Components of Conversions

Being focused more on the lead generation side of online advertising I often view the world myopically. That was the case last week until I received a question that warranted some additional perspective. Someone asked, “How important are conversions that were initiated by a search, but actually converted maybe 2-3 days later? Do you measure this and include it in your search cost per lead calculations?” These questions make up an important topic, one that many in lead generation and other areas of direct marketing take for granted. I know I have, which is why the components of conversions are the focus of this post

Components of conversions are really the study of behavior. It is part of a broader dialogue that deals with understanding how customers make their decisions and using that information to communicate more effectively. The challenge, and we try to solve, here is providing a framework that can be applied to other industries and verticals as they look to make sense of this behavior.

Granularity and immediacy of feedback has long been an Internet advertising selling point. Companies do not have to wait three to five weeks to determine if one segment did better than another or whether that particular buy made sense. Even the Internet, though, offers different levels of feedback. We can plot these levels on a spectrum from immediate feedback to delayed feedback. Those businesses that exist on the immediate, are those that know exactly what they make within a short period of time, say a few hours. On the other end of the spectrum, would be companies where acquisition and an understanding of a particular click / customer’s worth occurs after a lengthy delay, e.g. an Amazon.com customer or new car purchase.

Lead generation, as an example, falls toward the left hand portion of the spectrum, very close to immediate. This implies that calculations for search or other acquisition campaigns do not need to take into account delayed transactions. Determining whether or not delayed transactions play a significant role at all is something that, as mentioned before, those in the online ad space often take for granted, or don’t consider, given the singular nature of their product. For everyone else, presented below is a way to help assess where their product / service fits on the spectrum if they don’t know already (or just want to double check).

Example 1: Components of a Conversion – Solving the latency issue by determining whether to account for the existence of delayed conversions in a conversion.

The four major aspects to any given transaction:

• Time commitment / Comparison behavior– length of time needed to complete the transaction. Is it spontaneous or deliberate? For example, on one end would be a lead form where it takes two minutes or less to complete, and no real consideration whether to do it; on the other end would be a big ticket item where people will often think it over, do comparisons on it, etc.
  

   
• Financial commitment – how much money is required. Is it just your attention and personal data, or do you need at least a credit card, perhaps a loan where there are recurring payments with an often lengthy pay-back period.    
   
• Need for Permission – level of input needed by others in order to complete the transaction. Is it something you can do yourself or do you need to consult with a parent, spouse, etc?    
   

• Repeat Usage – the likelihood that users who convert, will convert again. Are you a single serving site or someone that maintains an ongoing relationship? Incentive promotion sites see people once; Amazon.com customers order from there again and again, on average.

The components above help illustrate why most lead generation sites do not need to account for delayed conversions and why performance data from search engines can be used as-is. More specifically, with most lead generation campaigns: a) Time Commitment is low (it takes two minutes); b) Financial Commitment is low (no credit card, only common information); c) Need for Permission is low (most fill it out if they decide they want to); and d) Repeat Usage is low (people who fill out the forms tend not to bookmark or come back later).

While lead generation is not easy, it is at least straightforward. Unfortunately, as the assessment above illustrates, that does not hold true for sales based businesses, e.g. electronics and other larger items. In these cases, web analytics play a critical role as profitability off initial click becomes near impossible to determine. Companies must track and really learn their customers. It will mean monitoring online and offline actions, but in the end it will lead to smarter spending. The good news is that the further right you get on the spectrum, often the more you can make per person, so those in lead generation looking to increase their yield can start moving further “right.”