Chapter 11: Maximize Your Profits

Chapter 11: Maximize Your Profits

Welcome to Phase 4: Store Operations. In this phase, we'll be covering everything that has to do with running your store.

Chapter 11 is all about maximizing your store's profit. Your site is now built (Chapter 5) and launched (Chapter 6), and you're hopefully starting to establish some good rankings in Google to drive organic traffic to it (Chapter 9). You should also be using paid advertising (Chapter 8) and other techniques to drive direct traffic to your store (Chapter 10). We've talked a lot about driving traffic to your site. Now it's time to switch gears and focus on increasing your conversion rate as well as your average profit per order to turn all of the traffic you're getting into more dollars in your pocket!

Profit Formula

A lot of site owners seem to equate profitability with traffic. They focus exclusively on driving more and more visitors to their site. While traffic is clearly important (as evidenced by the fact that we devoted an entire phase - comprising 4 chapters - of our training course to it), traffic is just 1 piece of the profitability puzzle. But there are 2 other factors that make up the profit formula...

Profit Formula

Please notice that there are 3 factors (multiplied together) that determine how profitable your store will be. Traffic is just 1 of the 3 factors! If you increase ANY ONE of the 3 factors, you will increase your store's profit. It's true that doubling your traffic will double your profit. But so will doubling your Conversion Rate! And so will doubling your Profit Per Order! Don't make the mistake of getting so caught up with increasing your traffic that you forget about the other 2 factors, which are equally as important as traffic in the profit formula.

Like I said, Chapters 7-10 were all about driving traffic to your site. Here in Chapter 11, we're going to focus on the other 2 factors in the profit formula: 1) increasing your conversion rate, and 2) increasing your profit per order. Maximizing these 2 factors is typically a lot easier than increasing your traffic level, and like I said before, they have just as big of an impact on your bottom line. So let's get to it!

Maximize Your Store's Conversion Rate

Your conversion rate is simply the percentage of visitors who do what you want them to do. So in the case of an eCommerce store, we're usually talking about the percentage of visitors who place an order. If 1 out of every 100 visitors buys something, you have a 1% conversion rate.

Maximize Your Conversion RateSorry for beating a dead horse, but remember that doubling your conversion rate will have just as big of an impact on your bottom line as doubling the number of visitors you get. If you currently get 100 visitors a day resulting in 1 sale, you can double your profits by either...

  • Increasing your traffic to 200 visitors a day and maintaining your same 1% conversion rate (which will result in 2 sales a day), or
  • Maintaining your traffic of 100 visitors a day and increasing your conversion rate to 2% (which will also result in 2 sales a day).

Which is easier to do? The answer is almost always doubling your conversion rate! Seemingly small changes to your site can have a HUGE impact on your conversion rate and lead to double or triple the number of sales without any increase to your traffic level. Sounds pretty important, right? It is! So let's talk about how to do it...

Step 1. Avoid the 7 "Conversion Rate Killers"

You've heard of the 7 deadly sins, right? Well, I've put together a list of 7 deadly sins in the world of ecommerce. I call them the 7 conversion rate killers. Before even bothering with anything else, you should first go through and make sure you're not guilty of ANY of these all-too-common conversion rate killers.

The 7 Conversion Rate Killers

Step 2. Use A/B Split Testing to Continually Improve Your Conversion Rate Over Time

Okay, at this point you should be 100% free from all of the conversion rate killers. Right? (If you're not, stop reading and go back and take care of any you're not good on. Step 2 is pointless if you're committing "conversion rate suicide" by being guilty of one or more of the conversion rate killers above.)

Use Split TestingAvoiding the conversion rate killers is a good first step, but you're far from finished. In fact, you should never really consider yourself "done." You should constantly be working to increase your conversion rate, testing out a whole bunch of different ideas to see what effect they have on your conversion rate. In the upcoming section, I'll explain how to use "A/B split testing" to methodically go about increasing your conversion rate over time. Week by week, month by month, your conversion rate will continue to climb, meaning you'll continue to make more and more sales with the same amount of traffic (or, better yet, your sales will go up dramatically as you're increasing both your conversion rate and your traffic)!

Pro's Edge: Coach's List of Ideas for Boosting Your Conversion Rate

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Pro's Edge: How We Doubled Our Site's Conversion Rate Overnight!

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Coach's Expert Site Review Service

Over the last decade, we've run over 60 profitable eCommerce stores ourselves... and coached and mentored thousands of store owners. So yeah, we've been around the block a time or two! 😉 We have A LOT of experience with conversion rate optimization, and we'd love to put all that experience to work for you. When you order an expert site review, we'll carefully review your website and prepare a custom report detailing specific action items you can take to boost your conversion rate. Most clients report that their expert site review pays for itself within a couple of weeks! Click here to learn more about our Expert Site Review service.

A/B Split Testing

In the section above, we talked about 2 steps for maximizing your conversion rate. Step 1 was to make sure you're not guilty of any of the 7 conversion rate killers, which you should now be good on. Step 2 is to use A/B split testing to continually improve your conversion rate over time. Here in this section, I'm going to show you how to actually do that.

What is A/B Split Testing?

The concept is very simple...

  1. Version A vs Version BSet your pricing, design, content, settings, etc. the way you want them (this is Version A).
  2. Leave everything as-is until you've had a certain number of visitors (i.e. 1,000 unique visitors).
  3. Analyze Version A's key performance metrics (i.e. conversion rate, average order amount, total profit, etc.) over that period.
  4. Make a single change, leaving everything else as-is (this is Version B).
  5. Leave everything as-is until you've had the same number of visitors for Version B as you had for Version A.
  6. Analyze Version B's key performance metrics and compare them to Version A's key performance metrics.
  7. Declare a winner (Version A or Version B) and introduce a new challenger.

A/B split testing is the key process you'll use to systematically improve your store's conversion rate over time. You should always be running split tests. Once you establish a winner between Version A and Version B, you should immediately replace the loser with a new challenger and start a new A/B split test.

Keys to Making A/B Split Testing Accurate & Effective

Think of A/B split testing as a lab experiment. In order to get accurate results you can truly rely upon, you need...

  • Keys to Accurate A/B Split Testing ResultsA large "sample size" - The testing periods need to be long enough to have a large enough sample size to be able to trust that the results weren't just anomalies (1,000+ visitors is ideal).
  • A single variable - You should only make 1 major change at a time (i.e. 1 major difference between Version A and Version B). If there is more than 1 variable at play, you won't know which variable was responsible for the change in performance.
  • A controlled environment uninfluenced by "outside factors" - It's important to try to have the 2 testing periods (for Version A and Version B) be as similar as possible (ideally, Version A and B should be running at the exact same time). Seasonality, holidays and even weekly/monthly cycles can greatly affect performance and skew the results of your tests.

A/B Split Testing Software Simplifies & Speeds Up the Process

A/B split testing software makes the process of increasing your conversion rate so much easier than trying to do it manually. First (and most importantly), it allows you to run Version A and version B at the same time. So on any given day, 50% of your visitors will see Version A and the other 50% will see Version B. This ensures that all of the conditions are identical so you know there aren't outside factors influencing the results. You know for a fact that you're comparing apples to apples.

Almost all A/B split testing software has built-in tracking and reporting, which greatly simplifies the process of analyzing performance and declaring a winner. Instead of using spreadsheets to track all of the key performance metrics manually, the software will do it all for you.

There are quite a few A/B split testing software solutions available. We'll have some recommendations for you soon.

Monthly Site Reviews

Periodic Site ReviewsIn addition to your ongoing A/B split testing (or in conjunction with it), you should also conduct a monthly site review to analyze your store's overall performance, analyze trends and set goals and milestones. It's really easy to get caught up in the day-to-day grind of marketing and operating a store and to lose sight of the "bigger picture." Monthly site reviews give you the opportunity to take a step back and think about what direction your store is heading and how you can either get it back on track (if it's heading the wrong direction) or expedite your success (if it's heading in the right direction). Failing to do regular internal site reviews can result in weeks and weeks (or even months and months) of "spinning your wheels"... working really hard but not getting much benefit.

Back in Chapter 6, I walked you through the process of creating a Google Analytics account and inserting the tracking pixel into your store's template. So Google should be tracking all kinds of useful statistics about your site and visitors: how many visitors you're getting, where they're coming from, which pages they're visiting, how long they're staying and so on. This statistical information can be extremely useful to you, but you've got to know where to find it within Google Analytics and what it means to you.

Pro's Edge: "Unlocking the Power of Google Analytics"  Pro Webinar Replay

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Your store's admin panel will also have several reports you should take a few minutes to look at during your monthly site review. We've found that Google Analytics seems to be the best source for looking at traffic data (i.e. number of visitors, where they came from, which keyword phrases brought them to your site, etc.), but your shopping cart's reports tend to be the best place for analyzing product-specific information (i.e. number of purchases, number of cart-adds, number of page views, etc.). You should really be looking at both Google Analytics and your shopping cart's reports to get a clear picture of how your store is doing.

If you're utilizing PPC advertising (as covered in Chapter 8) to drive traffic to your site, you should be analyzing your ads' performance on at least a monthly basis... and during your monthly site reviews is a great time to do it.

Another thing you should do during your monthly site reviews is log in to your Google Webmaster Tools account (which you also should have set up in Chapter 6) and make sure everything appears to be in order. Quickly check to make sure you don't have any crawl errors, broken links, duplicate meta titles or messages from Google about problems with your site.

Sounds like a ton of information, right? 🙂 It is, but never fear... we've put together a handy-dandy spreadsheet that helps you organize and make sense of all this information. It shows you where to get each piece of information (Google Analytics vs. store admin panel vs. AdWords and other PPC engines) and then runs a bunch of calculations for you to reveal several key performance metrics (including month-to-month trends). The Pro's Edge box below contains a link to download this spreadsheet and also goes over what each performance metric means.

Pro's Edge: Monthly Site Review Analysis Spreadsheet

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Maximize Your Average Profit Per Order

Alright, in the last couple of sections, we've talked all about increasing your store's conversion rate in order to turn more visitors into paying customers. Now let's shift gears and talk about the 3rd factor in the profit formula: Profit Per Order. Just to refresh our memories, let's take a look at the profit formula one more time...

Profit = Visitors x Conversion Rate x Profit Per Order

Believe me, I'm no mathematician 🙂 ... but I do know this: the fact that the 3 factors are multiplied together means that they're equally important and have the same overall impact on your bottom line. My point is that increasing your average Profit Per Order will have the same impact on your net profit as increasing either of the other 2 factors.

I've got 7 core ideas (I'm sure you can think of spin-offs for several) for increasing your average profit per order, which we'll explore in the Pro's Edge box below. Not all of them will work for every niche. For your particular product line, it's quite possible that only 2 or 3 of these ideas will be relevant or feasible. So definitely don't feel like you need to find a way to test out all of these ideas. Just cherry-pick the ones you like that you think will make sense for your niche and target audience.

Pro's Edge: 7 Ideas for Increasing Your Average Profit Per Order

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Explore Growth & Expansion Opportunities

Alrighty, we've now talked in great detail about maximizing each of the 3 factors that make up the profit formula. So we're done with that. But before I close out this chapter, I want to take just a few minutes to discuss a handful of growth and expansion opportunities to make your business more profitable. I'm feeling kind of lazy right now, so I'm just going to give it to you in bullet-list format. 🙂

Add More Brands or Product Lines

  • Consider adding complementary product lines available through your current supplier
  • Contact other suppliers in your niche (even if they turned you down initially) to set up a reseller account with them
    • Target the most popular, best-selling brand names first
    • It's much easier to talk them into setting you up with a reseller account now that you have an established site getting a fair amount of traffic & sales
    • Your dialogue can now be: "I'm the owner and operator of [YourDomain.com]. My site gets over XXXX visitors and makes a good XX sales per month. Right now, all of those sales are going to your competitors since we don't currently offer your brand. Would you please set me up with a reseller account so I can sell your products instead?"
  • By offering more brands and/or product lines, your conversion rate will increase because:
    • The average shopper is more likely to find the product that meets their needs
    • Shoppers can purchase all related items from your store (rather than buying just 1-2 items from you & then having to find another store to purchase the rest of the related items they want)

Sell in Popular Selling Marketplaces

  • Expand Selling MarketplacesMost popular marketplaces: Amazon, eBay, Etsy, Facebook & Pinterest
  • Most of these marketplaces charge "transaction fees" or "final value fees" (and some of them also charge "listing fees" and/or monthly fees) which will decrease your profit margin, but they can still increase your bottom line
  • You can basically look at these fees the same way you look at PPC fees; they're simply a type of advertising expense
  • Test out these marketplaces the same way you would test out PPC advertising opportunities
  • We've had stores where close to half of our total sales volume came through these selling marketplaces
  • We've also found that our "direct traffic" (i.e. visitors who come directly to our store by typing our domain name right into their web browser) increases substantially when we are selling at these marketplaces, which obviously increases our main store's traffic & sales as well

Expand Your Keyword Reach

  • Similar to what you did in Chapter 6, do expanded keyword research using Niche Finder Pro to identify additional keyword phrases in your niche
  • Before, you probably just did keyword research based on brands and products you already carried
  • Now, look for keyword phrases containing other brand names and/or other product model names/numbers (even if you don't currently carry it)
  • Also do keyword research for highly complementary product lines you could add to your store
  • Also look for lower-volume keyword phrases you can target on specific product pages or on blog posts or buying guide articles
  • Now that you have a well-established site with some decent domain authority, you can get a little more "aggressive" with going after keyword phrases with a slightly lower Can I Rank? score

Consider Building a New Store

  • You don't want your store to be too "nichey" but you also don't want it to be too broad either
  • You may also want to launch a 2nd store targeting a different "segment" of the market (different target audience, different price point, etc.)
  • Sometimes your best option for expanding your business will be to build a new store (either in the same general market OR in a completely different market)
  • You can re-use a lot of the same things you set up for your 1st store (and share most of the overhead costs), including your business entity, merchant account, toll-free number, live chat account and customer service employee/set-up
  • Building your 2nd store will be much faster and easier than building your 1st store was

Outsource Time-Consuming Daily Operations

  • Outsourcing OptionsYour growth will be limited by how much time you're able to spend doing high-level tasks that a) increase rankings & traffic, b) increase your conversion rate and c) increase your profit per order (the 3 components of the profit formula)
  • Many store owners are too busy with day-to-day operations to focus much time on these "growth drivers"
  • One of the best ways to grow your business is to outsource the daily operational tasks so you can use your time more effectively
  • We'll explore several outsourcing options in Chapter 12