What is the 5% Method?
The 5% method describes the constant monthly improvement in the number of sales or sales revenue.
Every month, you run comparison tests (A/B) tests at every stage of customer interaction: from the ad itself, to the final payment step.
This simple improvement can yield a 34% increase in sales – without spending more on Advertising.
Simply put, 5% is easy to understand and achievable. Aiming for a larger amount can be very difficult to sustain after the first few months, which can be a problem.
In our experience, early changes and adjustments deliver larger improvements as there are usually several obvious points to test.
The Ecommerce Equation
Ecommerce is not rocket science. There are only a few ways you can improve your sales with the same ad budget.
As an ecommerce company, your options are:
- Increase traffic
- Increase average order value
- Reduce costs
- Improve conversion rate
Increase Your Traffic
There are several ways you can do this. You can spend more Advertising, invest in SEO, and you can invest time and money in generating high-converting organic content.
Alternatively, you may be able to generate traffic / viewers through highly-engaging video content.
Many of our clients are not keen on any of these ideas.
They are often time-poor and may have a limited advertising budget. Their ad budget can only grow if their sales and revenue grows.
Increase Your Average Order Value
We work with our clients to increase the average order value with special deals, cross-sells, upsells, and email marketing to re-engage abandoned carts.
This is definitely an option for ecommerce owners but typically involves more advanced ecommerce sites and strategies and therefore a greater investment. (And would require testing!)
Reduce Your Costs
You may be able to reduce your production costs, staff wages, or your acquisition costs – typically advertising.
Fortunately, improving your conversion rate (the next option) will mean more sales for the same budget and will therefore also reduce your acquisition costs.
Improve Your Conversion Rate
This is our preferred method.
We focus on constantly improving the assets you have control over: your site, app, or engagement platform by running tests to find layouts, images, headlines, and copy that deliver reliable improvements.
Also, data privacy changes mean that it is now more challenging than ever to get accurate conversion data for Facebook and Instagram ads on their platform.
Similar changes are likely to start impacting Google ads and other platforms in the years to come.
This means improving what you do have control over – your site, app, or engagement platform – even more vital.
How Does the 5% Method Deliver a 34% Improvement in 6 Months?
It’s pretty simple, really.
Just like compound interest – every 5% improvement also improves on all the improvements before it, so that in the final month, the 5% is actually a 6.38% improvement.
For example, if you have an ad campaign that delivers $50,000 in revenue and you improve the overall revenue by 5% every month, you will be earning $67,005 in month 6.
|Difference in Revenue||$17,005|
How Achievable is 5% Per Month?
A 5% improvement may seem a lot to achieve on a single page, but it is very achievable for two reasons.
- There are many elements on each page to test and improve
- You do not need to make all the improvements at one point
Page Elements to Test
Nearly every product page can test:
- The hero / product image
- The headline text
- The CTA button (add to cart, shop now etc.)
- Supporting copy
- Image formats
- Layouts – especially for mobile vs desktop
Spread Your Improvements Across Your Sales Funnel
Making small improvements throughout your sales funnel means you may only need 1.5% ~ 2% of improvement at each step.
Most businesses have 3 or more steps:
- The Ad
- Product Page
- Checkout / Payment Page
Making small improvements at each point can quickly add up to 5% improvement in your conversion rate (or more) every month!
Your business may have more steps.
Many ecommerce businesses may have an additional view checkout with an upsell or a one time offer.
Others may focus on driving a newsletter signup with an email sequence to deliver that final sale.
Improving your Conversion Rate gives you a Competitive advantage
The more effective you are at converting your ad traffic into paying customers, the more sales you get for you ad budget.
In fact, if you can convert your ad traffic into customers at 7.5% and your competitors are only managing 5%, you have a major advantage.
Not only are you getting 50% more sales for the same ad budget, but your cost per sale is also much smaller.
This means you can afford to bid higher for potential customers, and invest more in advertising – crowding out your competitors.
In ecommerce, the business that can afford to spend more to get a customer, wins.
Setting Up Conversion Rate Testing (A/B testing)
Adding conversion rate testing to your site is not particularly difficult. You can add Google Optimize which has a free version.
You could also go for complete sales funnel builders like Clickfunnels.
For most new clients – especially those with less traffic and lower budgets – we start with Google Optimize, which provides 5 testing slots you can run at the same time, as well as 10 personalisations.
There are two main challenges for an entrepreneur, business owner or small team when working to improve your ecommerce conversion rate.
Challenge #1 - You need to put in time every month - consistently
The more traffic you have, the more time you need to put in. For our clients we may spend between 5 – 40 hours (or even more for large clients) every month.
Challenge #2 - You need to know what to test
Testing random changes will not get you anywhere. As a general rule, the less traffic you have, the greater the impact the change needs to be.
Make sure the changes are obvious and are seen as soon as your potential customer views the page.
To start with, we recommend testing:
- A very different product image: e.g a person with the image vs. just the image
- A video / slideshow instead of an image
- A very different heading
- Reviews vs. None
- Shop Now vs Buy Now button text
- Warranties/Guarantees vs. None
- Very different element position
To get beyond this, you need to get into your customers’ heads and find out what prevents them from buying from you. Can you add information or elements to alleviate these concerns.
There is also potentially a lot more, but this is a great starting point.