So it was with great enjoyment that I read SEOmoz’ “8 Predictions for SEO in 2010” where one of their predictions is “2010 is the Year of Conversion Rate Optimization.”

SEOmoz, best known for their blog of the same name, is a very well-respected Seattle based search engine marketing company which provides SEO, SEM, website design and other consulting services. Last week, Rand Fishkin, their respected CEO & Co-Founder, wrote:

“If I were doing another startup today, it would focus on software for conversion rate optimization. I think this is still the most under-utilized and highest ROI activities in the marketing department, but more awareness is on its way. CRO isn’t just about testing; it’s about building a process for improving conversion over time. Online businesses can generate so much revenue from this, yet few invest. I think 2010 is the year, simply because it’s an inflection point for companies to assess their spend and where they derive value.”

Rand Fishkin then goes on to present a table describing three tiers of marketing channels and their scores for Average ROI, Average Effort and Average Cost. Conversion Optimization appears in the #1 placement for Tier 1.

Great news for our clients, since that is precisely where WiderFunnel Marketing Optimization plays.

We have been in this wonderful business space called Conversion Optimization since June 2007, as one of the very first companies in the world that identified conversion optimization as the emerging field that would deliver significantly high ROI to clients investing in the strategy, and that would prove to be counter-cyclical once marketing budgets stopped growing as they had been until then.

So, with two and a half years’ experience doing just one thing, conversion optimization tests for clients in all areas and delivering conversion rate lift of up to 290% for them, we have seen a lot of changes – and Rand Fishkin’s observations deserve some pondering and feedback.

• “If I were doing another startup today, it would focus on software for conversion rate optimization”

Rand, don’t do that.

Testing software choices available to businesses today are plentiful and the market is very well served. Robust options, ranging in capabilities and pricing (and even “free”), include Google Website Optimizer; Omniture Test & Target; Ion Interactive; Vertster; and others.

We at WiderFunnel work with clients using different tools and, as a technology-agnostic firm, are free and unbiased to recommend the right testing tool to the right client at the right stage of their company’s adoption of conversion optimization as a strategy.

At the end of the day, conversion optimization success is never about the testing tool: there are already many excellent tools available.

• “I think this is still the most under-utilized and highest ROI activities in the marketing department, but more awareness is on its way.”

Rand, on this one you are right.

When we first started WiderFunnel, we would spend a lot of time explaining what testing is all about, trying to cause an “Aha! Moment” where prospects would suddenly (well, after a one hour presentation) “discover” that it was dramatically cheaper and far less risky to run conversion optimization tests than to keep throwing marketing dollars at Search campaigns.

Things have changed.

We now get a steady stream of well-educated prospective clients who contact us knowing what conversion optimization is all about and asking how we work with clients.

Most importantly, we now get a very high percentage of prospective clients who have already dabbled at testing themselves (both with free and with paid testing tools) and have realized that conversion optimization isn’t just “one more thing” their in-house staff can do: they know they need experts to deliver a sustainable and scalable testing strategy for them if they are to optimize the complete site and stay ahead of the competition.

• “CRO isn’t just about testing; it’s about building a process for improving conversion over time.”

Rand, again, this one is bull’s eye!

After two and half years of running tests for clients, we have learned that conversion optimization success is NEVER about the testing tool they choose and ALWAYS about two factors:

1. The right test hypotheses (or “knowing what to test”)

2. The right (and scalable) process (as in “Can you execute properly in the areas of web analytics; conversion optimization strategy; test design; variable content placement; wireframing; graphic design; copy and modifications; layouts and mock-ups; technical installation; HTML; real-time results analysis…?”).

WiderFunnel Marketing Optimization does all that for clients, consistently.

• “Online businesses can generate so much revenue from this, yet few invest.”

Rand, again you are right here.

So many marketers still look for the silver bullet: that shiny new idea that pleases their eye and their ego and which can be done with relatively little work.

However, current economic conditions, where the CFO continues to cut the marketing budget and demands marketing actually increase its productivity and deliver even higher ROI, is changing all this.

And it is changing on a daily basis: we are seeing not only greater investment in conversion optimization but a greater realization on the part of marketers that this is a business-model changer for their companies, here to stay.

• “I think 2010 is the year, simply because it’s an inflection point for companies to assess their spend and where they derive value.”

Amen to that!

For example, in a controversial article in AdAge late last week entitled ‘Why Digital Agencies Aren’t Ready to Lead’, Ana Andjelic, a freelance strategist whose Ph.D. dissertation was on digital branding, presents a model that separates digital from traditional agencies based on organizational theorist James March’s Exploration vs. Exploitation dichotomy.

(In case you, like me, aren’t up to speed on this subject, here is a handy definition of Exploration vs. Exploitation: |n essence, discovering new possibilities, conducting research, varying product lines, risk taking, innovation all fall under the realm of Exploration. On the other hand, Exploitation involves the refinement of current procedures: efficiency, production, execution, and so forth… Exploration is a long-term process, with a risky, uncertain outcome. Exploitation by contrast is short-term, with immediate, relatively certain benefits. Organizations face the problem of allocating resources between Exploration and Exploitation. Based on this model, the best companies have the optimal balance between Exploration and Exploitation; those less successful are doing too much of either.)

Using this model, digital agencies are considered as excelling at Exploration (i.e., impress clients with their passion, drive and technology know-how but cannot follow through) and traditional agencies as thriving on Exploitation (i.e., are risk-averse, accountable and systematic, but able to deliver).

What the troops are saying

What made this online article so interesting for me were the over 92 comments posted as of the time of me writing this post (worth reading here. There is passion as well as bile in those comments!).

The comments were posted mostly (I am guessing from the tone and content) by representatives of traditional agencies as well as digital, and range from well articulated and thoughtful to fringe and faltering.

However, they all missed the point: the comments are mostly self-serving and focus on who is more deserving of the client’s attention (and budget) and not on who delivers most value to the client.

This is wrong because deserving to be at the table and leading the marketing charge should only be a function of who delivers most value to the client.

As long as both digital and traditional agencies continue to recommend strategies that align with their own profitability model and not their client’s, there will be no resolution of the debate.

And the client’s role?

The client is only too often silent. The job of delivering greater value is enabled by the client’s understanding of its own business model and value proposition. And this means that the Marketing suite needs to move beyond “brand obsession” to a deep understanding of the company’s business model, as well as an understanding of the agency’s own profitability model.

As we have blogged in the past:

• Marketing has no real say within most top organizations

• There exists a big disconnect between what advertisers and what consumers believe works when it comes to marketing

In our experience, we see it as the marketing client’s role to define the business objectives in order to optimize profitability and then hire the right agency or agencies to deliver on those objectives.

Plus, clients need to be vigilant about aligning their needs with the right service suppliers who can not only service them properly but remain in business doing so for the long haul.

Only this way will the right agency type be ready to lead.

Consider this:

Being listed in public financial filings means an individual is among the highest compensated executives at the company and sits on the operating board, which is charged with fiduciary and operating responsibility for the company.

As it turns out, 13% to 15% of Fortune 1,000 companies employ some sort of marketing position with a chief or senior-executive-level title (such as chief marketing officer or chief revenue officer), but only 7% of those firms list the head marketer — carrying any title, not just CMO — in financial filings.

(On the other hand, the study also found that in some cases, other chief executives, such as the chief information officer and chief sales officer, were named in public filings while the head marketer was excluded.)

What does this mean to marketers?

The absence of a head marketer in public filings clearly means Marketing has no real say within most top organizations (not to mention that they don’t make the big bucks).

According to Ed See, a consultant in Ernst & Young’s advisory services practice and former president of Marketing Management Analytics:

“It means the CMO is not as involved as they could be. Within a corporation, you are either part of the core decision-making process or you’re submitting your budget to be approved. If you’re not listed as one of the top executives, chances are you’re submitting your budget.”

Why is this the case?

Clearly, financial acumen is becoming a necessity for CMOs seeking influence within organizations: Half of those marketers that are publicly listed as top executives have a background that includes product development, brand management or other operational roles.

Not surprisingly, it looks like the recession is accelerating the shift from “CMOs with agency background and brilliant at outbound messaging” to a new breed of CMOs who know how to cut marketing budgets while minimizing impact on revenues, and know how to monitor every dollar going out the door while demonstrating ROI.

According to Ed See, “the four Ps of marketing are being balanced against the three Ps of finance and operation: payroll, production and profit. After all, the biggest challenge most head marketers face is that they are viewed as an expense.”

It seems to me that the kiss of death is being seen as an expense – especially in this economy.

What can marketers working in corporations do about it?

It’s simple (but not necessarily easy): Marketing needs to aggressively reposition the ‘spending’ as ‘investment.’ Luckily, repositioning is after all something marketers know how to do.

The Marketing budget needs to be communicated across the organization not just an expense but in terms of metrics that everyone can understand. Marketers need to move away from metrics that only marketers understand (or care about).

Can this be done? The good news is that the answer is Yes – and it’s already happening.

The authors of the study liken the evolution of CMOs to that of chief information officers over the last decade.

“In the late 1990s through the early 2000s, most CIOs had little financial or operational expertise. Like CMOs today, they too were making major, multimillion-dollar investments in a variety of projects and promising certain outcomes. When those outcomes didn’t materialize or the projects failed outright, the role began to shift, as companies began to insist that the CIO role be held by someone financially and operationally competent. Today, CIOs, in most cases, are more well-rounded managers and are among their firms’ most highly compensated executives.”

It took CIOs a while to gain corporate credibility. Marketers need to be careful not to be left behind. The good news is that the shift is already happening.

We at WiderFunnel see this shift happening on an almost daily basis.

When we first launched the company two years ago, we would present capabilities to prospective clients and would often sense the boredom in the room when the presentation shifted from Creative to the ROI of Conversion Optimization (for example, by showing the Conversion Rate Optimization ROI Calculators).

Since last Fall, however, prospective clients contacting us have become incresingly focused on their problem: they need to improve their Marketing budget ROI by increasing the percentage of web visitors who transact by taking actions on their web pages. They have the data and we review the model to determine the viability of the strategy. And they need to do it Now.

Inspiring!

Learn more about the services mentioned in this article:

• Website Conversion Optimization Agency
• Landing Page Optimization
• The Kaizen Method
• A/B/n Split Testing
• Multivariate Testing