The case for an optimization budget

The Adobe 2013 Digital Marketing Optimization Survey received global responses from more than 1,800 digital marketers across North America, Europe, and Asia. With a focus on business-to-consumer and businessto-business commerce, the report explores the key areas in which digital marketers need to excel to ensure success, including mobile, social, personalization, and customer experience.

A recent article from Econsultancy asked whether 2013 will be the year of conversion optimization.1 In a world where a small uplift in conversion rates can translate into millions of dollars of extra revenue for businesses, would this be the year that companies finally grasp how incremental improvements in digital performance can pay significant dividends?

The survey data suggests that we still haven’t reached a tipping point, even though the evidence below points to a competitive advantage for those companies making this investment.

Figure 1 below shows that the majority of companies surveyed spend 5% or less of their total marketing budget on optimization activities, including agency fees, professional services, and technology. In fact, more companies are now in the lowest tier of spending (5% or less), increasing to 53%, compared to 48% of respondents from last year’s survey.

In total, 86% of companies surveyed allocate 15% or less of their marketing budget to optimization activities, including the 53% who allocate less than 5%. At the other end of the scale, only 3% of respondents allocate more than half of their marketing budget to optimization efforts.

Figure 1: What percentage of your total marketing budget is allocated to optimization activities (including agency fees, professional services, technology)?

With the bias toward ploughing marketing budget into media-thirsty marketing activities higher up the funnel, it is no wonder that conversion rates are so low for so many companies.

Figure 2 shows that the average site conversion rates are below 1% for 35% of the companies. But Table 1 shows that companies spending more on optimization are reaping the benefits, with those investing more than 25% of marketing budgets in this area being twice as likely to enjoy higher levels of conversion rates.

Figure 2: What is your average website conversion rate?

In Table 1 below, we see that only 16% of those who allocate up to 25% of their marketing budget for optimization enjoy average website conversion rates of 5% and above, compared to 39% of those who allocate more than a quarter of marketing budget to this area.

Table 1: Average website conversion rates and proportion of marketing budgets allocated to optimization.

More than half of North American companies allocate less than 5% of their marketing budgets to optimization, while only a fifth allocate between 6% and 10%, compared to 27% of their European counterparts. Despite this, North American respondents are more likely to indicate high levels of conversion rates, with 10% saying that their conversion rates are 9% or above.

What is holding back investment in optimization activities?

As well as best-of-breed technology, the right processes need to be in place and, crucially, the right people with the right skills within the business need to be incentivized to improve digital performance. Businesses need to instill a culture of testing and robust analytics, with a microscopic focus on measuring incremental improvements to justify further investment in resources and technology.

The good news is that the technology and tools to optimize digital marketing performance are becoming more user-friendly, enabling quick wins from multivariate and A/B testing of different variations of creative, images, layouts, videos, and calls to action.

Marketers are also getting better at using both real-time behavioral and existing customer data to segment website visitors, targeting the right content at the right visitors at the right time.

Invest in the test—marketers take control

Optimizing conversion rates hasn’t always been easy: it’s detailed, can be repetitive, requires a lot of iterations, and can even cause political battles. But what most don’t realize is that it’s one of the most rewarding efforts if prioritized and done strategically.

Although testing is the core of any optimization program, Figure 3 demonstrates that for 49% of the survey respondents, testing is not yet a priority at their company, with only 11% indicating that testing has been adopted as a form of decision-making company-wide (up by only 1% since last year’s survey).

While it still looks like quite a bleak picture, it is worth noting that marketing is increasingly leading the charge, with 16% of respondents saying that marketing departments have adopted testing as a form of decision-making.

Figure 3: How would you describe your organization’s current approach to testing?

More than half (53%) of survey respondents describe their testing process as manual, while 9% say they either don’t test or haven’t implemented a testing process.

Only 32% of respondents in Asia Pacific suggest that testing is not a priority at their company, compared to 54% of their North American and 46% of their European counterparts. They are also almost twice as likely to indicate that marketing departments have adopted testing as a form of decision-making. However, when looking at primary testing processes, respondents in Asia Pacific are also least likely to say they either test or implement a testing process.

When looking at the bigger picture, only 12% of those who don’t have a testing process or don’t run any tests enjoy average website conversion rates of 5% and above. Table 2 shows that average conversion rates are below 1% for 59% of the companies who don’t invest in testing or don’t have a strategic, structured process in place.

Table 2: Average website conversion rates and testing processes (cross-tabulation)

What are the main barriers to adopting or improving testing processes? Survey results reveal that budget and resource availability have remained the most challenging areas when it comes to testing, with just under half (45% and 42%, respectively) of digital marketers saying that they are “very challenging.” Knowing how to test effectively is the third most challenging area, with 82% of respondents saying that this poses a challenge for their organizations.

European respondents are least likely to perceive testing processes that are not scalable or manageable as a challenge, with a quarter saying that this is “not at all challenging,” compared to 19% of North American and 16% of European respondents. When looking specifically at organizations who haven’t made testing a priority yet, budget emerges as a major challenge for 53% of the respondents.

Figure 4: How challenging are the following when it comes to testing?

When looking specifically at organizations who haven’t made testing a priority yet, budget emerges as a major challenge for 53% of the respondents. This is followed closely by knowing how to test effectively, with half of those companies saying that this is very challenging.

At the other end of the spectrum, organizations who involve multiple departments in the testing process are most likely to say that determining the significance of test results is not a challenge for them (29% compared to around a fifth of those for which testing is confined to one team).

Companies should start with small wins and grow from there. It’s about optimizing every interaction and every conversion event that move the customer to the end goal. In fact, failed tests are just as impactful in the lessons learned.

The practice of optimization is not only about the small changes you can make to improve the way a user experiences your website. It is also about how the company itself approaches it. If each department runs small tests with different agendas and optimization goals—mainly to validate their own investment decisions instead of making a real difference—the result will likely be an inefficient use of resources. Adopting a crossdepartmental approach to testing can improve the chances of higher levels of conversion rates. A third of the companies in which multiple departments have input in testing processes say that their conversion rates are 5% or above, compared to 18% of all companies, as shown in Figure 2. Similarly, 28% of those who adopted testing as a form of decision-making company-wide are enjoying conversion rates of 5% or above.

However, this doesn’t mean that you need to promote and facilitate testing in the whole organization from the very beginning. This is no small feat, and most will resist change. But involving key people or groups and, most importantly, explaining to the rest why and how you are doing this, is a great starting point.

Unique audiences deserve unique content

Content is the engine of inbound marketing. The techniques that attract attention instead of demanding it are growing in importance as the efficiency of paid media erodes. The new emphasis on engagement means that marketers should view how they target and deliver content as a strategic capability within their optimization program.

Looking at the statistics below, it’s clear that most companies still largely rely on individuals to decide how, when, and where content is delivered.

• In just over half (51%) of the companies surveyed, marketing executives (vice presidents or higher) typically determine which promotional or marketing content is displayed on their sites and in their marketing communications. Respondents in Asia Pacific are almost twice as likely than their North American counterparts to say that heads of online marketing determine how content is displayed (38% compared to 22%).
• According to the vast majority (87%) of digital marketers surveyed, less than half of their onsite visitors receive targeted content, including 65% who say they receive less than 20%.
• Around a fifth (22%) of survey respondents automate the personalization of content to site visitors based on their profile or behavior, up by 5% since last year’s survey.
• More than half (55%) of digital marketers say personalization is “very” or “somewhat” important to the long-term goals of their organization, with North American respondents being more likely to say that this is very important. Over half (53%) of APAC respondents say that this is not important.

Figure 5: Who or what determines which promotional/marketing content is displayed on your site and in your marketing communications?

Today, content is managed in very organic ways, but every other scaled digital tactic has eventually migrated toward automation. Will content evolve in the same way? Technologies certainly exist, but is there a requirement for most organizations?

The real question, at least for most consumer-facing organizations, isn’t if but when. The surge in usergenerated and inbound marketing content demands that marketers put rules in place to satisfy multiple audiences and to justify the costs of content in the first place.

Figure 6: What percentage of onsite visitors receive targeted content?

Even for organizations that don’t see themselves as heavy content marketers, it’s time to think ahead about how customers and prospects will be consuming content and the implications for personalization and optimization.

• Mobile—A theme throughout this year’s study is that mobile changes the personalization equation. A “nice to have” on the desktop, personalization is essential for mobile where users’ attention and ability to navigate is limited. Mobile also introduces location as a powerful variable for what content to deliver. For example, if a consumer is in a building supply store, that’s a more powerful indicator of interest than any demographic or third-party profile.
• Growth in content volume—As brands get drawn into becoming publishers, they face some of the same issues. One of those is volume. Consumer brands have been contending with the scale of their content efforts since day one, but going back just a few years, a B2B company that focused on lead generation might have offered only a few white papers. Today however, it’s likely that they’ve dramatically expanded their content assets, adding web events, videos for owned and earned media, podcasts, searchable slide decks, blog content and, of course, social and user-generated content. As the options grow, it becomes increasingly difficult to manually determine what belongs where at the site level, let alone for audience slices or individuals. Organizations have made dramatic leaps in the creation and aggregation of content, but all too often they don’t enjoy a long-term benefit: Content is premiered and featured for a short time and then left to sink into the depths of the CMS, where only highly specific searches can find it.
• Batch and blast doesn’t work—Digital attention spans are short; competition for attention is fierce; and expectations for easy relevance are high. That’s not an environment for one-size-fits-all. Fortunately, this doesn’t always mean serving entirely different content for specific audiences. It may simply require different packaging, descriptive language, or editing. Two-thirds of respondents indicated that their customers had a “very” (15%) or “somewhat” (42%) positive reaction to targeting and personalization efforts. Only 3% of marketers surveyed say that their customers have reacted negatively to their targeting efforts. Our analysis shows that companies that say their customers react “very positively” to their targeting efforts have higher conversion rates and invest more as a percentage of their marketing budget than others. Contrary to received wisdom in some quarters, targeting (done sensibly and appropriately) can improve customer satisfaction and conversion rates rather than ticking customers off.

Two-thirds of the respondents who target content to more than 65% of their visitors report conversion rates of 2% or above, including a third who say their conversion rates are at least 5%. This compares to 36% of those who say less than 20% of their onsite visitors receive targeted content. Only 13% of these report conversion rates of 5% or above.

Most sites do not deliver targeted content to most visitors, failing to take advantage of a number of powerful options for optimization. In fact, 65% of the digital marketers surveyed said that less than 20% of their audiences are served targeted messaging, as seen in Figure 6. User profiles, stated preferences, behavior, social graph data and, in some cases, location all provide meaningful foundations for business rules that help site visitors engage with content that’s meaningful to them.

The metaphor of content as a magnet is common—and accurate. But magnets don’t have equal pull. Optimizing content is the difference between a powerful pull on consumers’ attention and one that lets them easily slip away.

The untapped opportunity in testing site search

Site search hasn’t been the topic of much discussion or research in recent years, but it’s a fundamental aspect of findability and one that may well be getting more important. Conventional wisdom suggests that site visitors will choose navigation over internal search to conduct most tasks. But conventional wisdom doesn’t always reflect reality, and it can often miss changes in the marketplace.

A primary issue for marketers is ignorance. Over half are unaware of the impact of site search techniques beyond the baseline functionality of keyword matching. When looking at the effectiveness of techniques by region, European respondents emerged as least likely to say their onsite search is “very effective” based on high-converting items (26%) and top-rated content or products (16%).

With modest traffic figures on most sites, site search isn’t a priority, but there are reasons to believe that optimization of site search can have a significant impact today and a growing one over time.

Mobile is changing when we use navigation. Navigation works best when it offers specific routes to content. It’s in the nature of mobile site design that menus get compressed and simplified to keep real estate manageable on the small screen. With fewer menu options, users might be more likely to search for their specific content.

For similar reasons, mobile means more home page visitors and fewer clicks to destination pages. Studies of mobile searchers show that they’re more likely to click on only paid and top organic listings, probably because there’s less room (and patience) for a full page of results. That means that they’re more likely to find themselves on home and category levels instead of more deeply linked pages. The more general the page, the more likely site search is used to narrow the focus.

Not all visitor segments are created equal. Most sectors find their buyers conforming to some variation of the 80/20 rule, with the majority of purchases associated with a minority of customers. Depending on how that group behaves, site search could be less important than the gross traffic numbers indicate. Regular and returning customers might be more likely to use site search to find products they already know or expect on a site with which they’re familiar. The reverse might also be true. But without testing, it’s an open and important question.

Specific searches correlate with high conversion. Multiword (or long tail) searches tend to show higher conversion rates than more general ones, for obvious reasons. The first order of business is to determine whether that’s as true for site-search users as it is for deep-linked visitors arriving from external search engines. If this proves to be the case, there are opportunities for optimization on the specific purchase as well as adding to the overall value of the shopping cart. If it’s not the case, it’s worth finding out why before deciding on whether to invest in optimization.

Figure 8: How effective is your onsite search based on the following?

Figure 8 demonstrates that there are a number of effective options for optimizing site search results. Marketers who test these options may find that different audiences respond to different optimization techniques and that different scenarios call for different rules. For example, a retailer might aim for revenue maximization at the end of a quarter while seeking to move older inventory in the post-holiday period.

The first step for any type of site is to make a concerted effort to understand the current role of site search for different segments and evaluate the role it might play in growth.

The power of automated recommendations recognized, but underutilized

Displaying recommendations is often thought of solely as a merchandising strategy most applicable to e-commerce. While that is the typical application seen today, it certainly is not limited to digital commerce or retail. Consumers embrace content and item recommendations because they deliver value that is meaningful and practical. Organizations should embrace this power of suggestion; while helpful to the customer, recommendations are a proven way of dramatically improving engagement and conversion goals. Figure 9 reveals that while e-commerce businesses continue to lead in recommendations adoption, other industries such as media and financial services (with primary business goals excluding selling items online) are recognizing the value of automated recommendations and planning to implement this year.

Figure 9: Do you currently use automated recommendations in your business?

Whether suggesting articles based on a visitor’s previous reading patterns, help resources based on recent sign-ups, or presenting tempting cross-sell offers based on a shopper’s affinity for certain products, marketers across industries can leverage recommendations as a way to engage and converse with a visitor through to conversion. Despite this, 38% of digital marketers do not use any content or product recommendations, which is flat from 2012. Automated recommendations engines often provide marketer-control and flexibility to power delivery of relevant suggestions optimized for critical engagement areas of a website, as well as other digital channels such as mobile applications, social networks, and email. Yet, the survey data shows consistently year over year that for marketers deploying recommendations:

• Most are focusing on at top of funnel locations such as the home page, category pages, product pages, or article pages.
• Primary recommendations featured are top-selling or most popular and new items or content
• Nearly half do not optimize their recommendation strategies, and rely heavily on manual updates. Only 18% are using an automated approach.

Recommendations is a natural, yet underutilized personalization tactic. Combining marketer-defined and automated approaches to optimize relevant recommendations across channels encourages consumers to engage with a brand, builds confidence and loyalty, and removes barriers to initial and supplementary conversions.

The mobile laggard is ripe for disruption

A recent Adobe Digital Index report analyzing more than 100 billion visits to more than 1,000 websites worldwide revealed that tablets now exceed smartphones in global web traffic. Because consumers spend more time engaging with tablet devices, marketers should be prioritizing tablet-optimized experiences in 2013.

During 2012, the Adobe Analytics business observed a doubling of traffic from mobile devices, and this trend is reflective of many clients. However, almost half (45%) of digital marketers surveyed say their organizations don’t have a mobile-optimized site or mobile application, relying on desktop sites only. Only 7% have built mobile apps, and a fifth (21%) have implemented both a mobile-optimized site and a mobile app. By not investing in mobile channels, organizations risk being left behind as mobile consumers choose a competitor’s mobile-friendly experience.

Separate research exploring digital trends for 2013 showed that while mobile optimization is an exciting opportunity for 43% of the companies surveyed, only 30% consider it a top priority in 2013.

Figure 13: What type of mobile channel does your business have?

Figure 14 shows that average mobile conversion rates are below 1% for more than half (57%) of companies, including 41% who say they are below 0.5%. Further interrogation of the data showed that companies investing in mobile-optimized sites are three times more likely to be enjoying mobile conversion rates of 5% or above than those who rely on desktop sites. Not surprisingly, those who use both a mobile-optimized site and a mobile app are experiencing even higher levels of conversion.

As Asia consumers come online, they do so most often via mobile devices, leapfrogging the fixed Internet stage as seen in developed markets. It comes as no surprise then that APAC respondents indicate not only higher usage of mobile-optimized websites, but also higher levels of mobile conversion rates. Half (49%) of APAC marketers surveyed say that they enjoy mobile conversion rates of at least 1%, including 28% with conversion rates of 2% or above.

Figure 14: What is your average mobile conversion rate?

As shown in Figure 15, despite the correlation between the use of certain mobile channels and higher levels of mobile conversion rates, 30% of digital marketers consider mobile apps very effective at increasing conversion rates.

Survey data also suggest that advertising promotions, bar-coded coupons, and QR codes are most effective at having a positive impact on conversion rates, with the vast majority saying they’re “somewhat’” (49%) or “very” (34%) effective.

While large companies are already addressing the rapidly expanding mobile audience, most businesses are only dipping their toe in the water. The reasons behind the slow progress are various, ranging from not knowing where to start, to being bogged down in complex mobile initiatives that eat up a lot of time and budget.

If your organization has just started its foray into mobile, don’t start building a mobile site or app just because your competitors have. Engage with your analytics team and evaluate the mobile device types (feature phones, smartphones, tablets) that are visiting your desktop website and the trending of mobile traffic over the past year.

Bear in mind that low mobile-browser traffic might not necessarily indicate that your mobile audience is small. It could be that your website just doesn’t perform well on smaller screens, and this is driving visitors away.

Don’t build an app just for the sake of it. Focus on the goal of your mobile initiatives, prioritize your company’s needs, and choose a solution that can best address these needs now and into the future.

As the Digital Trends for 2013 report highlighted:

“To move forward in ‘mobile optimization’ means coming to grips with the reality that every experience we offer through digital channels—every web page, shopping cart and piece of rich content—must work well on any device in any location. The customer understands that concessions need to be made for the smaller screen, touchscreen input and slower speed, but they won’t accept unnecessary hassle or delay. Apps are a part of today’s approach to mobile, but they are not a broad answer to this challenge, as use of the mobile web increases daily.”

Figure 15: How effective are these mobile tactics for increasing conversion rates?

Many companies choose to focus on form over function, not realizing that a mobile site needs to address customers’ needs and facilitate the key functional requirements of the main site. If your visitors are typically looking for certain specs in product descriptions, make sure that you provide this information in a format that is easily accessible on mobile devices. Simple design and flawless execution are paramount.

In a mobile market that is evolving quickly, there are no guarantees that the choice you make today will be the right one for your organization in the future. But focusing on your overarching business objectives, user experience, and customer expectations helps ensure that the odds are in your favor.

Social at a standstill—the analytics gap

Chances are that social at your company hasn’t been a complete success. One reason is that the term includes a variety of internal and external activities on Facebook, Twitter, Pinterest, and YouTube as well as on owned media. At some organizations, social even includes display ads on social networks, though it shouldn’t. It’s a challenge to reconcile and understand the real impact of all those pieces.

The real problem is the gap between what marketers believe and what they know. Most companies still fly blind, equating limited and flawed measures (volume of followers, for example)—or no measures at all—with success or failure.

Figure 16: Which customer experience measurement and optimization tactics do you currently use?

In study after study, marketers report that it’s challenging to measure the return on their social efforts, and it’s not just a problem for smaller companies. Even at organizations with revenues over $150 million, 71% of marketers agreed with the statement that “measuring the impact of social media marketing is very difficult.”

This challenge breaks into two parts: the nature of social, and the tools we use (or don’t).

Social is becoming the defining channel of the inbound marketing age. It’s where customers meet the brand and the closest thing to a true two-way relationship that exists online. It’s where companies measure sentiment, deal with service issues, discover the problems and potential of products, and try to activate word-of-mouth marketing from their more avid fans. But for all that activity, social interactions tend to happen somewhere in the middle of the customer journey (or mid-funnel), not immediately before the conversion event. Few companies (6% of this sample) are in a position to conduct the kind of attribution modeling to understand the interactions between social and the other channels that are in the mix.

If companies are doing attribution at all, it’s most likely around the last click prior to purchase, and therefore, undercounting the influence of helping tactics, like social and email. The more common approach to measuring social is to apply analytics tools designed for the purpose. These range from free, limited approaches to enterprise-ready platforms, but collectively they still represent only 47% of the market, virtually unchanged since last year’s study, as Figure 16 shows.

On-site social activity, including tactics ranging from user reviews to social sharing buttons, does not garner as much media attention, but this is an area which can have a more direct and measurable impact on the bottom line than an off-site media presence. Of course, on-site and off-site social media activities are often inextricably linked, with the atomization of the web blurring the boundaries between owned, earned and paid for media.

The power of social sharing functionality is evident from Figure 17 which shows that changes to the way this is presented can have a bigger impact on conversion rates than a range of other elements that contribute to the digital experience.

Social sharing (social sharing icons on pages) is deemed to be the most effective test variable for increasing conversion rates, with two in five companies saying that this is very effective and a further 44% saying that it’s somewhat effective.

Figure 17: How effective are each of the following at increasing conversion rates?

By synchronizing off-site and on-site social media activity, companies are increasingly using social data to augment the implicit and explicit information they already have about website visitors. With a website visitor’s permission, marketers can drill into a rich well of social intelligence enabling, for example, publishers to recommend more relevant articles and retailers to showcase more appealing products.

Separate research carried out by Econsultancy and Adobe5 last year showed that personalization of the web experience using social data can be a very effective way of boosting ROI. According to that research, only 6% use social graph (i.e. Facebook) data for personalization, though 88% say the impact on both ROI and engagement is high.

Figure 18 below shows a range of social media strategies and tactics, and how effective they are at increasing conversion rates. Again, social sharing can be seen to be worth its weight in gold when it comes to boosting conversion rates. European respondents are most likely to find it effective, with 43% saying that it’s very effective (compared to 37% of all companies).

Figure 18: How effective are these social media tactics on your site in increasing conversion rates?

Social-specific technologies address a variety of different functions, from workflow and asset management, to sentiment analysis and full-blown customer relationship management (CRM) integration. But underneath all these must be the ability to associate customers’ social interactions with meaningful business goals. Vague definitions of engagement and follower growth are increasingly less likely to satisfy senior executives.

Marketers recognize a gap in their knowledge and seem poised to do something about it. Almost one-third of the sample reported their organization’s intent to implement some type of social media analytics. Marketing departments that don’t grapple with how to consistently evaluate what social means for them may soon find themselves in the worst-case scenario of being judged by the flawed benchmarks they’re using for lack of anything better.

Summary

Despite the need for and proven competitive advantages of digital marketing optimization, businesses still lag in prioritizing investment in such a strategic program. With optimization technology and marketer skills continuing to advance, it is becoming easier than ever to test, tailor, and deliver an enhanced experience throughout the customer journey that is guaranteed to make an impact to top- and bottom-line revenues.

As you plan your strategic marketing initiatives for the year ahead, it is important to consider these key takeaways:

• Testing is the core of any personalization and optimization program. Start with small wins, and expand efforts from there; failed tests are just as impactful in lessons learned.
• Optimized targeting breeds customer satisfaction and conversion. Leveraging consumer data such as stated preferences, past and current onsite behavior, social graphs, and location can assist in tailoring content that resonates with visitors and pulls them to interact.
• Site search is an untapped opportunity for optimization; navigation works best when it offers specific routes to content. By testing and tailoring site search tactics including keyword matching, promotion of high converting items, and user profile targeted results, you can unveil the optimal experience to deliver a visitor to maximize conversion and revenue.
• Automated recommendations is not just for digital commerce; all industries can realize the benefits of this natural personalization strategy. Powering relevant suggestions across all digital channels is a proven way to increase consumer engagement, confidence, and loyalty with a brand.
• Nearly every consumer is a mobile consumer—is your mobile presence optimized? Determine the goal of your mobile initiatives; look at your analytics; and decide which mobile tactics best address your businesses needs now and in the future.
• Don’t fly blind when it comes to social. Use moderation and measurement tools to guide conversations toward a positive impact for your business.