Web moves fast. Technology changes faster than Denver’s weather, and while the pace is exciting, it can also be overwhelming keeping up. I sometimes feel like a dinosaur because I’m not on Pinterest yet (gasp!).

But I’m ok with that, because I have a framework for prioritizing my web marketing efforts, and I’ve determined that while Pinterest has its merits, it would be a very small fraction of my overall marketing strategy.

Let me explain.

Your website’s revenues depend on three factors:

– Getting traffic

– Converting traffic

– Having a positive dollar value for conversions

Multiply those three numbers together, and that’s your revenue:

Revenue = T x CR x VC

Where:

T = Traffic

CR = Conversion Rate

VC = Value of a Conversion

For example, let’s say your site has:

– 10,000 visitors a month

– 2% conversion rate

– Conversions are worth $100 each

Your site’s revenues are 10,000 x 2% x $100 = $20,000/month

If any of those numbers on the left side of the equation are 0, you’re not making any money. Yet businesses spend a disproportionate amount of time and money on traffic alone. In fact, according to Bryan Eisenberg, for every $92 companies spend driving traffic to their sites, only $1 is spent converting it.  Ouch!

But those three factors – traffic, conversion rate, and the value of a conversion – are equally important.  Neglect any of them and you’re doomed.

Let’s drill down on each one:

1. Traffic is broken down into paid or earned (not free; traffic is never free).

   a. Paid traffic is like traditional advertising, where you pay for clicks on, or impressions of, your ads.

   b. Earned traffic is broken down into SEO or Social Media, where good content and strong networks matter.

      i.      SEO can be further divided into on-page vs. off-page efforts, as well as local and non-local rankings.

      ii.     Social media is divided into about a million different platforms – of which Pinterest is one.

2. Conversion Optimization is a systematic process of finding and fixing problems on your site.

   a. Finding problems consists of using web analytics to identify problems and gathering user feedback to figure out why those problems exist.

   b. Fixing problems entails creating hypothesis and running A/B or multivariate tests.

3. Value of a Conversion

   a. For ecommerce sites, this is your average order value, which can be increased with upsells, cross-sells, and price anchoring, where you show the most expensive item first so the other products seem more affordable in comparison.

   b. For lead gen sites, it’s the value of a lead. It means determining how much a phone call, chat, form fill, etc., is worth to you, and how many of each you need, before you can close a deal. And when you do, it’s up to your salespeople to optimize the value of those deals. There’s a lot of salesmanship behind the questions you ask in your forms, for example, to lure the right people into filling them out.

  1. revenue factors chart

See where Pinterest fits into the grand scheme of things? This isn’t an argument that there’s no good traffic to be had from it; it’s just that it’s a sub-sub-sub-factor of one of three equally important factors. It shouldn’t demand too much of your time simply because it’s a shiny new channel.

Continue to embrace new technology as it emerges. But don’t beat yourself up if you’re not the first one to master the latest social media craze. Keep the big picture in mind and focus your efforts equally on getting traffic, converting it, and making money from those conversions.

9 Comments

  1. Jason Klass May 14th, 2013

    Great article Theresa! I think it also depends on the type of business. Pinterest may be more relevant to certain demographics than others so it could be a good traffic generator. Also, while there may be a million social media platforms, a limited number are biggies so I think it’s probably worth it to be on the top few. If nothing else, inbound links from a high quality site like Pinterest could help improve your visibility in search results. Of course search is changing all the time so I might be thinking too old school.

  2. Theresa May 17th, 2013

    Thank you for your comment, Jason. You’re right that it’s a good traffic generator and good for links, etc but the problem in general is that web marketers put WAY too much time, money and effort into traffic. But it’s no good getting a ton of traffic to a site that doesn’t convert. And it’s no good increasing conversion rates if those conversion activities don’t bring in any money. I’m not picking on Pinterest specifically; I’m trying to get marketers out of the mindset that traffic is the answer, and to get them to see the bigger picture of needing to convert that traffic and make money. Thanks for commenting!

  3. Terry Whalen May 14th, 2013

    Theresa, great post – everything is relative!

  4. Theresa May 17th, 2013

    Thanks Terry! Yep, all relative and needing to be prioritized!

  5. PPC Management May 17th, 2013

    Great article Theresa, I’ve been using Pinterest in advertising some of my products and nothing is wrong. I agree with Jason that it maybe depends on the of business.

  6. Theresa May 17th, 2013

    Thank you for chiming in, PPC Management. I agree that the value in Pinterest (or any other platform) depends on the business. But ALL businesses need to put equal emphasis on the three areas of the revenue equation: Traffic x Conversion Rate x Value of a Conversion. Unfortunately, too few allocate budget into CR and VC, and they only focus on traffic. I appreciate your comment!

  7. Reese May 17th, 2013

    Thank you for letting me off the hook a bit, with your explanation. I keep hearing: “must be on Pinterest, must be on Pinterest” but resources and time are limited, will Pinterest compete for my ability to promote via other platforms? I’ll go a bit easier on myself now, impossible to do it all!

  8. Theresa May 17th, 2013

    You’re absolutely right, Reese: it’s a matter of prioritizing efforts! Glad I could help you rest a bit easier now ;-) Thank you for joining the conversation!

  9. Jay Izso, Internet Doctor June 10th, 2013

    Good for you! Great to see another voice in the wilderness stand up and say, “The emperor isn’t wearing new clothes…he’s wearing nothing at all”. The truth is, it may work, however, when one says work, please make sure you mean, it puts real dollars into the business’ pocket. Driving traffic…means very little…it means even less when you cannot clearly identify that the purchase “may or may not” have been a result of Pinterest.

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Theresa Baiocco is the Founder of Conversion Max, which helps mid-sized businesses increase their online revenues with Conversion Optimization. She has a Master's Degree in Marketing from the University of Colorado in Denver, a Master Certification in Conversion Optimization from Market Motive, and she's a Google AdWords Qualified Individual. She's also a dog-lover and a travel junkie.