Tim Seidel says “We’re a mid-sized e-commerce business ($135 million) that sells both B2B and B2C. 2010 wasn’t a great year for us.  In fact, it was terrible.  Therefore, we are going to need to cut our already-miniscule marketing budget for 2011.  What would you suggest we spend our monies on? Should we spend it on driving traffic or fixing our abysmal site?”

Thanks for writing Tim.  

I’ve been getting this question a lot over the last three weeks.  Seems like a lot of folks are struggling with this very same issue. 

You need to study YOUR analytics but my feeling, from looking at hundreds of companies last year, is that the majority of companies get more than enough traffic, they just don’t know how to effectively convert it.  If you know me, this isn’t “news” per se – I’ve maintained this sentiment for a few years now – but 2010 seemed like it got worse.  Much worse.

Look at your traffic carefully – be sure to separate the different types of traffic you get into buckets – you’ll want to pay special attention to the direct/no referrer traffic versus the other traffic (which should also be broken down into major categories: PPC, organics, affiliates, thrust e-mail, triggered e-mail, Facebook, Twitter, YouTube, etc.)

Next, look at the conversion rate of each segment.  Contrary to popular belief, conversion rate is not an end-all-be-all stat.  In fact, it’s very dangerous to focus solely on conversion.  (If you want to increase your conversion, you can block/eliminate all your garbage traffic.  Your conversion will go up but your bottom line won’t necessarily follow.)  With that said, you’ll want to know what’s working and what isn’t.  For example, if you have an Ordering from a Catalog? section on your site and it’s not converting at 75% or more, you have problems in River City.   (Remember, every segment of your traffic will likely convert differently so you’ll need to determine what kind of traffic you need more of and what you need less of to improve your business.)

Last, you’ll need to figure out if you need more traffic if you need more conversion.  Every company has different benchmarks for success but it’s pretty easy to find out what will work best for you.  Look at how much more traffic you’d need to make your new (read: ideal) sales goals and then weigh that against how much you’d need to improve your conversion to make the same sales goals.  It’s all a numbers game.

If your traffic is there but your conversion isn’t, look at where you’re missing the boat.  Are you losing people in the checkout or are you not getting enough adoption-to-cart?  Adoption-to-cart (ATC) is one of the most important stats you can measure, yet very few people do it.  You want to know how many people are putting stuff in their basket.  (If you are in a lead generation business, ATC is critical for you too.  Instead of folks putting stuff in their baskets, you’ll want to look at how many people start filling out the lead forms for your white papers, webinars, etc.)

If the traffic isn’t there to support your goals, it’s not worth it to overhaul your site, no matter how “abysmal” it is.  Granted, you may want to do some tweaking, just stay away from complete redesigns.

Best of luck in 2011.