If you work in print, you’ll understand why estimate conversion rates are so important. Before you’ve even got to the point of creating the estimate, you’ve probably already carried out your due diligence, performed a credit check and done a bit of background research on the customer and the sector they operate in – all of which takes time and costs money. So if your cost per quote is say, £25, and you create 50 estimates a day, that’s £1,250 of cost coming out every single day! That’s why it’s important to analyze your conversion rates and identify ways to continually improve them.
Analysis you can carry out and why:
By market – Analyzing rates by market and plotting them on a BCG matrix will allow you to identify your ‘Star’ markets that you want to focus more attention on, as well as your ‘Dogs’ that you might want to consider avoiding.
By production method – This analysis could help you make more informed investment decisions about machinery and equipment. You could, for example, uncover that you need to invest in an additional press, or that you would be better off outsourcing work with low conversions in certain areas.
By product type – Identifying product types with low conversion rates might lead to the decision to remove them from your offering, or to outsource them, or to re-evaluate your materials and production methods. You can also use a BCG matrix to plot this out and identify your Star products and your Dogs.
By overall conversion rate – This could provide you with a BHAG (Big Hairy Audacious Goal) to set your whole company working towards.
How software can help with estimating conversion rate analysis
Business intelligence tools
It’s important to be able to differentiate between important information and noise in order to work out what the data you’re analyzing truly means. This is where a Business Intelligence tool will really benefit you, especially if you use one that integrates with your MIS solution and gives you full access to all the data collected by your MIS. Using a BI tool for conversion rate analysis removes the risk of having a knee jerk reaction to the results of your analysis, as it lets you really drill down into the data and find out what’s really going on. If you need any more convincing about this (though I’m sure you don’t), check out the Spurious Correlations website for some very humorous graphs depicting two seemingly connected data variables that have no causal relationship whatsoever.
Marketing automation tools
If you use a marketing automation tool and have it integrated into your MIS software, then you’re in an even better position to carry out your analysis. The customer intel provided by the likes of Hubspot and Pardot will allow you to look for relationships between your conversion rates and your marketing activities.
The performance ratios included in some MIS solutions are particularly valuable for this analysis. In the Tharstern MIS we provide a Value-Added chart that displays:
Value-Added (VA) percentage
Gross Contribution percentage
Feedback from our customers tell us that this is a particular effective method of keeping track of their conversion rates. In fact, in a recent INKspire podcast episode on this subject, Matt Cummings, the Operations Director at Elle Media Group, likened the Value-Added chart in his Tharstern MIS to the cockpit of a plane and even remarked that the chart was “burnt into my eyeballs”!
“There was a time when we would put in a price and we didn’t really know what it meant,” added Matt during the podcast. “But now we look at the Value-Added rate and we also look at Contribution... The VA chart is brilliant, especially with the performance ratios tied into it, and with the arrows pointing where your price should be. It’s like a cockpit of a plan – instead of your airspeed and altitude, you’re checking your Contribution, your VA and your VA per hour. It’s made understanding the commercials of a job and making the pricing decisions much easier. I remember my old boss once said, “When I discount a job, I want to know what damage it’s doing to me.” And that’s what you get by looking at the AV graph.”
In the same podcast, another customer - Chris Smyth, Strategic Performance Director at BCQ – backed this up. “The VA is the floor for us, and we’ll also monitor the Contribution and look at Net Profit. When we build up a picture over the month, VA is what we use. Contribution and Net Profit is going to be quite theoretical at this point, dependent on utilization and how much is going through the factory, whereas your VA should be the reality of what’s building up through the month. It’s actively used in the context of markups to look at where that floor level is of where we walk away.”
If this daily used graph is such an important tool for our customers, imagine the goldmine of data that will accumulate in an MIS over time, ready for analyzing using a Business Intelligence tool! Combine the 3 pieces of software above together, and you will have no problem finding ways to continually improve your conversion rates and increase your profits.