some more on the first site; possibly to turn to the second window again later in the session

Insights gained from the study

Improve Headlines and Briefs
Be straightforward and efficient with headlines. Recognize that getting too cute may actually turn off online users, who just want to quickly discern if a story is worth reading.

Edit online photos and graphics
Use an appropriate photo with a single focus or single subject, or crop the image tighter to help the user focus on the main detail.

The best of both worlds
It may be necessary to deliver two versions of the story: a high-end graphically intense presentation and one that is bare-bones and designed with both wireless and low-end computers in mind.

Reconsider animated banner ads
If a banner is animated, every animation frame must have the brand name included. Not doing so can mean the consumer will look at the ad but not comprehend who placed the ad, because the average fixation period only one second.

Conclusions:

The results of this study echo what Google has experimented with on the Internet ever since it launched its Google AdWords Program (Google’s own online advertising program) by using text-based advertisements rather than graphical ones. Google’s results do indicate that the effectiveness of pay-per-click text advertisements is higher than graphical advertisements for the click-through rate because online visitors tend to read text rather than look at graphics. In my view, this can be explained by the fact that the primary motivation of people going online is to “search and collect” information, and so they tend to “read” more on this medium when compared with other medium like TV and magazines.

My challenges to the test results:

One of my criticisms is that objects in this experiment are too focused in two cities within one country, and no information on how they were recruited. The failure to achieve “random sampling” in the experiment defeats the possibility to generalize the results to the general online population.

It is suspected most of the subjects are frequent online news readers and thus already have the tendency to “read” text rather than looking at other graphical elements of a website. Therefore, the test results are not conclusive.

Tags: banner advertisements, banner advertisements Vs text advertisements, Google AdSense, text ads, banner ads Vs text ads

Google has just acquired YouTube for $1.6 billion US, one of the largest acquisitions in Google’s history. It is creating the same exciting feeling as we used to experience in the dot.com era in the ’90′s. However, the move is not really well understood.

If we take a look at the background of YouTube, it lacks the very successful elements of previous successful dot.com companies. It does not have proprietary technology nor does it possess customer lock-in capability – a very important element for a market leader to keep on dominating market.

In study of successful dot.com companies like eBay, we have to go back to a special network utility phenomenon called Network Externality Effect. Its basic argument is a network’s utility increases exponentially with the number of users in the network, making it more valuable in due course. For explanation of this phenomenon, refer to another post here:Â Metcalfe’s Law and Network Effect.

Theoretically if you run a similar auction network service like what eBay started to do more than 10 years ago, it’s unlikely you can knock down eBay because it has already had so many buyers and sellers entrenched in its network. Its network utility is so high that you have no way to attract new users to your service, no matter how hard you try. When a new user (irrespective of whether he/she is a buyer or seller) is looking for an online auction service to join, their most likely choice will be eBay.

The network effect keeps boosting the increasing network dominance power of eBay, making it virtually invincible. Sometimes we call this phenomenon “The Law of Increasing Returns”.

But we don’t see this in YouTube. It has no customer lock-in capability. Theoretically, let’s say that if you have sufficient capital to start with a server farm facility as big as YouTube, you can start offering services to public like they do, allowing users to upload their videos and share them with others. A new user can select your service or YouTube. YouTube has no immediate advantage over your new service to this new prospect.

YouTube model actually works on the viral marketing effect – the marketing effect that takes place to boost its exposure by people’s word-of-mouth. For a further discussion on viral marketing, refer to this post – Viral Marketing: A Powerful But Free Marketing Tactic. The new service can definitely take this viral marketing approach. It doesn’t matter if it’s a late comer.

Let’s go back to the discussion of eBay. The only way you can knock down eBay is to start a new service that rests on a new technology that eBay does not have. And that technology must truly benefit the new and current users of eBay in a way that can pull them away to try your service. This is the only way you have chance to succeed.

To put it another way, the way to win and keep your market position is to possess new technology, if you do not have the network externality effect that helps like companies like eBay.

We cannot see this in YouTube either. The video broadcast technology is neither new nor exclusive to YouTube. Although we know that they claim to have proprietary technology to identify copyright protected material, but that is not the main theme of this deal.

Google spent $1.8 billion US to acquire this company. The same amount of money (perhaps much less) can definitely be used to build broadcast facilities that resemble the power of YouTube. This is addition to the fact that Google already started its own video service years ago.

The only advantage we can see for this deal is its immediate access to its vast number of broadcasting page views, and that it can put to use for its famous and profitable Adwords’ service customers.

Even though it represents only a tiny portion of its vast market capitalization of $131 Billion US (as of stock closing at Oct 10, 2006), is it really worth the $1.6 billion US expenditure?

Related Topics: Google , YouTube, Google Acquires YouTube, YouTube is acquired by Google, Google Acquired YouTube, Network Externality Effect, Law of Increasing Returns, Network Effect, Market Capitalization of Google, Market Capitalisation of Google, Viral Marketing, The Law of Increasing Returns, network utility, customer lock-in capability, Google Adwords

[This discussion is the continuation of previous post: The Number One Rule of Marketing - Find Out What People Want And Satisfy That Desire ]

The Previous Question:

People like to follow trends and own the newest stuff on the market if they think that many other people do those new things or own that new stuff. They want to be part of a crowd, doing the “in” thing, having the “in” stuff. Is this then an example that need is created by products?

The Answer:

The reality is that people have an underlying need to be like others, not to stand out from the crowd. This need is not directly related to the product itself. It’s because they are afraid being isolated from people. They’re afraid that they won’t be part of “in” crowd if they don’t own certain things or follow certain trends. And that is the reason they want things most other people want. They want to ride the trend.

This is one of the fundamental needs – Love/Belonging – that comes after a person’s physiological and safety needs are met, as outlined in Maslow’s Hierarchy of Needs model.

So again, this explains how the product and the related marketing promotional activities cannot create a need in people. You must first uncover the underlying need in people and then satisfy that need with your product.

The Number One Rule of Marketing – Find Out What People Want And Satisfy That Desire.

Best online Marketing,

Damen
Related Topics: Love and Belonging, Maslow’s Hierarchy of Needs

When I took an MBA class ten years ago, one of my most respected marketing professors asked a very controversial question, “Is marketing able to create a need for a product?”

My first answer was: Of course, it can. We’ve all had the experience where we see something advertised on TV or our attention is captured by an attractive billboard for a new product, and we decide that we’ve just got to have that product – right now! But before we saw the ad, we didn’t even know that product existed! We didn’t have the desire to buy that thing. All of a sudden, we want it!

But at the end of the marketing course, I changed my mind. The reality is: “You cannot create the need for a product for a person. What you can do is to find out what the customer needs and satisfy that need.”

Why? There was an interesting debate in the classroom that night. Read on and you’ll understand.

To demonstrate his belief, the professor presented a case. The Tamagotchi. Ever hear of it? It is a small electronic game device that was very popular about ten years ago. In this game, there is a small electronic duck or chicken that you need to feed and play with. It “grows” if you take care of it carefully or “dies” if you neglect its needs, like eating or taking exercise regularly. Is it an interesting game? Yes. But what surprised people then was that this small gadget became so popular in countries like Japan and Hong Kong (my home country). Many of us really were curious about the successful factors behind that game.

We debated about the reasons for its success. Some students felt it was because people tend to use and try popular stuff, especially when it’s new to the market. These are the people that are the “trend setters”, who want to be the “first on their block” to try something new. It was trendy to have such a device. Others said it was because people wanted to be part of the “crowd”, part of the “popular” crowd and that’s what created their desire to own one.

And finally our professor raised a point that most of us thought was the ultimate reason that the game had become so popular.

In a crowded city, like New York, London, Hong Kong or Tokyo, many people don’t have time and space to raise little animals. However, we still have strong desire to have one, to have someone or something to care for. This gadget satisfied our strong need for having someone to love and take care (whether it is a baby or a small animal). And city dwellers usually have less resources to have a real one ourselves, so we turn to this little device for an artificial one that does not actually exist. But somehow that satisfies our underlying desire of loving someone or something.

Our professor commented that modern people are lonely. We live in crowded cities without any spiritual life. We dare not love people. We dare not raise our own children. We don’t have the resources to raise small animals. And this device can fill the gap in this empty area.

Bingo! We cannot deny people have this desire. And this gadget, in its own way, can really help satisfy this need.

Marketing is after all the act of finding out what’s missing in our customers’ lives and filling that need. To be a successful marketer, you have to find out what your customers’ needs are before you can satisfy them.

This principle applies to all areas of marketing, whether you are doing it on- or off-line.

Some argue that people like to follow trendy stuff if they know many people have this gadget. They want one for themselves, as well. Is it not a counter-example that need is created by the product itself?

The answer is “No”!

Watch out my next posting for follow up discussion.

Related Topics: Tamagotchi, Number One Marketing Principle, Satisfy Your Customers’ Need, Power of Marketing, Customer Demand, CUHK MBA, Professor Chan Chi-fai
P.S. Interested to know my professor? Here you can find his profile: Professor Andrew Chan Chi-fai

The MBA programme I took is ranked one of the best in the world. Check out the profile of it here

The common mantra that most other Internet Marketers follow is “The money is in the list”

Without the list, you miss an important tool to carry out “push marketing” strategy. The strategy you use to actively promote your product/services.

One of the way to build your opt-in email list is by setting up the Squeeze Page in your website. There are two types of Squeeze page:

The Gift Page

On this page you are going to offer your prospect a gift to join your mailing list/newsletter. You will give them a free ecourse, ebook, software, service or script in order to capture their name & email address. They have to provide it to be able to download your gift to them. It is a trade off. They get your gift, & you get their email address. Once you get their email address, then it is up to you to provide them with useful information & get them to remain a member of your list. You will have those who sign up & immediately unsubscribe after they receive your gift. But you will wind up with a higher percentage who stay subscribed for an issue or two, just to see what you have to offer. That is when the ball is in your court. You got them, now it is up to you to keep them.

The Benefits Page

On this type of page you will sell the benefits of being a subscriber to your newsletter. This is where it is up to you to tell them exactly what they will receive by being a member of your list. This is also where you will have to sell yourself. Here is what you are going to have to tell your prospect:

• What can you provide to your reader?
• Why should they listen to you?

On this type of page you are going to really have to sell. And I mean really sell yourself & your benefits. This is the hardest type of page to produce. BUT, at the same time, they produce the best kind of prospects for you.

The best of all is to mix these two strategies together in your Squeeze Page.

Best eMail Marketing,

Damen

Autoresponder should be used in your day-to-day online marketing activities. It helps to convert a stranger who comes to your website for information into your loyal customers. How and Why?

Autoresponders works in the underlying theory that trust could be built between two strangers if they start to communicate. The trust tends to be accumulated every time you approach your potential customers and give them more information about yourself, your product, your services or your opinion on something you two have shared interest.

Once there is trust, you can start your process of converting them into your paying customers. And this is a demonstration of the simple theory of converting a stranger in Internet into your revenue-generating customer.

So theoretically you can send them several self-written messages yourself once you have acquired a customer contact (by opt-in marketing techniques in mailing list management. Refer to another post Use Squeeze Page to get subscribers). You can do this manually by sending them email messages day by day after they have opt-in your email list.

But this process could be tremendously tedious if you have many new customers everyday. (Imagine if you have several lists that capture hundreds of customers everyday, can you send each of them a personal message the first day and days after?). This is the reason we need autoresponder.
It works by automatically sending a daily message (or in whatever interval you decide) to each of your new customer by a pre-written series of messages. In this way, your new customers experience an illusion that you personally send each of them a follow up message every day. And hence the process of conversion can be done automatically without you lifting your own finger.

To understand this service, try this experiment. Subscribe to my autoresponder experiment here

(No worry, I am not going to sell you anything nor would I keep your email address after this experiment). Go ahead and you can stop the sequential messages I am sending anytime you want by clicking the unsubscribe link at the end of each message.

And tell me your feeling right after this experiment by posting your comment here at this blog post.

There are free services available in Internet for autoresponder. Here are just two examples:

http://www.freeautobot.com/

http://www.sendfree.com/

Best Conversion in Your Internet Marketing,

Damen

Over Optimization – SEO guys – Be Careful!

Webmasters who have been doing Search Engine Optimization (SEO) should know about the importance of inbound links to their websites. People come to build inbound links by participating in link exchange programme or buying inbound links from websites of high page rank.

It helps boosting your page rank if you plan and carry out diligently the tedious tasks of link building for your website. But one thing you have to be careful not to ruin your good work. It is: you have to be careful about choosing the anchor text (or called link text) that the sites have put in to describe the link to your site.

Why? It is because search engines start to analyze those link texts and decide if those links are naturally built or artificially built.

How? Naturally build link text should vary in its description for every link that points to your site. Artificially built link text is not. A web master could easily negotiate and work with a dozen web masters requesting them to place a link to his/her website with exactly the same description in their link text.

Search Engine works in picking up this clue now. If it notices that there are exact wordings or descriptions in most of the links to your website, it could trigger its link discount algorithm to reduce the metric of page rank contribution of those links. The worst of all, if it concludes you are undergoing some search engine spamming tactics, your site could be de-listed from its listing forever.

So be careful when you setup your website link exchange page. When you invite other webmasters to exchange link with your site, you’d better advise each of them to use different link text in the links that point to your site.

Actually the mutually two-way link exchange tactic is losing its value as more and more webmasters are doing the similar thing. Search Engines are discounting the values of those mutually linked websites’ inbound links. Think about other tactics like buying inbound links and article submission with resource box of your websites.

Try this service to learn about the inbound links’ anchor text to your website.

PageRank Toolbar from Google:
It returns page ranking rated by Google when you visit a particular website’s page
http://toolbar.google.com

Alexa Toolbar from Alexa.com
It returns the traffic ranking of a particular website you visit
http://download.alexa.com/index.cgi

Alex does not offer toolbar compatible with Firefox. If you use Firefox, please refer to their information page to install 3rd party Alexa toolbarfor Firefox:
http://www.alexa.com/site/help/?index=127

Get used to using them in your web browsing. You’ll soon get yourself the power to distinguish good sites from bad ones.

A study held by Stanford University and Poynter Institute confirmed that text is the preferred “entry point” of a webpage for web surfers.

Is it surprising? It may be as many people regard graphic should be more visually appealing than text to normal web surfers.

I’m not surprised, however. Why? There is a much larger experiment on earth that confirms the finding in this research. It is the Google Adwords program.

When Google first launched its Google Adwords program, there was an intense internal debate whether it should go for the format of banner-based advertisement or text-based advertisement. Though with much uncertainty, it decided to go for the text-based one.

And the rest is history. Google becomes the number one online advertising company. Web users are attracted to click on the text-based advertisement showing at the right hand side of the search result page that helps boosting Google’s online revenue. As a frequent web surfer and Google’s search user, I click on those advertisements many times where I’ve found interesting or useful and I guess you have done similar thing as me.

So it confirms that “text” is more important than graphics in your webpage.

Would that conclude Banner Advertisement “dead” in the present finding? Unlikely if you read carefully the research results of the Stanford’s study: Here is the link:
http://www.poynterextra.org/et/i.htm