Not long ago, I was out for a run, except that the Dallas heat drove me to run around the indoor track at the local university fitness center. That’s a great place to run because there are rarely more than one or two others using it (and I get to watch basketball going on below!).
On this particular day, I was running, and another runner approached and passed me. I am by no means a speedster of any kind, but sometimes when someone passes me, regardless of who it is, I start wondering if I should be keeping up with them. Is this person young or old? Overweight or fit? Are they dressed like a serious athlete or do they look like they’re out for the first time all year? Do I think they’re doing one mile or ten? Should I be keeping up with them? Going faster?
Businesses Do This All the Time
What I was doing in that instance was benchmarking my running. I know about how fast & far I’m running. Is that good or bad? Should I be thrilled or frustrated?
Companies do this all the time. They look not just at their bottom-line numbers like Revenue & Profit, but also ratios & percentages like Return on Investment, Debt to Equity Ratio, Contribution Margin, etc.
We’re no strangers to this in the Conversion Optimization industry. We closely watch things like Conversion Rate, Revenue per Visit, Bounce Rate, Email Open rate, and more.
And percentages & ratios were invented to compare to those of others!
So one question I hear all the time from clients and potential clients is this: “Is my [insert metric here] good?” Is my Cart Abandonment Rate too high? What’s a good Conversion Rate? How does my Subscribe Rate compare to other companies?
It makes sense. You always want to know not only how you’re doing, but how you’re doing compared to your competition.
Benchmarks Are Great…
It’s important to keep your eyes on the key metrics. And I always preach, “Focus on the metrics as close to the bottom-line for the company as possible.” This means focusing on things like orders and total online revenue most.
And like I say, it’s natural to try to compare those numbers to what others are doing—especially your competitors.
But it’s extremely difficult to get that competitive information. After all, you’re not out broadcasting your Conversion Rate to the world are you? No, companies keep their strategic data close to the vest, as they should.
So instead you have to rely on things like (often outdated) industry studies and anecdotal information to get an idea of how you compare to others. In the end, the data you’re trying to compare to is inaccurate, and frankly, unimportant. I mean, if your Conversion Rate is 2%, how will your strategy change if you found your competition’s was 3%? Would it be any different if your competitions Conversion Rate were only 1%? Benchmarks are great but…
But You Should Benchmark Against Yourself
I’m a big fan of focusing on what you can control. And you can’t control your competition’s numbers. But even if you could, that probably wouldn’t affect your own numbers much. And that’s what you really want to focus on.
Let’s go back to the running example for a minute. There are millions of people who run. Each one of them is very different. They all have different levels of experience, are in different states of health, have different athletic abilities, and different objectives. There is absolutely no way you can look at a stranger running past you and know whether or not you should be running as fast.
What you should be paying attention to is how you are improving yourself. Are you getting faster over time? Are you able to run farther? That improvement is what you’re looking for.
The same is true for businesses & organizations. If your conversion rate is 2%, what was it last month? What was it this month last year? Have you been stuck at 2% for the past 24 months? Forget about trying to figure out what your competitor’s Conversion Rate is, or what you think it is for your industry.
There are so many variables unique to your situation which affect your numbers differently for you than for other operations. Are your items extremely high-priced? Do you have a loyal base of customers who reorder often? Did you just redesign your website? Is yours a product/service that people think about or need while they are at their desk, or out in the field? These are just the tip of the iceberg of factors that can have a very significant positive or negative effect on various numbers in your website metrics.
Instead of trying to normalize for those factors so that you can compare to some estimated industry average, just focus on improving your own numbers.
A Process of Constant Improvement
What are you doing to improve your numbers? If your Conversion Rate is at 2%, whether you think that’s good or bad doesn’t really matter. What you should be thinking about is how you can take it from 2% to 3%!
Take a look at your metrics, and think about what you know about your site and your customers. Where do you think are the biggest opportunities to get some immediate improvement? Maybe it’s your Conversion Rate.
Is your desktop rate much higher, but your mobile rate is dragging things down as more and more visitors come to your site on phones? Are you properly leveraging your highest-converting sources? Are your top-selling products/services featured prominently enough? Are there trust issues that could be resolved?
Tackle one or two of those areas and make changes that you think will improve that situation. If you have the traffic, A/B test the changes. But if you don’t have the traffic to prove statistically the improvement, by all means still make the changes and see if you can notice an improvement in your numbers. Achieving improvement is more important than achieving statistical significance.
If things didn’t improve, that’s okay. Try something else. If things did improve, great! Now look for the next way to nudge the numbers higher. Maybe this time, you’ll attack your Cart Abandonment Rate, which if reduced, will result in improvements in Conversion Rate, and more importantly, Revenue.
This process of constant improvement is the philosophy around which winning organizations base their activities. Nice to know how your friends are doing. But better to know that you’re doing better than last week/month/year, and that your future is even brighter!