Optimization vs growth

Posted on Monday, 3. April 2017 in category Growth. 4 min read • Written by

Andraž Štalec

In my recent closing speech at inOrbit 17 I made the point that there is a fundamental difference between optimization and growth. For years, businesses were focused on optimizing their digital costs, budgets and revenues. Whole industries were developed just to squeeze as much as possible from established digital channels and websites. From CRO (conversion rate optimization) to PPC management and audits, we were all trying to figure out how to eliminate as much waste as possible. It became the trend in industry. Be lean. If you’re lean, you’re more agile. Cut away everything that doesn’t deliver value and results. Don’t get me wrong. I was probably one of the first kids on the block to advocate lean digital marketing. For the past few years it was my core conviction. But I’ve come to the conclusion that optimization itself is not enough. It’s far from being enough.

Optimization still works

I’m not saying optimization doesn’t work. It does! It’s a necessary step in your business development and you better get good at it (or hire an agency to optimize your marketing for you). Optimization keeps you lean and healthy. It also saves you a lot of money. In my recent conversation with Larry Kim, founder of Wordstream, he told me how he was able to save his client 5 million dollars a month just by optimizing their Google AdWords campaigns. In my experience almost every digital campaign, from Google AdWords and Facebook Ads, to RTB and Premium buys, can be cost-optimized by at least 30%. Optimizing digital marketing has but one purpose – lowering your CPA (or CAC, CPT, etc., depending on your business model) while keeping the number of conversions constant.

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The problem with constantly focusing on optimization is that after some time you’ll get rid of all the fat/waste, but the road ahead will only lead to starving your business. While it’s good for a body to get rid of the majority of fat, it would be suicidal to rid your system of all fat. Less fat means being leaner and more agile, so in better shape to achieve remarkable results. But for the body to gain more muscle, and be able to achieve even more remarkable results, it needs to get fat first.

Invest in growth!

It’s much the same with businesses: focusing only on optimizing your budgets, marketing and overall costs will save you some money, but it can never add value. To add value you need to expand. And by expanding I mean adding new channels, innovations, marketing products, aka trying new things and experiences. This will of course cause your CPA to rise, but if you expanded in the right direction the number of conversions will also rise. Your CPA might be too high for your business to stay profitable in the long run, but no worries. We’ll get there in a moment. Your only goal at this point should be significantly increasing your number of conversions. We are looking for an increase in conversions of at least 30%, and by as much as 100 % and more. Don’t be satisfied with a mere 5% increase—it’s a trap! In order to achieve a 30% increase, you’ll probably need to test a few of those new approaches/channels/products. Don’t bet everything on just one horse, aka channel.

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If and when you achieve a 30% (or more) increase in conversions it’s time for the next step. Start optimizing again. Your goal is to optimize the new/extended part of your digital marketing to achieve your target CPA. In the process some new additions will prove impossible to optimize and still deliver your target CPA. Get rid of them. (That’s why you need to increase your conversion rate by 30% or more and focus on more than one channel. If you increase your conversions by just 5% it might easily happen that you’ll need to get rid of all those additional conversions). Although they bring new conversions the CPA becomes too high and unsustainable for your business. Keep the parts you’ll be able to optimize to achieve your target CPA. In the end you’ll end up within your target CPA range, but with a higher number of conversions. Congratulations! You just raised your business to a higher level. You expanded, added value. You were able to achieve this because you invested in expansion and were ready to accept a lower CPA for the time being. No pain, no gain, no fame.

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To optimize or not to optimize

As I said at the outset, it’s not that I no longer believe in optimization. It’s just that I discovered that it’s only one of two steps on the road to success.

Is your goal to optimize your costs and business or to grow your business, revenue and profits? You can’t do both at the same time! Optimize or grow. The decision is yours.

Or as my friend Primož put it: “You can’t optimize candles into light bulbs”.

How are you growing your digital business? What channels and tactics worked for you?

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