Traffic Tunnel Vision -The Hidden Threat
to Your Ecommerce Business

In this episode, host Scott Reid explores Traffic Tunnel Vision (TTV) in D2C Ecommerce, highlighting the risk of over-relying on traffic for revenue growth. It contrasts two strategies: the common traffic-driven approach and the effective optimization of user experience through conversion optimization, customer research, and A/B testing. This discussion emphasizes the importance of enhancing site experience for sustainable revenue growth, moving beyond TTV by prioritizing strategic action toward conversion optimization. The episode is crucial for Ecommerce professionals aiming to shift from narrow marketing strategies to comprehensive, impactful approaches.

EPISODE SNAPSHOT

  • [0:00] Intro
  • [4:22] Traffic-focused approach to business growth with a case of traffic tunnel vision.
  • [9:01] Ecommerce revenue growth strategies.
  • [15:51] Ecommerce traffic and revenue growth strategies.
  • [20:28] The risks of relying solely on traffic growth for ecommerce success.
  • [24:31] Improving website optimization for better conversions.

EPISODE DESCRIPTION

In this episode, host Scott Reid dives into the phenomenon of Traffic Tunnel Vision (TTV), a cognitive bias prevalent in the world of Direct-to-Consumer (D2C) Ecommerce. Explore the compelling insights that unveil the critical misstep of over-relying on traffic to boost revenue.

You’ll discover the peril of this approach​​ and clearly understand the TTV concept: the mistaken belief that increasing traffic is the foremost route to revenue growth​​.

The episode contrasts two pivotal strategies: the common yet less efficient traffic-driven approach and the high-impact solution of optimizing user experience​​. We highlight how conversion optimization, integrating customer research, web analytics, and A/B testing, transcends mere traffic investment, offering a more sustainable path to revenue growth by enhancing the site experience for all visitors​​. This discussion is not just theoretical; we also cover real-world implications of TTV in the D2C Ecommerce sector and the significant financial resources it can waste​​.

Join us in understanding how overcoming TTV starts with awareness and strategic action toward conversion optimization, aligning with your business’s growth objectives​​. This podcast is a must-listen for Ecommerce professionals seeking to navigate beyond narrow marketing perspectives toward comprehensive, impactful strategies.

SPONSOR

This episode is brought to you by Ecommerce Optimizers

We specialize in helping Ecommerce brands in one focused area: and that’s making your website easier to use so that more of your visitors buy from you. 

An easy-to-use website delivers a highly intuitive, straightforward, and smooth experience throughout the customer journey – making it much easier and more enjoyable to do business with you. This translates into a wide variety of business-building benefits, including increased revenue, higher profits, and happier, loyal customers who buy from you time and time again. 

If you’d like to learn more about how we make Ecommerce sites easier to use and how our services might benefit your business, head on over to our website at EcommerceOptimizers.com and check out all the details.

EPISODE TRANSCRIPT

00:00
Welcome to the E commerce optimizer Show. I’m your host, Scott Reid. For our new listeners, I always like to start every show with my quick definition of ecommerce optimization since it means different things to different people. As a specialist in this field, I view optimization as a continuous evolving process with three core objectives, one, enhancing traffic quality to reducing traffic costs, and three refining the online customer journey. These aren’t just goals, they’re the pillars for scaling your business effectively. So why does this matter? Because when you blend these objectives together, you convert more visitors into customers grow revenue, cut costs, and boost your bottom line. It’s all about getting more for less, more conversions more revenue at a lower cost. Now this episode is sponsored by our very own e commerce optimization hub, your essential tool for enhancing traffic quality, reducing traffic costs, and refining the online customer journey with the hub. Complex marketing data becomes easy to understand helping you to clearly identify what’s working and what’s not throughout your traffic and website. And the best part is that subscribers of the hub also get access to weekly optimization feedback and coaching from yours truly, you can take a test drive with our full access 30 day free trial, no credit card is required. And you can get all the details at ecommerce optimizers.com.

01:28
The title of this episode is traffic tunnel vision, the hidden threat to your direct to consumer ecommerce business. So this episode is hopefully going to be very valuable to you, if not to you to others on your team. And I think just having the awareness of this threat, which is essentially a phenomenon that I’ve kind of coined a phrase around traffic tunnel vision, by being aware of it, I think it will help you I’m very confident that it will help you and it will end up putting more money in your pocket at the end of the day. And it will just allow you to really think about traffic investment and website optimization it in a different way, perhaps. Alright. So one of the things that we’re going to go through is I’m going to explain to you what traffic tunnel vision is how I came to coining that phrase because it’s instructive. And it’s kind of helpful and put some some context around it with a story, a real life story. And then we’ll also talk about how conversion optimization and optimizing your website, and your online customer journey can really help to improve your revenue growth and overall financial success. So that being said, I want to start out with a statistic and this statistic, I think it’s very instructive and just focusing on on the percentages here. So according to E marketer, DTC direct to consumer ecommerce brands invested over 20 billion in digital advertising and 2022. So last year, to drive visitors to their websites. But when you look at the average conversion rate of the average ecommerce brand, only two to 3% of these website visits visits resulted in a transaction, which indicates that at least 97% of all digital advertising investment, or over $19 billion could have been allocated more effectively. Now, that’s kind of a provocative statement, because clearly, not all traffic is designed to convert somebody from first click to a conversion. But the point is, is that there’s a ton of money that’s being spent on digital marketing on driving traffic, to e commerce brand websites. And a lot of it can be a lot more effective than it actually is. So I had this discussion with a prospective client about a year ago, a little bit under a year ago, that provided the ideal context for verbalizing a concept that I long been aware of, but I’ve always struggled to, I guess, convey it effectively in a relatable narrative form. And that concept is, is that when you rely on traffic exclusively to grow revenue, it is very, very dangerous. Okay, and this meeting that I had this client is this ultimately inspired my traffic tunnel vision concept. So during this meeting, I met on zoom with this guy’s a co owner and CEO of a direct to consumer women’s luxury ecommerce brand. And I had connected with him through a mutual business acquaintance. So during our conversation, he our initial conversation because we had a couple, he revealed that his company’s annual revenue had dropped it had plummeted by 25% over the last year, so his revenue went from 12 million to 9 million. So he was desperate to recover this lost revenue and he liked having that revenue. And what he did in an attempt to to recover this loss revenue was he bumped his monthly traffic investment by 37%. So he brought it from his about on average run at about 200 grand. He brought it up to 275,000 a month. So he brought it up

05:00
About 37%.

05:02
And so as a result of this, there were a lot of consequences, his profit, cash flow, and just overall business health were all under threat. So I what I did was, I said, Yeah, I can take a look at everything. As I conducted my analysis, across his traffic in his website, it was clear to me that there was one area, which was his website is online customer journey that had a lot of low hanging fruit in terms of optimization opportunities, there were things that were just painfully obvious that if they were adjusted, that there would be a high likelihood that his conversion rate would go up significantly, okay. And we never know these things until we test them. Let me just be clear about that. But it was pretty clear, based on my professional opinion, that there was a lot of opportunity. So I presented this to him. And I was shocked, you know, I went in and I said, Hey, listen, this is what I would recommend that we do that we do some testing and an effort to improve your online customer journey. And I was shocked when I was met with resistance, because he was of the mindset, that traffic, that just improving his traffic was going to be the thing that would write the ship for him. And he basically disregarded my recommendation out of hand that improvements could be made to the user experience of his website. He just didn’t want to hear it. So frankly, I was bewildered, I was wondering, Did I say something wrong? Did I not present this properly to him. Because his current approach, it was crystal clear his current approach of just pouring money at the problem, which is what he was doing, had proven to be a failure. So short time, after my final discussion with him, I was hiking by myself up in the White Mountains in New Hampshire, where I live. And I was walking along and thinking throughout the day, kind of reflecting on our exchanges. And I was trying to make sense out of what could possibly drive somebody to persist with a strategy that was clearly damaging to his business. So it wasn’t until I was driving back home, when it suddenly dawned on me, you know what it’s like when something kind of hits you between the eyes. You have this epiphany, if you will. So the binoculars that I keep in my backpack, and that I had actually use these binoculars earlier in the day during my hike, that these were a metaphor for this guy’s mindset. So just as binoculars limit one’s peripheral vision, because you’re only focusing on a narrow field of view. This perspective clients unwavering emphasis on traffic had created what I now refer to as traffic tunnel vision, he was blinded to the broader aspects of his business, other things which created revenue and contributed toward revenue and or took it away. So he couldn’t see these critical user experience issues that were potentially and highly likely hampering his company’s growth. And this realization, of thinking about binoculars our discussion led me to coined the term traffic tunnel vision, or TTV, for short. And it’s a highly counterproductive decision making phenomenon that’s can in many situations depends on the degree of investment and the severity of the situation, it can really put a company at risk from a financial standpoint, among other areas. So traffic tunnel vision. It’s a cognitive bias causing marketers to mistakenly believe that boosting traffic volume is the sole or most effective means of achieving revenue growth objectives, and they’re just spending money on traffic. And that’s it now, that traffic could be high quality traffic, but that’s primarily what they’re focused on. Okay, and that is a problem.

08:56
So to better understand, traffic tunnel vision TTV and how to overcome it. Let’s look at two separate and distinct strategies for revenue growth. So the first one is what I refer to as the common approach and the other one is the high impact solution.

09:11
The common approach is to drive more traffic,

09:15
in essence, increase your marketing investment to attract more visitors to your website. Now, while this can clearly contribute to increase revenue, there may be and almost always is more efficient paths to growth. Clearly, we all need traffic, and the better the traffic is, the more revenue you’re going to generate. But when you focus exclusively on traffic, or you’re heavily weighted towards driving traffic in terms of attempting to grow revenue, it can be very dangerous, because there are simply just more efficient paths to growth, easier paths to growth, and in many cases, much more cost effective paths to growth. The high impact solution is to optimize your user experience, optimize your online customers.

10:00
Journey. Instead of focusing solely on traffic or primarily on traffic, refine your website, improve your website, optimize your website to engage visitors better and streamline the transaction process. And this approach can significantly impact your entire business. Though it works best, when combined with better traffic. And I don’t want to come off as saying that optimizing your website is more important than traffic, I think it’s equally as important. But what I see is, is that people just again, they just focus more on the traffic. I’ll probably talk about some of the reasons for why I see people focusing more on traffic to grow revenue, as opposed to optimizing their website by the end of this episode. So I thought it would be helpful to talk about the E commerce revenue formula, what I refer to as the E commerce revenue formula, just to illustrate my point in terms of how the math works, because at the end of the day, a lot of this is just a math equation. Alright, so here’s the equation, here’s the E commerce revenue formula. So stay with me, we’ve got we start out with traffic. So think about that in terms of number of sessions, you multiply the number of sessions times the conversion rate, so that represents the product of that represents the number of transactions and you take your transactions, you multiply that times your average order value, and then you multiply that times your purchase frequency. Okay, and that generates your revenue, that’s the product. So we have four variables, let’s talk about them with a specific example. We have a call it 100,000 sessions, multiplied times a 2% conversion rate, that’s 2000 transactions, multiply that times 50 for your average order value, that’s $100,000. And let’s say that the average purchase frequency is one. So there’s all of these sessions only result in one transaction, and then they’re gone. Okay, so that’s $100,000. In revenue, when you’re optimizing your website, your online customer journey, the objective of doing that is to improve three of those variables, those being conversion rate, average order value, and purchase frequency by making it easier, among other things for website visitors to do business with you, as opposed to your competitors, those three variables have the potential to be increased. All right. Now, let’s look and see how increases across those three variables translate to your top line revenue. Let’s say that those go up by 50%. Just to make the point here, if you were to increase your conversion rate from two to 3%, your average order value from 50 to 75. And your purchase frequency from one say, on average, people come back half of a transaction across those 2000 transactions, your revenue would jump to $337,500. So that’s a 237% increase. If you apply a 50% improvement across those three variables, right? It’s not gonna happen all the time. It’s it that’s not a statement or any guarantee whatsoever. I’m just using 50%. To illustrate my point. The point is, is that by improving the customer online journey, the online experience, improving your website, the flow and everything about it, you can positively impact those three variables, because you make it easier for people to do business with you, you create a platform that they stay at, and they don’t go to their competitors, all sorts of other different things. But it is crucial. And I want to say this, again, it’s crucial to recognize that both strategies.

13:44
The common approach, and the high impact solution are essential for a growing direct to consumer ecommerce brand. As website enhancements depend on traffic to generate transactions. But while both approaches offer benefits, the high impact solution, which is all about emphasizing user experience optimization, in a lot of respects, it’s significantly more effective in maximizing ecommerce revenue and it’s all in it can be much much, much more cost effective as well. So this strategy, it’s a multidisciplinary strategy. You hear it referred to as conversion optimization, conversion rate optimization, a B testing are probably the most common reference name is an acronym for conversion rate optimization, which is CRO.

14:32
So let’s shift gears now and talk about the power of conversion optimization and why it surpasses traffic investment. Now, although investing in traffic, it can attract more visitors to your site. There’s no doubt about that and potentially increased transactions. This approach mainly focuses on new visitor acquisition rather than enhancing the experience for all site visitors. Alright, so that’s a key distinction. Moreover, increased traffic investment it doesn’t guarantee a favor

15:00
bol return on investment, or ROI, as its success hinges on factors such as traffic quality, visitor expectations, and the website’s overall ability to engage in convert. So in contrast, you can significantly boost both transactions and revenue by optimizing your website to increase the percentage of visitors who complete purchases, spend more, and shop more frequently. Those are those three variables. Okay, conversion rate, a Ovie and purchase frequency. Now, this approach conversion optimization approach delivers extensive benefits, as website improvements impact all visitors, not just newcomers. Okay, so any improvement that you make is improving the customer journey for everybody, not just bringing new visitors to to your brand. As a result, you can achieve substantial and sustainable revenue growth. And the other key differentiator is something that I mentioned a minute or two ago is the cost effectiveness of each strategy. So I’m sure you’re well aware that traffic acquisition demands continuous spending to maintain traffic levels. And those traffic investments are not going down anytime soon as it relates to a number of eyeballs. Okay, website optimization yields long lasting benefits at a considerably lower cost. Conversion Optimization for many companies represents a business transforming strategy that can deliver serious returns to the bottom line, as well as the top line in terms of that revenue growth. It combines customer and user research, psychology, web analytics and design with scientific ABX testing. All right. And through this a very integrated, holistic process that draws upon a variety of disciplines and strategies and techniques. The objective is to improve the online customer journey. And the thing is, is that highly successful ecommerce brands that they don’t just try these strategies now. And again, they put their arms around it, they weave this, what you might call a conversion optimization mindset into their marketing strategy. All right, and they enthusiastically embrace it for one simple reason. It’s because it works. And quite frankly, because you kind of have to do it because your competitors are doing it. And if your competitors are making it easier for their customers to do business with them, and your site doesn’t work quite as well guess who they’re going to do business with? All right. There’s a lot of other reasons that we’ll probably talk about some of those as we move as we move forward throughout this episode. But the reality is, is that a high percentage of ecommerce brands that they just don’t prioritize optimizing their site as much as they should? And again, what did they do? They instinctively and just kind of by default, or knee jerk reaction, they invest more money into traffic, because they believe that to be the optimal choice for revenue growth.

18:04
And if you again, if you have this mindset, if you have that traffic tunnel vision, going back to the original topic and subject of this episode, it’s highly likely that you’re burning a significant amount of cash needlessly. And it’s just a counterproductive cache. We all know that that’s the fuel that powers business growth. And so the more of that you have on hand, the better and conversion optimization when coupled with an intelligent traffic strategy. That’s the kind of like the magic bullet if you will. Now, there are three main reasons moving on why many DTC ecommerce marketers why they primarily focus on traffic to grow revenue. And the first thing is historical triumphs. So in the past, back several years ago, buying more traffic, it was an effective strategy that consistently delivered results, right, we remember that we remember when it was kind of like you just put money into the Facebook slot machine. And it always paid off a big winner. But today’s advertising platforms just not as efficient as they once were. Yet many individuals still clinging to outdated tactics, and this just simply hinders their success. So the second reason why many ecommerce marketers primarily focus on traffic to grow revenue is ad platform attribution complexity. We all know how challenging attribution can be within these ad platforms. It’s complex, it’s confusing, it’s overwhelming. Among other adjectives. They are very good at claiming undue credit for transactions and they’re highly intricate reports. And it’s challenging to determine the accuracy of the of these reports. So people often trust the data presented to them, and they continue with the same approach hoping for positive outcomes. The third reason is lack of awareness. So as the saying goes, you

20:00
Don’t know what you don’t know until you know it. Okay. Now many marketers have heard of or tried conversion optimization in the past, but they might not fully understand its extensive benefits. And they’re just not aware or haven’t had a great experience with the wide variety of benefits that conversion optimization can deliver to their business.

20:20
If you are heavily weighted in terms of leveraging traffic to grow revenue, there are some key business risks to consider. The first one is diminished traffic affected effectiveness. So over the past several years, privacy rules and regulations have increased significantly. And this increase has adversely affected ad platform performance, you’ll probably remember the iOS 14.5 update. And that serves as a prime example. That was when I think it was April of 2012, the end of April 2012, if I’m not mistaken, when Apple created the opt into track, across different sites. All right, this is a post production edit. The date of iOS 14.5 was not 2012. It was 2022. I don’t know what was going through my brain when I said that I was off by 10 years, let’s get back into the episode. That just makes it harder for ad platforms to operate their algorithms and deliver performance or increased performance or better performance through knowing where people are navigating to on the web. So relying on traffic, as your primary revenue growth strategy may hinder desired results. Due to this reduced ad efficiency and the ever evolving regulatory landscape, which is not going to get better, it’s always just going to get harder and more difficult. The second thing is storing customer acquisition costs. So decreased traffic effectiveness leads to higher customer acquisition costs. And this depletes cash reserves. And when you have less cash, as we spoke about earlier that complicates business operations, and just makes life generally more difficult. The third one is eroding customer lifetime value. So when you neglect to address or improve issues on your website, it can result in loss potential revenue from existing customers, which decreases their lifetime value and ultimately reduces revenue and profit. You don’t want your customers you don’t want to give them any reason whatsoever to go to a competitor because you may lose them forever. That’s the point of that. The fourth business risk to consider is cashflow struggles. So the expenses associated with increasing traffic volume and hiring that skilled personnel and those costs are going up as well to manage advertising campaigns professionally, whether that’s an internal team or you’re hiring an agency that can create cash flow challenges, because there’s an expense to that there’s a big expense to the management of traffic, and inefficient traffic investment can quickly drain financial resources. We all know that. Now what I’d like to do is to start closing this out by talking about some of the various benefits of conversion optimization, again, just want to reiterate that a blended approach is the best approach. It’s just that over reliance on traffic is dangerous. But when you couple quality traffic, with website optimization with customer journey optimization, and you reduce your traffic expense as a result of those two things coming together.

23:32
What happens is is you grow revenue and you maximize profit. Okay, so in terms of how can you tap into conversion optimizations full potential?

23:44
Clearly, it does fuel more cost effective sustainable revenue growth. That’s a primary benefit, but there are some other things as well. And those are profit growth right? Revenues great, but you don’t pay the bills with revenue you pay the bills with profit, and marketing expense. In almost every case. Any type of growing direct to consumer ecommerce brand marketing expense is a significant line item on your income statement. Okay, and when you adopt conversion optimization and you get results from it, positive results it elevates your revenue and strengthens your expense structure. And this unlocks the potential for substantial profit growth. The second thing is optimization of decision making. The success of your business hinges on your capacity and your ability to make informed choices to make better decisions and conversion optimization, that process that I talked about earlier. Using psychology and research and web analytics, conversion optimization uncovers through that process invaluable quantitative and qualitative data will

25:00
which equips you directly. It empowers you to make better marketing and business decisions. That’s huge. If you can make better business decisions, you win full stop. The third one is outsmart the competition. So, competitors traffic investments attract visitors to their sites. Okay. But as you know, many online shoppers compare products and prices across multiple websites before purchasing. If you focus on your customer experience and your journey,

25:34
your online journey,

25:36
and ensure that your website is doing and that you are doing everything as much as humanly possible to outshine your competitor and provide a better customer journey, you will capture their visitors and secure the deal. Essentially, you are capitalizing on and cashing in on their traffic investments. By delivering a better online experience to potential customers, somebody who has money in their pocket and is ready and willing to make a purchase. The fourth thing is skyrocketing your revenue. So optimizing your website for conversions increases the number of people completing desired actions, which directly boosts your revenue, it’s kind of an obvious one. But the better you’re able to optimize your website and your customer journey for conversions, the more people are going to do what you want them to do, which is progress through the website ultimately transacting with you, and that goes right to your top line, and then to your bottom line.

26:40
By association.

26:43
The fifth item is to improve the return on investment of your retargeting efforts and retargeting traffic investments. Okay, the reality is, is that website visitors do not buy, in many cases on the very first visit, they have to become aware of the brand, first of the products that are offered, and then they will likely come back or the goal is is to get them to come back to complete a transaction in the future after that awareness has been established and perhaps some engagement as well. Okay. So in an effort to bring people back, we retarget we spend money to send ads to those people who have already been on the website. Okay. Now, that being said, if their first experience on the website was not a positive one, are they going to come back? What’s the likelihood? It’s probably less than it would be if the website experience was one that was positive, and it was enjoyable, okay.

27:47
So companies that spend a lot of money on retargeting, and your retargeting to a site that has challenges or is not a good user experience is like lighting money on fire, okay? So retargeting ROI, can see be significantly improved via a better website experience.

28:08
Number six is to improve your customer loyalty and increase lifetime value of your customers. So whenever your website, and wherever your business as a general rule is easier to do business with people are just simply going to come back and they’re and they’re going to come back more often. And that’s going to do two different things. It’s going to improve loyalty. And it’s going to increase that LTV. So the seventh and final reason there are more but we’re going to cap it at seven is that the research that goes into the conversion optimization process that I spoke about earlier, that almost always reveals opportunities to enhance other aspects of your business, or other kind of roles and responsibilities within your business, including items like copywriting, okay, product development, customer service, expense management. And we’ve talked about this but more cost efficient traffic acquisition. So it’s really something that you learn a lot about your business from an other ways to improve outside of just improving your website.

29:19
Alright, so overcoming traffic tunnel vision, depending on how bad you have it, if you have it at all, it all starts with awareness. So at this stage of the game, you’re aware of it, many people aren’t. And I just firmly believe that I see it all day long. They just kind of as I said earlier, they just kind of put money at the problem by default without necessarily thinking about some of the alternatives. And conversion optimization is a great complement to a traffic strategy. Again, a high quality, blended thoughtful approach is the best approach. At this stage of the game you have a couple of different choices based on how you’ve assessed yourself and thought about your business throughout this episode. If you think

30:00
Think as a for instance, that you might be able to do more, or that you should do more in terms of improving your online customer journey, this is what I would do, I would go to our website, go to the hub, sign up for the free trial, to e commerce optimizers.com. Just go to the E commerce optimization homepage, sign up for the free trial.

30:22
And you will be able to see and we will be able to see together what type of opportunities you have based on your marketing data. That’s the first step. The other thing is, is that during that 30 day trial, okay, you can schedule a 60 minute session with me, during which we’ll sit down on Zoom, roll up our sleeves, we’ll look at your traffic strategy, we’ll look at your traffic results, we’ll look at your website results, we’ll use the hub, we’ll look at your website. And we’ll kind of assess and see where the opportunities are like where that low hanging fruit is. And then we can make some determinations based on the potential positive net impact that improving your website might deliver to your bottom line. Thanks very much for listening to this episode, I really appreciate you taking the time to do so I hope you got a lot of value out of the episode and that it opened your eyes perhaps if you had a little bit of a case of traffic tunnel vision, which I believe everybody does, to a certain extent. It’s just kind of the default behavior that so many people adopt. So if that’s you, you’re definitely you know, it’s so cliche, but you’re definitely not alone. Because that is kind of like the de facto standard standard, if you will. When you do embrace conversion optimization, it can be a massive game changer for your business. And when you combine it with an intelligent, thoughtful traffic strategy, it’s like lights out See you later to the competition. And just watch your revenue and your profit go through the roof. So thanks very much again, really appreciate it and we will talk to you soon on the next episode. Bye bye