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Looking Past Conversion Rate


Will Panton
Head of Product

Looking Past Conversion Rate


Will Panton
Head of Product

Marketers are obsessed with conversion rates, and rightly so. Generally speaking, the higher the conversion rate, the higher the return so it makes sense to focus our attention on optimising where we can. This means minimising spend on low converting courses or channels and maximising spend on high ones.

Conversion in isolation is quite straight forward, but what about other factors such as the price of the course? If two courses have the same conversion rate but different prices, the focus shifts entirely. Let’s look at an example:

Leads Cost Per
Lead
Cost Of Leads
Generated
Conversion
Rate
Enrolments Course
Price
Revenue ROMI
Course A 100 $40 $4,000 10.0% 10 $1,500 $15,000 3.8
Course B 100 $50 $5,000 10.0% 10 $5,000 $50,000 10.0

Here, Course B has generated 263% more revenue (mainly due to it’s much higher price) than Course A despite them having the same conversion rate. This is an overly simplistic example but it illustrates the point that conversion rate in isolation is meaningless, particularly when comparing courses and marketing channels.


Looking at ROMI, Not Conversion Rate

A more accurate comparison is ROI, or more specifically, ROMI (Return On Marketing Investment). ROMI is a factor of revenue over cost. In the above example, Course A generated 100 leads at a cost of $4,000. Of these 100 leads, 10 converted to students generating revenue of $15,000.

Course A ROMI:

$15,000/$4,000 = 3.8

Course B ROMI:

$50,000/$5,000 = 10

Effectively this means that for every dollar spent on attracting leads for Course A, it returns $3.80 in revenue.

ROMI becomes really helpful when we begin to look at a bigger data set with multiple variables. In the above the number of leads and conversion rates were all equal. In reality, these are likely to be different, as is the cost per lead for different courses. Let’s take a look at a more complex example of a range of courses, prices and conversion rates:

Leads Cost Per
Lead
Cost Of Leads
Generated
Conversion
Rate
Enrolments Course
Price
Revenue ROMI
Low Course 1 448 $40 $17,920 9.2% 41 $1,100 $45,338 2.5
Low Course 2 147 $40 $5,880 7.3% 11 $2,455 $26,345 4.5
Mid Course 3 281 $50 $14,050 3.2% 9 $5,045 $45,365 3.2
Mid Course 4 378 $50 $18,900 8.2% 31 $5,815 $180,242 9.5
High Course 5 140 $60 $8,400 2.9% 4 $9,224 $37,449 4.5
High Course 6 105 $60 $6,300 4.9% 5 $10,037 $51,640 8.2
Total/Ave 1499 $71,450 6.7% 101 $3,820 $386,378 5.4

Here we have a range of course prices, two low range, two mid and two high. Each of these categories attracts a different cost per lead, every price is different and the conversion rate of each course is different. With every metric being different, it’s no longer as simple as looking at conversion rate.


Low Conversion – Not Always Bad?

It would be easy to look at Course 5 above and say that it is performing poorly with a conversion rate of just 2.9%. But because this course has a high price and a relatively low cost-per-lead of $60, the ROMI factor is 4.5, which is actually really good!


High Conversion, Not Always Good?

Leads Cost Per
Lead
Cost Of Leads
Generated
Conversion
Rate
Enrolments Course
Price
Revenue ROMI
Low Course 1 448 $40 $17,920 9.2% 41 $1,100 $45,338 2.5
Mid Course 4 378 $40 $18,900 8.2% 31 $5,815 $180,242 4.5
Low Course 2 147 $50 $5,880 7.3% 11 $2,455 $26,345 4.5
High Course 6 105 $50 $6,300 4.9% 5 $10,037 $51,640 8.2
Mid Course 3 281 $60 $14,050 3.2% 9 $5,045 $45,365 3.2
High Course 5 140 $60 $8,400 2.9% 4 $9,224 $37,449 4.5
Total/Ave 1499 $71,450 6.7% 101 $3,820 $386,378 5.4

Here, the table is ordered from highest conversion rate to the lowest, with some surprising results. Most notably, the highest converting course, Course 1 at 9.2%, is actually the lowest ROMI at 2.5 because of it’s low price and relatively high cost per lead of $40.


High ROMI? ALWAYS GOOD!

Leads Cost Per
Lead
Cost Of Leads
Generated
Conversion
Rate
Enrolments Course
Price
Revenue ROMI
Mid Course 4 378 $40 $18,900 8.2% 31 $5,815 $108,242 9.5
High Course 6 105 $40 $6,300 4.9% 5 $10,037 $51,640 8.2
Low Course 2 147 $50 $5,880 7.3% 11 $2,455 $26,345 4.5
High Course 5 140 $50 $8,400 2.9% 4 $9,224 $37,449 4.5
Mid Course 3 281 $60 $14,050 3.2% 9 $5,045 $45,365 3.2
Low Course 1 448 $60 $17,920 9.2% 41 $1,100 $45,338 2.5
Total/Ave 1499 $71,450 6.7% 101 $3,820 $386,378 5.4

When the table is sorted by highest to lowest ROMI we get a very different picture. Take a look at Course 6 for example. A conversion rate of 4.5% is not mind blowing by any stretch. But the combination of it’s high price, relatively low cost-per-lead and reasonable conversion rate makes it the second best ROMI performer at a massive 8.2!

It can be hard to fathom that a course with a conversion rate of just 4.9% can be returning over 8 dollars for every dollar invested, right?

It also worth noting Course 2 and Course 5. They have vastly different conversion rates of 7.3% and 2.9%, but they have an identical ROMI of 4.5%.


So What’s More Important Than Conversion Rate?

The combination of conversion rate, the price of the course or the cost per lead combined. Or… ROMI.

The combination is far more important than conversion rate, price of a course or the cost per lead alone. As we have seen above the lead-to-enrolment conversion rate in isolation can be very misleading. There are so many variables which makes it vitally important that we analyse the whole picture and not just the headline metrics in front of us. Check out our ROMI calculator to see how you’re tracking.


So What is the Perfect Mix?

The perfect ROMI can vary from provider to provider and of course the cost of delivering a course is always going to be a key driver of price. On top of this there are other factors to consider such as course completion rates, loan defaults and other business overheads. So when calculating ROMI and setting a target, it is important to remember that it is just return on MARKETING investment, not net profit.

A typical target ROMI factor range will be somewhere between 3 and 8.

Once you have a handle on the other costs involved in delivering a course and a desired profit margin, a target ROMI can be set.


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Will Panton
Head of Product

As Head of Product at Candlefox, Will is responsible for ensuring users have a great experience when visiting the marketplace, and clients get a great return from our services.

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