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<Img
img="/uploads/what_is_statistical_power_a8256e4185.png"
alt="What is statistical power"
/>

Defining statistical power or the "sensitivity" of a test is an important part of planning before launching A/B testing. It allows you to introduce more positive changes to a website and increase your revenue.

## Definition of statistical power

**Statistical power** is the ability of a criterion to detect differences where they actually exist. The sensitivity of a test will show a significant result and reject the incorrect null hypothesis.

Before delving into the elements of statistical power, it's essential to understand the types of errors that can occur in tests and how to prevent them.

## Two types of errors

### Type I error

**Type I error** is a false positive result: rejecting the null hypothesis that is actually true.

**The null hypothesis** states that there is no difference between a pair of events or phenomena.

A false positive test shows that there is a difference between the compared variants, even though there isn't one in reality. Such a situation can occur due to an error in the test or if randomness creeps in.

The probability of a type I error is denoted by the Greek letter alpha (α) and indicates the threshold level at which an A/B test should be trusted. If a test is reliable at 95%, the remaining 5% represents the probability of a type I error.

If a business cannot tolerate a 5% chance of error, considering it too high, the probability of false positive results can be reduced by increasing the test's reliability. If the reliability is increased to 99%, the probability of a type I error decreases from 5% to 1%. However, there are some "pitfalls" in this calculation.

The decrease in the probability of type I errors increases the probability of type II errors because there is an inversely proportional correlation between these values. Therefore, reducing the alpha error level (for example, from 5% to 1%) ultimately reduces the overall statistical power of the test.

<Img
img="/uploads/types_error_36faa5eac7.png"
alt="Graph by statistical power"
src="Type I error and its proportional connection with type II error"
/>


Sometimes it's necessary to consciously increase the risk of type I errors (for example, from 5% to 10%) to achieve high test sensitivity.
### Type II error


**Type II error** is a false negative result, meaning the inability to reject a false null hypothesis. Such a test will not show the advantage of any of the options, even though there are options that are more effective than others.

The probability of a type II error (β-error) is inversely proportional to statistical power (1 - β). If the risk of a Type II error is 20%, the sensitivity of the test is 80%.

Since alpha and beta errors have an inversely proportional relationship, if a test has an extremely low alpha error value (for example, 0.001%), the risk of a type II error is very high.

Finding a balance is not an easy task. Through A/B testing, a business aims to determine the best combination of elements and identify the most effective variant among many. If the tests lack sufficient sensitivity, there's a great risk of not noticing a genuinely good option.


## Variables affecting test statistical power


Next, we'll examine four variables that influence the statistical power of a test. While studying these variables, it's important to remember that the primary task of a tester is to control the probability of errors. This can be achieved through:

- sample size; <p>
</p>
- minimum detectable effect (MDE); <p>
</p>
- significance level (α); <p>
</p>
- desired level of power (implied Type II error coefficient).


### Sample size


The sample needs to be sufficiently large; otherwise, conducting a good split test is impossible. It's crucial to calculate the sample size to ensure it's of the necessary and adequate size. A small sample won't provide enough test power, while an excessively large one will extend the test duration (long tests are more expensive and time-consuming).

Each analyzed variant or [**segment**](https://altcraft.com/help-center/manage-customer-database/database-segmentation-for-email-newslettering) should have a significant number of users. For this reason, the sample size should be planned in advance, ensuring that the test always has good statistical power. Otherwise, exiting the test might reveal too many variants or segments. If this realization comes too late, the test will have been conducted in vain.

Expect statistically significant results within a reasonable period (e.g., no less than a week or a business cycle). In most cases, it's recommended to conduct testing for 2-4 weeks. Any duration exceeding this might lead to sample contamination and issues with cookie file deletion.

Therefore, determining the sample size and testing duration beforehand is crucial. This helps avoid the common mistake of conducting A/B testing "blindly," ending before obtaining statistically significant results.


### Minimum detectable effect (MDE)


MDE is the difference between variants that needs confirmation. Small differences are hard to detect, requiring very large samples. Substantial differences are noticeable even in small samples.

However, there exists a paradox where small samples can be unreliable, leading to erroneous tests. There's always a risk of error, and there's a narrow range within which results can be considered reliable. Since there's no single rule for determining sample size, all nominal levels are not 100% reliable.

### Significance level


Testing results are considered statistically significant under the condition that the null hypothesis is incorrect.

In simple terms, if during a split test, one landing page can confidently be preferred over another (with a test confidence level of 95%), there's only a 5% chance that the observed improvement is due to chance or error. Conversely, there's a 95% chance that the observed difference is not due to chance.

The 5% significance level is the most commonly used initial level in online testing, representing a 5% chance of a type I error, as mentioned earlier. An alpha of 5% means there's a 5% chance of incorrectly rejecting the null hypothesis.

Under equal conditions, reducing alpha from 5% to 1% simultaneously increases the likelihood of a type II error. An increased risk of a type II error reduces the validity of the test.

### Desired level of power


If the statistical power of a test is 80%, there's a 20% chance that the real difference between variants won't be detected. If a 20% chance is too risky, it can be reduced to 10%, 5%, or 1% to achieve powers of 90%, 95%, or 99%, respectively.

Before concluding that a 95% or 99% power analysis will solve all your problems, note that each increase in analysis power significantly increases sample size and analysis time.

So, what level of test sensitivity do you really need? The acceptable level of false negative risk for conversion optimization is often considered to be 20%, corresponding to an analysis power level of 80%.

There isn't a universally recognized standard for 80% power, but it represents a reasonable balance between alpha and beta errors. Consider the following:

- What is an acceptable level of risk for missing out on a quality improvement for you? <p>
</p>
- What is the minimum sample size required for the test to achieve the desired sensitivity?


## Calculating the statistical power of a test

You can use an A/B test calculator. Enter known variable values to determine, for example, the required sample size to achieve sufficient test sensitivity.

For instance, you calculated that testing each variant requires a sample size of 681 individuals. Your calculations were based on the following initial values: test power of 80%, alpha of 5% (95% statistical significance). You also knew the conversion rate for the control group is 14%, and you assumed an expected conversion rate for the better variant of 19%.

<Img
img="/uploads/calculate_the_statistical_power_of_a_test_848e9bae89.png"
alt="Calculation of the sample size"
src="How to calculate the statistical power of a test"
/>


Using the same initial data, knowing the sample size, alpha value, and the desired level of statistical power (for example, 80%), you can determine the  minimum detectable effect (MDE).

<Img
img="/uploads/determination_of_mde_f4e64ce91b.png"
alt="Calculation of the minimum detectable effect (MDE)"
src="Determination of MDE"
/>


As we can see, an A/B test calculator is quite convenient when you know the values of three variables and aim to find the fourth one.

## What to do if the sample size cannot be increased?

In some cases, there's a need for a more high-powered test, but increasing the sample size is not possible, such as when the page traffic is too low.

Let's consider a scenario: you've inputted your data into the A/B test calculator, and it shows that a sample size of 8000 or more is required.

<Img
img="/uploads/use_a_sample_size_calculator_34fab3e500.png"
alt="Determining the required sample size"
src="How to use a sample size calculator"
/>

But you don't have the ability to gather such a sample; it would take several months or even longer. In this case, you need to increase the minimum detectable effect (MDE). In the example below, increasing the MDE from 10% to 25% reduces the sample size to 1356.

<Img
img="/uploads/sample_size_depends_on_increasing_the_mde_1aac156651.png"
alt="Increase the MDE to get the desired sample size"
src="Sample size depends on increasing the MDE"
/>


Is it really always possible to increase the MDE to 25%? After all, this will reduce the quality of the test.

The second option comes into play if you're willing to accept a 10% risk of type I error. In that case, the optimal option would be to decrease the test's significance level to 90%.

<Img
img="/uploads/balance_between_errors_within_calculator_1d200f99e4.png"
alt="Reducing the level of confidence to obtain the required sample size"
src="Balance between errors within sample size calculator"
/>

Iterating through data in hopes of obtaining satisfactory figures isn't the most reliable strategy. Analysts recommend starting by determining the sample size and then arbitrarily adjusting other values until the results are deemed satisfactory.

## Conclusion

Statistical power helps avoid errors during testing and identifies genuinely impactful performance factors on your platforms.

Adhere to these simple guidelines:

- Choose the test duration wisely: ideally 2-4 weeks <p>
</p>
- Use a test calculator to determine an acceptable test power <p>
</p>
- Adhere to the requirements for the minimum sample size <p>
</p>
- Aggregate segments and test them if needed <p>
</p>
- Set sensitivity test requirements only after meeting the minimum sample size requirements.

Source: [**CXL**](https://cxl.com/blog/statistical-power/)


Statistical power gauges a test's ability to detect differences. It helps avoid false conclusions by assessing the test's sensitivity to find genuine changes.

medium_what-is-statistical-power.png

small_what-is-statistical-power.png

thumbnail_what-is-statistical-power.png

what-is-statistical-power.png

About how to correctly calculate the statistical power for testing.

Statistical Power: Definition, How to Calculate & Variables 

What is Statistical Power

<Img
img="/uploads/audit_dannyx_014ad471e9.png"
alt="How to Maximize Your Buisness Decisions with Data Auditing"
/>

The world generates [**2.5 quintillion bytes**](https://explodingtopics.com/blog/big-data-stats) of information every day, with the Big Data market reaching $274 billion in 2022 and the analytics platform market following suit. This upward trend shows no signs of slowing down.

Data is highly valuable for businesses, serving as an inexhaustible source of inspiration for marketers and [**providing insights**](https://martech.org/analytics-audit-101-identify-issues-and-correct-them-to-ensure-the-integrity-of-your-data/) into consumer habits and expectations. Through data, companies can make informed predictions about their growth and select effective methods for outcompeting rivals.

However, processing large amounts of information is a challenge. Without quality analytics, the data collected is nothing more than meaningless numbers.

Data analysis, first and foremost, involves checking the authenticity of the information. But that's not all. The main task of the audit is to determine how the collected data can help the company solve the set tasks. Without accurate data, companies can't make informed decisions. Let's explore data auditing in more detail.

## How data auditing can benefit your business

Data can be a lifesaver for a company, as long as the sheer amount of it doesn't overwhelm management. Storing a large volume of information can be costly, and it needs to be organized and utilized correctly. This is where a data audit comes in. Data auditing can:

- **Consolidate disconnected databases from various departments.** Auditing, using cloud tools, can combine information across the entire company. This allows marketers to utilize valuable information collected by the sales department.
- **Resolve data integrity issues.** Company databases often contain duplicated, incomplete, or incorrect information, which cannot be used as a basis for business decisions. Relevant and reliable data is needed to solve business problems.
- **Comply with regulations.** To maintain order in business processes, many companies establish internal regulations for handling information, while some industries are regulated externally. Auditing helps ensure compliance with prescribed rules, avoiding fines for violations of data storage and usage deadlines.
- **Avoid data leaks.** [**Data leaks**](how-to-respond-to-data-breaches) occur when third parties gain unauthorized access to information that is not intended for them. Personal data security issues can be significant for companies, which is why they are vigilant in this area. Data auditing highlights vulnerable areas.

## Phases of data auditing

### Step 1. Planning

At this stage, it is necessary to develop a step-by-step plan for the audit and assign responsible individuals for its preparation, conduct, and presentation of results. The success of the entire «operation» depends on how well the planning is done.

### Step 2. Inspection and information gathering

Find out what information is currently stored in the company. How it is collected, how long it should be stored, and most importantly, how it is used in business processes.

### Step 3. Analysis and evaluation of data collected

Evaluate the situation for compliance with legislation and regulatory acts. Check data security and determine the procedure for employees' access to information.

### Step 4. Development of recommendations

Develop correct business processes and implement them in practice. Reject and replace non-working algorithms. Provide recommendations to employees on how to work with information. Remove excess data, set current storage periods for information that quickly becomes obsolete. Provide access to information for those employees who need it for their work.

<Img
img="/uploads/data_audit_steps_7cd0afe42d.png"
alt="Phases of data auditing"
/> 

## Who is in charge of data auditing?

Data scientists are usually the ones responsible for conducting data audits. In some cases, it may be appropriate to form a team of competent individuals to monitor information usage, make budget decisions, and set priorities. The team's work typically results in internal policies and data processing strategies that are then shared throughout the organization. This is how employees are trained to work with data within the company.

## Why is data audit automation needed?

Based on the analysis of events of the past three years, it can be confidently stated that customer information quickly becomes outdated: their behavior and desires change so rapidly and unexpectedly. Data quality auditing is necessary for modern businesses, as it provides the opportunity to make relatively accurate predictions of the near future. However, processing large amounts of information manually is practically impossible.

This is where data management automation platforms come in. They completely take over routine and labor-intensive processes such as cleaning the database of duplicates, monitoring information sources, and clearing the database of clutter. All of this is necessary, but it is not practical to do it manually.

Automating data auditing is beneficial for the company. It significantly frees up employees' time that they can spend on more critical and creative tasks. Moreover, the results obtained are more accurate and reliable than if the database were processed by a human. Robots do not make mistakes, do not get distracted, do not tire, and their vision does not «blur». Therefore, in this regard, they work much better than a human.

## How to choose a data audit automation tool

Platforms designed specifically for collecting and storing marketing data can help you with this task. Artificial intelligence has made significant advancements in this area, enabling precise targeting of marketing campaigns and reaching interested audiences.

Smart platforms identify new visitors using JavaScript tags and track their IDs, gradually building detailed profiles that include behavioral characteristics, demographic data, and purchase history. The data is not mixed up between users, processed accurately, and subjected to analysis.

When selecting a platform, it is important to look for the ability to [**segment users into target audiences**](how-and-why-to-segment-target-audience) in real-time. Businesses find it easier to succeed in the market when they have accumulated enough useful information. The key is to ensure that this information is relevant to improving current business processes within the company.

In this post , we will explain what a data quality audit is, how it can help your marketing, and how to conduct a data audit.

medium_audit dannyx.png

small_audit dannyx.png

thumbnail_audit dannyx.png

audit dannyx.png

For those who want to know what a data audit is and how to conduct it.

How to Maximize Your Buisness Decisions with Data Auditing

Data Quality Audit: How It Can Benefit Your Marketing

<Img
img="/uploads/ROAS_ROI_ROMI_7292d14939.png"
alt="ROAS, ROI, ROMI"
/>

If your company only invests money in development, but does not earn it, that's definitely something to think about. ROAS, ROI, ROMI metrics are used to evaluate the effectiveness of investments in business and individual areas of work and, as a result, to see the weak spots and make the right decisions to change the strategy.

Each metric is suitable for a different degree of company overview. ROI is a complete assessment of the success of investments; it takes into account all revenues and expenses. ROMI is calculated when working with marketing. ROAS is used for individual advertising campaigns.

Metrics are often confused, so in this post we are going to figure out what they mean, how they differ, and why each is needed. We will also tell you how to calculate ROAS, ROI and ROMI correctly.

## What is ROI

**Return on Investment**, or ROI is used to understand how much is earned from each dollar invested. The ROI formula takes into account the costs of creating, maintaining, and promoting a product. This includes the cost of purchasing materials, salaries, the budget for advertising campaigns, etc.

### Why and how to calculate ROI

The calculation of ROI is important for assessing the profitability of your business: whether investments pay off and whether there is a profit from them. When the ROI is low, the decision is made to close unprofitable projects or change the marketing strategy and the entire direction of the company's development. ROI saves you from wasting your budget and tells where to invest money to get a better result.

**ROI formula (%):**

<Img
img="/uploads/ROI_b6b5495f5a.png"
alt="ROI formula"
/> 

ROI is calculated for a certain period, but during this period there should not be a dramatic change in circumstances, such as price hikes, new suppliers, and so on. In the formula, **revenue** is the money earned by the company. **Costs** include all investments made.

Also, the time interval for calculation depends on the sales cycle length.

What is a good ROI? Usually a result above 0% means that you have made a profit. Below that figure means the business is losing money. Exactly 0% ROI means that the business has paid off the investment, but has not earned anything.

*Example. In September, a sportswear store spent 10,000 dollars to update its clothing collection, paid employees 5,000 dollars in salary, and bought advertising for 3,000 dollars. This month, the store's sales amounted to 22,000 dollars. ROI = (22000-18000)/18000=22%. This is not a high value, but at the same time, the costs paid off in full, and the store's activities in September made a profit.*

### How to increase ROI

* **Check the effectiveness of marketing channels** and disable or adjust those that bring low results.
* **Work with your target audience.** It is possible that [**low quality leads**](MQL-and-SQL) are coming in because you are addressing the wrong people in your ads.
* **Connect sales and marketing** if there is inconsistency or problems getting information to another department. Sometimes a successful advertising campaign comes to naught if the sales team does not handle leads the right way.
* **Revise your business goals** and make sure they are realistic. Exaggerated plans will not bring results if there are not enough resources.

## What is ROMI

**Return on Marketing Investment**, or ROI is used to understand how much is earned from every dollar invested in marketing. Marketing expenses include the costs of advertising, promotions, events and other marketing activities. It can also be calculated for individual channels, such as [**messenger**](messenger-marketing) or email campaigns, contextual advertising, and so on.

### Why and how to calculate ROMI

The metric is important for evaluating the effectiveness of promotion. ROMI gives businesses a broader view of marketing. If you evaluate the superficial result (the number of clicks, applications, etc.), you can decide that the campaigns are successful. However, after calculating the return on investment, it turns out that you spend more money on marketing than you earn from it.

**ROMI formula:**

<Img
img="/uploads/ROMI_0dbda34671.png"
alt="ROMI formula"
/>

The ROMI formula is similar to the ROI calculation, but the **costs** include only the costs of marketing tools.

*Example. The company spent 3,100 dollars on contextual advertising, 1,000 dollars on email campaigns, and 900 dollars on [**influencers to promote products**](how-to-find-effective-influencers-to-promote-small-business). In the current month, the company's income amounted to 4,500 dollars. ROMI is (4500-5000)/5000= –10%.*

**What is a good ROMI?** More than 0% means that the investment pays off. Less than 0% — costs exceed revenue. 0% shows that investments go «to zero». *In the example above, the investment does not recoup the costs.*

### How to increase ROMI

* Make it easier for users to buy. Remove unnecessary steps in advertising and on the site. Don't force interested leads to fill out dozens of fields and confirmations. Let them reach the “Buy” button faster.
* Check the effectiveness of channels and individual advertising campaigns. Don't invest in things that don't work. Always look for ways to optimize your advertising and website — test hypotheses and reject unsuccessful solutions. Invest more in high-priority channels that generate revenue.

<Note>
Reliable data management system increases control over marketing performance. [**Altcraft Platform**](/en) automates the work with advertising and collects information from different sources in a single profile, so the company knows everything about customers. As a result, marketers make the right decisions and choose profitable strategies.
</Note>

## What is ROAS

**Return on Ad Spend**, or ROAS is a measure of the return on investment a business spends on advertising. It is used to check how much money has returned from investments in individual ad campaigns or channels. The ROAS formula includes advertising revenue (due to customers who saw the ad, clicked on the link and bought) and campaign costs (usually the cost of advertising on sites and excluding the work of a specialist).

### Why and how to calculate ROAS

ROAS is a metric that shows the effectiveness of a particular advertising campaign or promotion channel. You can evaluate individual strategies and techniques to eliminate unsuccessful ones and allocate a larger budget for successful ones. Thus, ROAS is needed to make decisions on specific marketing actions, but not on the entire strategy, as ROMI.

**ROAS formula:**

<Img
img="/uploads/ROAS_00f0e1c5ce.png"
alt="ROAS formula"
/>

The total metric for a campaign or individual ads is calculated.

*Example. The online store launched a Facebook advertising campaign and sent out an email campaign. Facebook advertising expenses amounted to 1,000 dollars, and the revenue received was 1,800 dollars. The email campaigns cost the company 300 dollars, and the revenue was 1,200 dollars. The ROAS of an advertising campaign on Facebook is 1800/1000=180%. And the ROAS of email campaigns is 1200/300=400%. Perhaps the company should increase the investment in email marketing, since it brings more profit for every dollar invested in advertising.*

**What is a good ROAS?** The calculation is different from ROI and ROMI. ROAS is considered good if its value is above 100%. Otherwise, investments in advertising do not pay off.

### **How to increase ROAS**

* Change creatives and offers of advertising campaigns that are not performing well. Check them out through testing.
* Drop the channels that bring insignificant results.
* Find weaknesses in the [**sales funnel**](what-is-sales-funnel) and work out the places where leads are lost.
* Check the effectiveness of the site: clarity, speed, accessibility, etc.

## The difference between ROI, ROMI and ROAS

The metrics are similar, but differ in scale. Some show the business globally, others in more detail. Let's compare them in the table.

<Table>
| **Difference** | **ROI** | **ROMI** | **ROAS** |
| ------ | ------ | ------ | ------ |
| **Calculate the return on investment in…** | business | marketing | ad campaigns |
| **Used to…** | Сhange the overall business strategy and focus areas | Test effectiveness and adjust marketing strategies | Change or cancel advertising campaigns |
| **What costs to consider…** | all (creation, maintenance, product promotion, and so on) | only marketing | only the budget of individual campaigns |
| **Formula** | (Revenue − Costs) / Costs * 100% | (Revenue − Marketing costs) / Marketing costs * 100% | Campaign revenue / Campaign cost * 100% |
</Table>

## Key points when working with ROI, ROMI and ROAS

* **Consider the context of the metrics.** Pay attention to the circumstances (market conditions) and don't look at metrics in isolation.
* **Collect accurate and complete data for the right analytics.** Choose a convenient system for data management.
* **Correctly determine the calculation period**, which depends on the duration of the sale. The longer the deal, the longer the time span.

## Conclusion

ROAS, ROI, ROMI are metrics that help to understand the effectiveness of investments in a business: whether the money spent on its development pays off. ROI refers to more global and general metrics. It takes into account the return on investment after calculating all investments made (from the cost of producing to advertising). ROMI shows the effectiveness of marketing investments. ROAS is responsible for the return on investment of individual advertising campaigns.

Metrics give a hint what to change in the work of the company. ROI is needed to adjust overall strategies. ROMI is calculated to adjust marketing strategies. ROAS answers the question of what to do with specific ads, newsletters, and other campaigns.

It is important to consider all metrics in context with other business data and use analytics systems.

Metrics are often confused. Read the post to learn what these metrics mean, how they differ, and how to calculate ROAS, ROI and ROMI correctly.

medium_ROAS, ROI, ROMI.png

small_ROAS, ROI, ROMI.png

thumbnail_ROAS, ROI, ROMI.png

ROAS, ROI, ROMI.png

For those who do not know how to calculate the return on investment in their business.

ROI, ROMI, ROAS: What is the Difference and How to Calculate

What is the Difference Between ROI, ROMI and ROAS

<Img 
img="/uploads/Blog_b0169471f4.png"
alt="Sales funnel"
/>

Customers do not always buy as soon as they find a product on a company's website or elsewhere. When it comes to complex and expensive products, consumers take the time to compare and study. For this reason, companies try not to be intrusive and help users go through all stages of decision making step by step.

It is a sales funnel that is used to make the process transparent and simplify analytics. A sales funnel is a concept that describes all the steps a customer takes on the way to a conversion. There are several funnel models: the classic five-step buying scheme, the AIDA model, the SPIN method, and others. The company chooses a model and adapts it to its needs or creates its own version.

In this post, we will explain what a sales funnel is, why use this concept and how to develop it.

## What is a sales funnel and why use it

A **sales funnel**, also known as a **marketing funnel**, is the journey a customer takes from first contact with a business to making a purchase. The model is usually visualized as an upside-down cone and represents all the stages of sales that the client goes through. The top part gets the most [**leads**](MQL-and-SQL). But not everyone gets to the end where the purchase takes place, so the cone narrows to the bottom.

### Why does your business need a sales funnel

- **Highlight weak spots.** When all steps are written and all stages of the sales funnel are tracked, it is easy to analyze and understand where there is a problem in sales.
- **Supervise the work of sales reps and marketers.** The funnel includes marketing tools and sales activities, so it is easy to track the effectiveness of each participant in the process.

*For example, your advertising campaign results in 100 applications per week, but only 5-10 people buy. The analysis shows that the applications are targeted, and most of all clients are “turned back” after talking with the manager. You look into the situation and find that sales reps are not interested in dealing with the client and do not know how to handle objections about the high price. If the company did not have a sales funnel, it would be more difficult to find the reason.*

- **Create controlled sales.** If you know at what stage of decision-making the lead is now, you can make an offer that will satisfy their needs. This approach will speed up the purchase.
- **Analyze sales performance.** You can calculate your sales funnel conversion using the formula. Divide the number of converted customers by the total number of users, and then multiply the result by 100%.

<Img
img="/uploads/sales_funnel_conversion_formula_db6b695bd1.png"
alt="Sales funnel conversion"
/>

In other words, this is the difference between the number of leads at the top and the bottom. The more potential customers reach the purchase, the better the funnel works.

## Sales funnel stages

The classic sales funnel is the AIDA model, which consists of four stages.

<Table>
| **Stage** | **Description** | 
| ------ | ------ |
| **Attention** | The lead contacts the brand for the first time through advertising or direct search on the Internet. |
| **Interest** | The lead is interested in the product, for example, they subscribe to the newsletter, click on the links or ask questions. |
| **Desire** | The lead understood that he needs the product, and now they are looking for options for a profitable offer, such as discounts, free shipping, etc. |
| **Action** | The lead places an order. |
</Table>

<Img
img="/uploads/classic_sales_funnel_8977a756a3.png"
alt="Classic sales funnel"
/>

The other type is the marketing funnel, which repeats the five stages of sales.

<Table>
| **Stage** | **Description** | 
| ------ | ------ |
| **Approaching the customer** | The first contact between a sales rep and a potential client or automatic first message. It is important to make the right impression and motivate a person to continue communication. |
| **Discovering customer needs** | The sales rep asks the client questions about their needs. Then the manager draws a conclusion and offers a suitable solution. |
| **Pitching** | Present your solution. Based on the discovered needs of the client, talk about the features of the product and its benefits. The sales rep presents only those features that are important to the client. |
| **Handling objections** | The sales rep answers the buyer's questions and works out objections. For example, doubts about the cost or quality of the product. |
| **Closing the deal** | The customer is ready to buy and is interested in payment methods or installments. The task of the sales rep is to switch the client to the completion of the purchase: pay, order delivery, and so on. |
</Table>

In brick-and-mortar retail stores, all five steps are done in a conversation here and now. However, if your company operates in the digital space, the online sales funnel consisting of such stages is not always fast. Sometimes the process includes phone calls, messaging, and sending files.

Another option is the SPIN method. Its author, Neil Rackham, said that classic five-step sales models are not effective for large and complex deals, such as B2B. According to SPIN, at each stage managers work with different types of questions that identify the customer's problem, clarify and lead to a purchase.

<Table>
| **Stage** | **Description** | 
| ------ | ------ |
| **Situation** | Open-ended questions to clarify the situation in which the customer is now.  |
| **Problem** | Questions to identify problems and hidden needs. |
| **Implication** | Questions that demonstrate the possible negative effect if the problem will not be solved. |
| **Need-payoff** | A type of “what if” question that guides the customer into the future; questions like these show how a customer's life would change if they fixed a problem with your product. |
</Table>

Each company chooses the model that best suits its needs, and transforms the stages, adjusting them to the business processes.

## How to build a sales funnel

There are no universal methods, so brands not only adapt existing marketing funnel models for themselves, but also develop their own. Some models also include after-sales service, upselling and cross-selling.

Let's create a custom sales funnel in six steps:

### 1. Collect data

Collect information about the audience that should be included in the list of leads. Determine the channels through which customers come. Find out how customers behave on different resources, as well as what their needs and objections are. Next, plan a funnel for a specific audience, and not for all customers at once. Choose one of the existing models, exclude the steps that are not important for your company and add the missing ones.

### 2. Define a goal for the funnel

Specify what conversion rate you would like to receive from the funnel and also rates for intermediate stages. The model is divided into top, middle and bottom. Specify how many users are expected to reach each stage.

### 3. Think through the steps of the funnel

Define actions at each funnel step. For example, at the beginning it may be the launch of an advertising campaign. The middle is a call from the sales rep or an email reminder of the purchase. At the end, you can offer free shipping or bonuses.

### 4. Create content for each step

For automatic funnels, the content can be email templates. If sales reps lead customers through the funnel, prepare scripts, materials that they will send to customers for a detailed acquaintance with the product.

### 5. Set up a sales funnel

Marketing funnel can work:

- manually through the sales staff;
- semi-automatically — email marketing services, phone services and other automation platforms are responsible for some of the stages;
- automatically — a marketer only controls and optimizes.

You will have to use [**special services**](/features/analytics) to set up semi-automated and automated sales funnels. In the future, this will save time for your employees and speed up communication with the client.

### 6. Run the funnel, analyze and optimize

Once the funnel is up and running, it is important to monitor and improve it. Regularly measure performance at each stage and quickly respond to changes. Only in this way the model will bring the expected income. To optimize your funnel, you need to get feedback from users on the sales process and analyze the stages of the funnel.

## Sales funnel example

The user visits your site, adds the item to the cart and immediately checks out. This is an example of a simple funnel, but this rarely happens. Often the path to purchase is longer and more difficult. Here is an example of such a funnel.

The user:

1. Gets to the company's website through contextual advertising. 
2. Views a product, for example, an autumn jacket. 
3. Subscribes to an email newsletter that informs about promotions and brand news. 
4. Receives an email with an offer for the autumn collection. 
5. Follows the link and adds the item to the cart, but does not check out. 
6. The company sends a reminder email about the product in the cart and the user buys.

## How to automate your sales funnel using Altcraft Platform

The platform supports [**omnichannel marketing**](omnichannel-vs-multichannel), so it collects information about different stages of the sales funnel in a single profile. Let's take a look at how to automate the customer journey from the example above.

1. You set up and run contextual advertising through Google Ads.
2. Jane visits your site and leaves her email. Her contact details are included in the Altcraft Platform database. The subscription to the resource is added.
3. The platform launches an automatic series of welcome emails.
4. Jane receives an email with a promotional code. She reacts and adds the item to the cart, but does not check out.
5. Altcraft Platform starts an [**abandoned cart**](how-to-reduce-cart-abandonment-rate) email scenario.
6. Jane becomes interested and buys. The funnel ends.

The entire process of moving a user through the sales funnel is automated through workflows and other Altcraft Platform tools. Sending messages through different channels — Email, SMS, Push, WhatsApp or Telegram — can expand the possibilities of your business and make the customer journey completely clear and controlled.

<Img
img="/uploads/abandoned_cart_scenario_607a42d15b.png"
alt="Abandoned cart scenario"
src="Abandoned cart scenario"
/>

The Funnel report is used to track the process performance. The report displays metrics for all actions within the strategy. It is possible to visualize all the steps of the sales funnel: the number of customers and the percentage of conversion.

<Img
img="/uploads/sales_funnel_in_altcraft_platform_d15cdd4757.png"
alt="Conversion funnel in Altcraft Platform"
src="Conversion funnel in Altcraft Platform"
/>

## Conclusion

A sales funnel is a model of a customer's journey from the first meeting with a brand to purchase. Using this approach, you will make sales transparent and controlled. The company begins to control each stage of the transaction, monitor the work of the sales department and find weak spots.

Building a sales funnel is possible using the AIDA, SPIN models, five classic sales steps and others. There is no universal solution, so companies also create their own models. To do this, you need to collect customer data, define goals, make a plan for each stage, prepare content, set up a funnel, and continue to optimize after launch.

This post explains what a sales funnel is, why use the concept, what funnel models exist, and how to build your own marketing funnel.

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A sales funnel is a concept that describes all the steps a customer takes on the way to a conversion.

Why Businesses Use a Sales Funnel and How to Build It

Sales Funnel: Definition, Models and Stages

<Img
img="/uploads/Blog_1_320fd9f520.png"
alt="Why You Need Data Modeling"
/>

Business cannot exist without data. Companies plan, analyze and solve their problems using data. Information is collected from everywhere at each stage of the organization's activities. Modeling is needed to make the most of the collected data.

## What is data modeling

Data modeling is a method of compiling and structuring information. You don't need special technical skills to do data modeling. All you need is logic and understanding of business processes.

## What are the benefits of modeling

Here are some of the challenges data modeling can help you solve in business:

- Organizes business processes;
- Provides storage, systematization of information and make it easier to find the information you need;
- Sorts extra data and fills in gaps.

Proper organization of data ultimately leads to effective management decisions.

## How to model data

Start by building a conceptual model, then create a logical model based on it, and finally a physical one. 

### Conceptual data modeling

This is a visual representation of business processes and the relationship between them. This stage does not require software; it is enough to draw a model by hand.

### Logical data modeling

You create a conceptual model in the first step, and then you can convert it into a logical data model. To do this, add key and non-key attributes to the entities. And also you can show the relationships between primary and foreign keys. The result is an independent model that is compatible with all databases.

### Physical data modeling

The entities are transformed into tables; the attributes are transformed into columns. The names of the table and columns within it are adapted for compatibility with databases.

For ordinary users, the physical model is difficult to understand. Use the logical concept for dialogue with users, and use the physical one for in-depth analysis.

## Data Modeling Approaches

### Hierarchical data model

The simplest model was presented by IBM in 1996. In the approach, much attention is paid to the hierarchy based on the principle of a tree structure. The «parent» entity is located at the top, «children» goes down from it.

[**Information Management System**](https://www.ibm.com/ibm/history/ibm100/us/en/icons/ibmims/) is great for taking inventory. In a clothing store, at the top of the model is «clothing», its «children» can be «male» and «female». The decomposition separates women's wardrobe items (tops, dresses, skirts) from men's wardrobe items (trousers, shirts, jackets).

<Img
img="/uploads/hierarchical_data_model_a6083d81ed.png"
alt="Hierarchical data model"
/>

### Relational data model

This model was invented by Edgar Codd in 1970. Edgar, an IBM employee and computer scientist, based the model on an intuitive way to create tables. The data is organized in columns and rows, each cell is in its place. This method is still used effectively in the field of enterprise computing. Specialists use this method in the field of enterprise computing. Using relational models, it is convenient to track the number of goods in stock, store information about customers and conduct transactions in e-commerce.

### ER data models

This model stands for «entity-relationship». Within the model, entities are connected using relationships.

For example, when a user places an order in an online store, the order is assigned a unique code. This is an entity. Further, many events can happen with this order: the client can add or remove items, change the quantity, or even make a return. All these actions are the relationships to the entity.

### OODM

The Object Oriented Data Model (OODM) maps any complex scenarios. A closer look highlights the obvious and not so obvious business problems. OODM has proven to be great for funnel analysis. A potential client acts as an object with its own attributes (name, email, phone, etc.). As long as the lead has not [**turned into a client**](MQL-and-SQL), there are two objects: a «potential client» and a «client» itself. The «client» has all the same attributes as the «potential client», but with additions: ID, addresses and payment details.

OODM is designed to build relationships around a real-world object. When specialists build such a model, they rely not only on logic and mathematics, but also on the actual situation.

### Dimensional data model

When there is too much information, it is divided into data of the first, second and subsequent orders. In such a structure, it is very difficult to quickly find the required solution. Dimensional models are used to optimize databases and make it easier to find the information you need.

<Img
img="/uploads/dimesion_data_model_fa8c1d26c3.png"
alt="Dimensional data model"
/>

It is recommended to use OLAP (online analytical processing) for trend analysis, sales forecasting, financial reporting, etc.

## How to build an efficient data model

1. **Set a clear, measurable goal.** The goal should work for the result. Imagine what effect you want to achieve through model building.
2. **Strive for simplicity.** This advice applies to both the initial stage of working with the model and subsequent ones. At the very beginning, do not try to make the model complex and confusing. Get maximum clarity. In the future, you will fill it with the necessary information without making it difficult to understand.
3. **Organize your data based on facts, dimensions, filters, and order.** Let's say a business owner has over a hundred stores. The task is to find the point that is the most effective in terms of sales of product N over the past year. "Fact" is the sum of sales of each specific store. "Dimensions" are the product N that the owner is interested in, and the location of the store. "Filter" sets the time interval (year), and "order" determines the Top 10 stores according to the specified parameters.
4. **Avoid mistakes.** This is especially important when it comes to a large-scale project. If you skip a mistake to the next stage, there is a chance that at the very end of the project you will have to return to the roots. To avoid such situations, double-check.

## Data modeling tools

There is a wide range of data modeling tools on the market. In this post, we list a few of them. When choosing a tool, rely on the needs of your own business and pay attention to the following points:

- How clear is the organization of work with large amounts of data?
- Is there a visualization functionality?
- Can this tool streamline data mapping through the enterprise?

Here are some options:

- [**Erwin Data Modeler**](https://www.erwin.com/products/erwin-data-modeler/) is a tool from Quest. Suitable for designing and visualizing data and compiling detailed reports. 
- [**Enterprise Architect**](https://sparxsystems.com/) does a great job of visualizing business processes. 
- [**ER/Studio**](https://www.idera.com/products/er-studio/enterprise-data-modeling) is a service for working with complex data; you can build dimensional and relational models in it.
- [**Altcraft Platform**](/en) is a marketing automation platform that combines data from various sources into a single profile. Analytics works in real time, visualization is achieved through charts and reports. The advantage of the tool is the speed of processing large amounts of information.

<Img
img="/uploads/summary_report_d793cf8f9d.png"
alt="Data modeling in Altcraft Platform"
src="Data modeling in Altcraft Platform"
/>



In this post, we talk about what data modeling is, why it is important, and what tools to choose for data modeling.

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Most of your data will come from your business processes and software system. Modeling is used to maximize value from the data.

Data Modeling: What It Is and What Tools to Choose

Why You Need Data Modeling

<Img
img="/uploads/CRO_35eb42856c.png"
alt="CRO"
/> 

**CRO (Conversion Rate Optimization)** is essential when it comes to lead generation and effective sales. In an attempt to improve the functionality of sites, many companies overload it with complex algorithms and completely forget about convenience and logic. However, it is “smart” but not complex sites that work best for traffic. 

Increasing traffic is an important task, but not the final one. It is much more significant for businesses to convert the attracted traffic into quality leads. Moreover, according to statistics, it is more profitable to keep existing leads, rather than attract new ones. Businesses are more likely to grow progressively and have a stable future with such leads. In this context, it is important to keep track of the Conversion Rate.

## What is Conversion Rate

**Conversion Rate** is the [**ratio**](https://www.google.com/url?q=https://blog.hubspot.com/marketing/conversion-rate-optimization-guide%23conversion-rate&sa=D&source=docs&ust=1662554610152440&usg=AOvVaw0PugTYPGDhW9B6woIORNAs) of site users who have completed the target action to the total number of visitors. The target action can be anything: purchase, registration, subscription, and others. It depends on the tasks of the business at the moment.

<Img
img="/uploads/Conversion_Rate_19102f3e3b.jpg"
alt="Conversion Rate"
/>

*Let’s say, the target action is a subscription to a newsletter. The subscription form is placed on all pages of your site. In three months 500 people out of 20,000 site visitors became subscribers. To calculate the conversion rate, you need to divide the number of subscriptions by the total number of visitors and multiply by 100. We get 2.5%.*

You can calculate the conversion rate for each page of the site separately, and the calculation formula is universal for any task.

*For example, you need to calculate the conversion rate of a [**lead magnet**](what-is-a-lead-magnet). You use an e-book as a lead magnet. You add a download link only to some pages of the site. To find out the conversion rate, it is enough to divide the number of downloads by the number of visits to those pages where the lead magnet is located.*

A quality website has a high conversion rate. What does quality mean? User-friendly, informative, attractive to the [**target audience**](creating-a-customer-profile). Low Conversion Rate indicates poor design, low site speed, and form errors.

## "Good" Conversion Rate

What are high values and low values? What value will be a positive result? Everything is very individual and depends on the scope of the company, its geography, business goals, characteristics of the target audience and other factors.

In the [**field of e-commerce**](https://www.statista.com/statistics/439576/online-shopper-conversion-rate-worldwide/#:~:text=Global%20online%20shopper%20conversion%20rate%202018%2D2020&text=In%20the%20United%20States%2C%20online,the%20top%20spot%20for%20conversions.), the average conversion rate globally was 2.17% in the third quarter of 2020. A year ago, the indicator was 2.37%. At the same time, the American market showed a value of 2.57%. 

The conversion rate varies significantly in different time periods and in different countries. It also varies depending on the niche.  The conversion rate of e-commerce in the food segment is 5.5%, and in the hair care segment - 3.5%.

What should you rely on? On your own expectations, on the increase in the indicator in relation to the previous year, on the comparison of the conversion rate with the average value for your industry, on the achievements of competitors. If any position doesn't suit you, start optimization.

## Where is the CRO strategy applied

Any page on your site can convert, whether it's the home page, pricing page, or blog. You need to tidy up each section of the site in order to achieve the maximum effect from optimization.

1. A [**main page**](https://altcraft.com) is the number one goal for CRO, since the first acquaintance of the user with your company begins with it. A good homepage will encourage a visitor to continue their journey through your website. A bad homepage will force them to leave it. The homepage is a good place for "anchors". It can be a chatbot for constant communication with the client, a subscription button or interesting links.

2. A **pricing page** visit can be decisive on the way to conversion. Attractive and convincing prices will strengthen the desire of the buyer, and the biased prices will scare away. How to convince buyers of the adequacy of the cost? Use CRO. The conversion can be increased by changing the pricing intervals (cost per month or per year), information support of the price, noticeable contacts for communication with the manager and the usual pop-up form.

<Img
img="/uploads/pop_ap_s_predlozheniem_11ec493171.png"
alt="Pop-up form"
/>

*For example, Hotjar placed an email collection pop-up on their price page. As a result, the company received more than 400 new customers in less than a month.*

3. [**A blog**](https://altcraft.com/blog) is an interesting section of your website that has a high conversion potential. Post useful and high-quality content and convert readers into potential customers. Use a CTA button to do this. You can provide readers with extended content, summary reports, or e-books in exchange for email.

4. **Landing pages** have the highest conversion rates because that's what they're made for. They are needed so that the person who visits them completes desired actions. On average, the conversion rate here reaches 23%. Landing page optimization is simple and very creative. *For example, it is enough to add a video from last year's event to the page in order to optimize its conversion rate. This will increase the interest and desire of visitors to attend this year's event in person. Share with users some free material. At first, make available a preview of the content, and then offer to download the full version.*

## CRO in figures

There is no doubt that CRO is useful for any company that is interested in a strong digital presence. The desire to make casual website visitors into potential buyers and, ultimately, high-quality leads, doesn’t depend on the size and type of your business. Everyone wants it. It remains only to choose an effective optimization method.

Easy to say, not easy to do. Marketers face difficulties already at the stage of setting a conversion goal. “Last month the landing page converted 50 people, next month it should convert 100 people.” What does this phrase mean? When it comes to CRO, it is not about getting 50 extra conversions next month, but about getting 50 conversions for every X number of people who visit the site. In other words, we are not talking about sales in absolute terms, but about the effectiveness of sales, in relative terms.

Conversion rate optimization is not about generating more new traffic, but about getting more out of existing traffic and leads. Here are two formulas to calculate CRO:

1. **Calculate conversion rate**. As we wrote above, you need to divide the number of conversions (leads generated) by the total website traffic, and then express as a percentage.

<Img
img="/uploads/calculate_conversion_rate_cd3de2eb4c.jpg"
alt="Calculate conversion rate"
/>

2. **Calculate the lead goal**. Determine the required number of new customers and divide it by the ratio of attracted customers to their total number.

<Img
img="/uploads/calculate_the_lead_goal_9b26eba51d.jpg"
alt="Calculate conversion rate"
/>

*For example, the website has 10,000 monthly visitors. 100 of them become leads, and 10 people become customers. The conversion rate of this website is only 1%.*

At the same time, it is interesting for a business to receive not 10, but 20 or even 30 customers every month. What to do? You can try to increase website traffic to 20,000 people, and pray that traffic doesn’t drop. However, this method carries certain risks. Or you can go the other way and use conversion rate optimization. It will allow you to “squeeze out” the required number of customers from current traffic.

*Doubling the conversion rate doubles the number of potential leads and customers.*

<Table>
| Company | A | B | C |
| ------ | ------ | ------ |
| Traffic per month | 10 000 | 10 000 | 10 000 |
| Conversion rate | 1% | 2% | 3% |
| Leads received | 100 | 200 | 300 |
| New clients | 10 | 20 | 30 |
</Table>

Have you noticed that along with the increase in the conversion rate, the number of new customers and leads has also increased? And yet the traffic remained unchanged.

It’s like filling a bucket with water: no matter how much traffic you pour into a “leaky bucket”, it will never be full. If you don't fix the cause of the “leak”, you won't improve business performance. So, it's time to start optimizing.

## Conversion Rate Optimization Strategies That Work

Here are 7 CRO strategies your business could benefit from.

1. **CTA in blog texts**. If you manage to overcome the banner blindness of readers, then the practice of using CTA in articles will show itself perfectly.

2. **A/B testing of landing pages**. Landing pages promote close interaction between customers and the company This is where users become leads and then buyers. Use A/B Testing to optimize landing pages. Tests will suggest designs and content that are interesting to visitors. Test different site versions, images, forms, CTAs, buttons to find the best combination.

*For example, China Expat Health was able to achieve a 79% [**increase in conversion rates**](https://techcrunch.com/2021/07/02/79-more-leads-without-more-traffic-heres-how-we-did-it/?hubs_post-cta=blognavcard-marketing) through testing. Among the activities that led to a significant result, it is worth noting the change of the name "Health Insurance in China" to "Save 32% on Health Insurance in China". The effect was backed up by posting real customer reviews.*

3. **MQL without delay**. Some leads are ready to become part of the conversion without preheating. Don’t interfere with them, don’t push them on the typical path of an ordinary lead, but on the contrary, help them. A qualified marketing lead will be interested in thoughtful design, high-quality sales texts, and attractive CTAs.

4. **Automation of the work of your employees**. Among the variety of work processes, there are absolutely routine ones. Such tasks can be taken out of the manual control of your colleagues, which will make their life easier. It's not difficult to do with marketing automation software.

*For example, set up [**automatic sending**](marketing-automation-for-insurance-companies) of messages to subscribers. After that, a potential client with one touch will be able to book a convenient time for him to meet with the manager. You can also set up notifications that the sales team will receive when leads move through the site and take a valuable action (visiting the pricing page).*

*According to statistics, the Open rate of abandoned cart emails reaches 45% ([**Moosend**](https://moosend.com/blog/cart-abandonment-rate-infographic/?hubs_post-cta=blognavcard-marketing) research). In the field of e-commerce, this knowledge definitely needs to be used. After opening an email, 21% of readers click on the link, half of them complete their purchase.*

<Img
img="/uploads/uvedomlenie_o_broshennoj_korzine_786032bf92.jpg"
alt="Pop-up form"
/>

Such letters also can be automated.

5. **Distinguish high-converting website pages**. You need to know the pages of your site with high conversion rates inside and out. And in different ways to communicate with visitors on these pages. If suddenly the user has a question, he should be able to instantly get an answer. For this purpose, use live chat software, various messaging functions, and chat bots. If the user is “stuck” on the page for more than 2 minutes, offer him help through a pop-up window.

6. **SERP for effective articles**. The posts you publish on your blog are sometimes useful to analyze and categorize. There are those who have high traffic but low conversions. Then SEO is needed, or you need to work on the CTA or the content of the article as a whole. High conversion rates for an article are a reason to think about improving the quality of the traffic they attract. To do this, apply to such posts SERP — content optimization for the search engine results page. Don't forget that your blog should contain only relevant information.

7. **Retargeting**. Here's the simple truth. Most visitors leave your website without taking the targeted action. Retargeting from social networks and other platforms will allow you to return some of the "runaway" customers. Retargeting works on the following principle: visitors to your site are “tagged” and then they are tracked. When they visit correlated sites on the Internet, ads pop up that remind them of you. This method works especially effectively for those who have left high-converting pages of the site.

For ads used in retargeting, the same “golden rules” apply. Advertising should be bright, texts should be selling, CTA should be eye-catching, and your offer should be clear, concise and attractive, without puzzles. Then the retargeting tool will work as it should.

*For example, [**United**](https://www.thinkwithgoogle.com/marketing-strategies/video/acquisition-video-marketing/?hubs_post-cta=blognavcard-marketing) launched a retargeting campaign that focused on potential customers who interacted with the company for the first time and were already considering booking a vacation. The target audience was shown with a 15-second video with a CTA at the end. If the client was attracted by the video, he clicked on the button and instantly got to the company's website. The system worked great: 52% of monthly YouTube conversions came from ads from this video.*

## How to take the first step

We invite you to evaluate the potential of the project using **the PIE system**. This simple method will determine the course of action if you are confused.

Each element of optimization is evaluated from the position of three factors:
1. **Potential**
2. **Importance**
3. **Easy**

Score each item from 1 to 10, where 1 is the lowest score and 10 is the highest score.

The following questions will help you to grade:

1. How much improvement will this project bring?
2. What is the significance of these improvements for the business?
3. How much effort will it take to bring the idea to life?

After scoring, calculate the arithmetic mean for each item. Rank items in descending order based on results. The best projects will head the list, and you should start with them.

The PIE system is quite subjective and primitive, but it is simple to understand and implement, and can definitely serve as a starting point at the beginning of CRO.

## CRO FAQ

### What is the goal of CRO?

Companies use conversion rate optimization to increase the likelihood that website visitors will take targeted actions. In other words, the goal of CRO is to increase the percentage of people who complete the targeted action out of the total number of visitors.

### What is a CRO strategy?

A CRO strategy is a set of actions that a business takes to achieve its goal. In simple words, it converts random visitors into potential customers, and then into people who have made a purchase. Each CRO strategy is individual, because it depends on the starting state of the company, key indicators, characteristics of the target audience, and other factors.

Before developing a strategy, do not neglect [**feedback from customers**](how-to-use-customer-feedback-to-increase-sales). Reviews will help you find interesting ways to improve. Conduct A/B tests to find the best combinations of website elements that drive conversions.

### Why are CRO tools needed?

CRO tools are a set of tricks and software that simplify the process of website optimization. Some tools allow you to fully automate CRO, others help with customer acquisition and retention. There are tools that help with analytics, as well as tools that allow you to track the actions of visitors on the site, work with heat maps, collect feedback, or automate tests.

### Why do a CRO test?

CRO tests are carried out to understand how you can change the elements of the site to increase conversion. For example, you can change text, buttons, page design, element layout, colors, and shapes. In this case, your decisions are based on an accurate calculation, and not on personal opinion.



In this article, we talk about what is conversion rate, where is the CRO strategy applied and how does this strategy work.

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What is conversion rate, where is the CRO strategy applied and how does this strategy work.

How to Optimize Your Conversion Rate

7 Effective Ways to Optimize Your Conversion Rate

<Img 
img="/uploads/mql_i_sql_e8f1b52ac4.png"
alt="Competitive analysis"
/>

**A lead** is any potential customer who is directly or indirectly interested in your product or service. Each lead is unique. Each of them has its own needs and motives. They are at different stages of making a purchase. You need to know the degree of lead warming up to fix the moment when you need to push the client to the target action. If you rush or be late, you can lose a lead.

In most companies, the marketing department works first with the lead, and then the sales department takes over. The transfer will take place when an MQL becomes an SQL. In other words, when a marketing qualified lead enters the state of a sales qualified lead. Let's talk about this in the article.

## Marketing qualified lead (MQL)

You can determine which category a lead belongs to (MQL or SQL) based on the characteristics and behavior of the client. **Qualified marketing leads** show through their actions that they are interested in your product. Here are a few signs that distinguish them from those who are not interested in your company at all:

- They click a link.
- They browse your site, maybe a few times.
- They use a lead magnet: download a guide, participate in a survey, etc.
- They look through the items and add something to the cart.
- They look for extended information about your company or your product.
- They subscribe to the newsletter.
- They attend a free webinar.
- [**They read your blog.**](/blog)
- They are the first to contact you: they message in social networks, start a dialogue with a chat bot, or order a call back.

Marketing qualified leads stand for **engaged leads.** Remember that MQLs don’t express willingness to buy, although they correspond to the profile of your [**target audience**](creating-a-customer-profile). The company acquires MQLs through search engine optimization, PPC ads on social media, content and email marketing.

## Sales qualified lead (SQL)

**Sales qualified leads** are characterized by a pronounced readiness to make a purchase. They are highly active in promotional events and actively discuss the details of the deal with the manager. SQLs are **proven or promising leads.**

Actions specific to SQLs:
- They visit your site multiple times.
- They read newsletters and respond to value propositions.
- They are well informed about your company and product.
- They are interested in a product demo.
- Ready to discuss [**the cost**](/prices) and talk to the sales rep.
- They contact you on the recommendation of your regular customers.
- They are going to buy urgently or know the exact date of purchase.

## Business must know MQL and SQL

For clarity, let's summarize the differences between MQLs and SQLs in a table:

<Table>
|  | **Marketing qualified lead** | **Sales qualified lead** |
| ------ | ------ | ------ |
| **Position in the sales funnel** | Enter the funnel earlier than SQLs. Occupy starting positions. | Located closer to the peak of the sales funnel. |
| **Lead processing speed** | It is necessary to carry out preparatory work that takes a lot of time before a potential client moves into the MQL category. The same applies to the transition from MQL to SQL: the lead warms up gradually, weeks and months can pass. | Once a user becomes SQL, all processes associated with it are accelerated. It is important to be proactive here: delay can result in the loss of a client. |
| **Number of leads** | In business, there are always more MQLs than SQLs. | Ideally, as a result of well-coordinated marketing actions, each MQL should become an SQL, but in practice this doesn’t happen. |
| **Degree of involvement** | MQLs are just getting to know you and your offer. Compared to SQLs, marketing qualified leads are characterized by a lower degree of engagement and [**loyalty.**](customer-loyalty) | SQLs are more interested in your company, marketing campaigns and product. They are aware that the product can solve their needs. |
</Table>

<Img 
img="/uploads/MQL_and_SQL_03a26e1d04.jpg"
alt="MQL and SQL"
/>

The task of every business is to be able to distinguish between MQL and SQL, because the principle of working with a specific lead depends on it. A spot approach will save you time and money. It is wrong to determine the degree of the buyer’s readiness for the purchase intuitively or with the help of “fortune-telling”.

Get your marketing and sales departments working together smoothly. This will double the effectiveness of the work with leads. Strong business is characterized by a large flow of MQLs, most of which become SQLs. The profit of the company directly depends on this indicator.

In this article, we talk about what SQL and MQL are, how they differ, and why businesses should know MQL and SQL.

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mql-i-sql.png

What is the difference between MQL and SQL and why companies need to know them.

SQL and MQL: What They Are and How They Differ

MQL and SQL: What's the Difference

<Img 
img="/uploads/konkurentnyj_analiz_871647e363.jpg"
alt="Competitive analysis"
/>

Entering the market blindly with a new product is a risk for a company. If you encounter a strong player there, the whole business plan will probably collapse and losses will follow. Even if your business has been operating for a long time, you shouldn’t underestimate existing competitors. The only way to stay competitive is to «run faster» than other companies with a similar product, or at least keep up with them. Perfect knowledge of your competitors plays a key role here. To achieve this, you need to conduct a competitive analysis.

Competitor research takes time and resources, but it pays off after all: the company reduces uncertainty, understands better how to grow the business, and makes fewer planning mistakes.

We will tell you what the analysis of competitors consists of: stages and methods, what benefits the knowledge of competitors brings to the business.

## What is competitive analysis

**Competitive analysis** is the research of a company's competitors from the same field to bring products to the market and improve existing ones. The purpose of competitor analysis is to understand the disadvantages and advantages of competitors, their marketing features and development strategies, and then, based on this knowledge, correctly create your own business plan or edit an existing one.

Analysis and evaluation of competitors are regularly carried out to maintain market positions and improve products and services, as well as when launching new products.

What does competitive analysis do for your business:
- Forms adequate pricing.
- Shows the strengths and weaknesses of competitors and your company.
- Find gaps in your business.
- Gives a complete picture of the market where the business operates.
- Predicts negative consequences caused by wrong strategies.
- Shows business trends.
- Finds ideas and opportunities for company development.

## How to look for competitors and what they are

Competitors include all organizations that create and sell the same or similar products. There are three types:

**Direct competitors** are companies that offer similar goods and services to a similar target audience.

**Indirect competitors** work with the same target audience, but offer different goods or services in the same category.

**Replacement competitors** exist outside your product category, but they satisfy a similar customer need. 

### How to find competitors

It depends on the capabilities of the company and the type of business: offline or online, B2C or B2B, etc.

**Search options:**

- analysis of advertising that a search engine shows if you enter a query containing your product or service;
- search queries on your topic in Google or Yandex;
- review sites;
- ratings of companies in the media;
- surveys of your customers;
- maps (for offline business);
- search for competitors on marketplaces.

## How to do competitor analysis:

**1. Set goals and choose the direction of competitive analysis.** For example, a company can research only pricing policy to form its own correctly, or specific product lines. The goal emerges from the problem that the business is going to solve: find the best price, improve the product and promotion methods, etc.

**2. Make a list of competitors for analysis.** It is not necessary to analyze all existing competitors — it is enough to evaluate the main ones. The choice of the number of competitors depends on the resources of the company.

**3. Identify sources for data collection**: company website, public reports, ratings, social networks, reviews and other available channels.

**4. Select competitor research methods**: SWOT analysis, 7P, PEST and others (see below).

**5. Collect data and create a map of competitors.** Include them into a single table to simplify the work. The competitor analysis table includes:

- Company staff and management. 
- Competitor's product features: size, type, packaging, and other characteristics.
- Product line: filling and volume.
- Estimated percentage of market share.
- Product quality and price ratio.
- Competitor pricing and discounts.
- Marketing metrics: site positions, SEO-promotion, strategy, advertising. Brand positioning and corporate identity.
- Channels for attracting and retaining customers: newsletters, gifts, events and others.
- Geography of the competitor: in which countries, regions and districts business operates.
- Unique features of competitors.
- Work of the company's staff.
- Organization of business processes.
- Strengths and weaknesses.
- Customer reviews and positions in industry ratings.

<Note>
Important! Add to the competitor map only the data that is needed to achieve the goal of the analysis.
</Note>

**6. Carry out analysis using one or more methods.**

**7. Draw conclusions and act.**

## Competitive analysis methods

There is no single benchmark for competitive analysis. The company chooses the one that meets the needs. Consider the classical techniques that are used separately and in combination with others.

### Comparison and evaluation 

It is the easiest way. Take a map of competitors and compare your company with each of the list on a ten-point scale and according to the criterion «yes» or «no».

<Table>
| | **Your business** | **Company A** | **Company B** | **Company C** |
| ------ | ------ | ------ | ------ | ------ |
| Product quality | 8 | 6 | 9 | 4 |
| Delivery speed | 5 | 8 | 3 | 10 |
| Customer reviews | 7 | 7 | 6 | 4 |
| Installment | yes | yes | no | yes |
</Table>

### 7Рs

This is a classic marketing scheme consisting of seven parameters:

<Table>
| **Element** | **Description** | 
| ------ | ------ |
| Product | The product received by the end user, its brand identity, characteristics, uniqueness. |
| Price | Pricing policy of the company: retail and wholesale cost, the possibility of discounts. |
| Place | Online or offline platforms, distribution on shelves in offline stores and storage conditions. |
| Promotion | Advertising, [**social media marketing**](self-marketing-how-to-promote-yourself-on-social-media), events, company promotions. |
| People | Company staff who are responsible for sales to the end user. |
| Process | How the buyer and seller interact. |
| Physical evidence | What the customer sees when they buy a product or receive a service. |
</Table>

Each element is described and assessed in a point system.

### Analysis of digital resources of competitors

**What elements are evaluated:**

<Table>
| **Element** | **Description** | 
| ------ | ------ |
| Company website | Clearness and correctness of texts, site navigation convenience. Loading speed and correct operation of elements (for example, subscription forms). How much the site «sells» and SEO parameters. |
| Social media | How the brand leads social media: content, targeted advertising. How to communicate with users in the comments. |
| Advertising | What platforms and what calls to action does the competitor use, what keywords are promoted in contextual advertising. |
</Table>

### SWOT analysis

Comparison of strengths, weaknesses, opportunities and threats is also a classic marketing analysis that is suitable for studying competitors.

As usual, strengths and weaknesses are chosen as follows: company product, finance, staff organization, marketing, the state of production, the company's flexibility, which is responsible for the ability to adapt to change. For opportunities and threats, take into account scientific and technological progress, level of competition, demand for product, economic situation. Each item is described and evaluated on a ten-point scale.

<Img 
img="/uploads/swot_analysis_9fca9cad0e.png"
alt="SWOT analysis"
/>

### PEST analysis

The method evaluates the business of competitors according to environmental factors that affect the company. The analysis finds market trends and can be combined with SWOT analysis.

**What factors are included in the PEST analysis:**

- **Political.** Legal environment of the company’s industry. 
- **Economical.** Economic development, inflation, currency hikes, income and other.
- **Socio-cultural.** Education and age, cultural characteristics, tastes of the audience.
- **Technological.** Technology development, innovation, the role of the Internet in business development.

### Porter's five forces

Porter's five forces model determines the strength of competitors, threats, finds competitive advantages and shows how to choose a niche and position a product correctly.

**What elements does it consist of:**

<Img 
img="/uploads/Porter_s_model_522a645a27.png"
alt="Porter's five forces"
/>

**Threat of new competitors**

If new companies come in with advanced technologies and innovative products, they are likely to «take» the company's customers in the existing market. The possibility of a competitor appearing through the entrance barrier to the industry is assessed.

**Bargaining power of buyers**

Analyze customer requirements for the product, satisfaction with goods and services. With high demands, the company will have to improve quality. Also, the company is affected by the volume of purchases: if the client makes large orders, he can dictate his terms. Especially when there are enough analogues on the market.

**Bargaining power of suppliers**

The business depends on the change in the price of products by the supplier. Analyze the volume of goods deliveries, alternatives and status of suppliers: monopoly or multivariate market.

**Threat of substitute products or services**

The client will change your product for an analogue if it turns out to be a good value for money. Therefore, it’s important to take into account the possibility of the appearance of such goods and create the uniqueness of your product in order to prevent substitution.

**Competition within the industry**

It shows how many players are on the market, the threshold for entering the industry, what conditions each offers, what alternatives there are for the client.

## Competitive Analysis Example

An [**EdTech company**](marketing-automation-for-online-education) is going to release a new online course.

1. **Purpose**: to determine the optimal price of a new product on the market — a course on financial literacy.
2. The list of competitors includes only players whose course cost is more than $300 and who conduct courses online and offline in St. Petersburg. These are companies A, B, C.
3. Sources for finding information: company websites, trial webinars, feedback from participants.
4. Choose SWOT analysis as a method.
5. Make a map of competitors who have a similar course and include only the necessary data:

<Table>
|  | **Company A** | **Company B** | **Company C** | 
| ------ | ------ | ------ | ------ |
| Course format | online | online | offline |
| Course duration | 3 weeks | 4 weeks | 2 weeks |
| Price for the same exchange rate in dollars | 300 | 350 | 330 |
| Minimum discount | 10% | 10% | 5% |
| Maximum discount | 40% | 25% | 30% |
| Availability of installments | yes | no | no |
| Price-quality ratio in points 1-10 | 6 | 3 | 8 |
</Table>

6. Conduct a SWOT analysis of each competitor. On the example of Company A:

<Img 
img="/uploads/SWOT_table_e48a2fe666.png"
alt="SWOT analysis"
/>

7. Draw your own conclusions. For example, during the analysis, it turned out that the course of our company is more informative than that of competitors. There is an option with individual support, which others don’t have. Then it’s reasonable to set the price higher than $700.

## Resume

Competitive analysis is the process of studying competitors to scale a business, eliminate shortcomings in work, and bring new products to market. Business investigates direct, indirect and replacement competitors through available channels: company websites, social media, ratings, reviews, search results, maps and other ways. 

For analysis, a map of competitors is compiled with the main characteristics of their businesses: product, marketing, staff work, prices. Also choose one of the research methods: comparison with evaluation, digital analysis of company resources, 7P model, SWOT or PEST analysis, Porter's five forces analysis. The company uses a convenient method that is suitable to achieve the purpose of the analysis.

Learn more about what competitor analysis consists of: stages and methods, what benefits the knowledge of competitors brings to a business.

medium_konkurentnyj-analiz.jpg

small_konkurentnyj-analiz.jpg

thumbnail_konkurentnyj-analiz.jpg

konkurentnyj-analiz.jpg

It is important to know your competitors perfectly. The best way to do this is to conduct competitive analysis.

What Is Competitive Analysis, How and Why to Conduct It

Competitive Analysis: When, Why and How to Conduct

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