visibilitymagazine-winter09

The 80-20 Rule in SEO, CRO, and Social Media

by Rob Laporte
Visibility Magazine – Winter 2009
(original article reprinted below)

This article applies the 80-20 rule to conversion rate optimization, SEO, and social media. It is addressed primarily to marketing managers, while the busy agency pro could jump to the final section on pay-for-performance deals. Article length precludes application to PPC and link campaigning, both of which deserve an article on the 80-20 topic. The article concludes that diverse SEO experience and data from many kinds of web sites are required to project how much more or (rarely) less than that 20% of maximum that any given business should invest, which in turn suggests that pay-for-performance deals may unlock the most returns for both agencies and clients.

The 80-20 rule is another name for “The Pareto Principle,” which was coined by the business management thinker Joseph Juran in the early 1940s. It is based on mathematics, and has been applied in economics, in such business management programs as Six Sigma, in The 4-Hour Workweek by Tim Ferris, and even in wardrobes, where often 20% of one’s clothes get 80% of the wear. (Thanks to Wikipedia.com for the facts in that summary). Business people often hear the 80-20 rule in connection with sales, where 20% of the prospects or clients bring 80% of the business.

What many marketing managers don’t understand, especially in small and medium-sized businesses that are less rigorous in managerial accounting, is how to apply this rule when allocating web marketing dollars and time and when choosing the services of web marketing firms.

The 80-20 rule is merely a rule of thumb, and it is difficult to know (1) how much more or less than the 20% of maximum you should invest and (2) what activities should be part of the that 20%. Is it worth paying for and taking time to use the more expensive SEO keyword research tools offered by the likes of Hitwise, comScore, and Enquisite? Will you earn positive ROI by going beyond giving a good copywriter a day or two of training, and instead hiring a dedicated professional or spending several thousand dollars in training? If you triple PPC labor, will the resulting increase in revenue pay significantly more than the additional labor? Will you earn positive ROI by doing A-B testing in Google’s Website Optimizer after implementing the first 20% of usability enhancements? The answers differ in each web marketing activity and require long experience with the marketing ROI for diverse web sites. This requirement adds value to the wise and honest council of well-established search agencies.

The 80-20 Rule in Conversion Rate Optimization (CRO)

You can achieve about 80% of optimum usability in the first 20% of the maximum labor, without investing the additional 80% of labor cost into split A-B tests or user labs, assuming that you have already digested the handful of top usability books, studies, and web sites. Small- and medium-sized businesses and big businesses with constrained budgets can easily double conversion rates merely by applying universal usability rules that have been established as enduring principles by a handful of top usability publications. Of course if you have a sufficiently large budget and revenues, methodical usability testing is probably worthwhile.

Implications and Applications: In CRO, the usability enhancements done during the first 20% will earn superb ROI, and most of them would be refined and not completely over-turned by more extensive testing. So you should do the first 20% as soon as possible. Here at DISC we have found that between 25 to 33 hours (depending on whether the site has a shopping cart) is sufficient for that 20%. But even the first 7% will help, so smaller businesses can gain great returns from as little as seven hours of professional CRO.

The 80-20 Rule in SEO

My Visibility Magazine article, “Is KEI Useful?” (Fall 2009, www.visibilitymagazine.com/disc-inc-/rob-laporte/is-kei-useful-), explains: “Keyword research follows a variation of the 80-20 rule: the last 20 percent of perfection can take 80% more time. If your potential ROI and your order fulfillment capabilities are sufficiently high, then it’s worth finding the funds to factor KEI, or even to spend the tens of thousands of dollars on the more expensive keyword research tools.” The mirror image of that statement is, the first 20% of the enormous, maximum amount of time one could spend in keyword research generates 80% of the value in the final keyword lists. The 80-20 rule applies to SEO copywriting as well: the final 20% of perfection in lacing in both key phrases and conceptually related phrases according to optimum frequency, density, and distribution can take 80% more time, and the first 20% of labor can deliver 80% of the results.

Implications and Applications: SEO, as opposed to PPC, has much less predictive data by which to ascertain the reasonable maximum investment and thus the amount of labor cost comprised by the first 20% in the 80-20 rule. As in PPC, the tide of competition is rising, although recent studies reveal a dramatic lag in SEO investments relative to PPC and relative to the clicks and conversions delivered by organic vs. PPC listings. Given the saturation in the PPC market, and given the Great Recession, firms have been flooding into SEO during the last year and a half or so. While I still see plenty of low-hanging fruit in this field, I’ve also observed SEO proliferating. Like CRO but unlike PPC, the first 20% of SEO will almost always produce positive ROI because there are no click costs and probably most of your competition has under-invested in SEO. For more about the content and costs of this first 20% of SEO, please see “One-Time vs. Ongoing SEO” in the December ’08 Visibility Magazine, www.visibilitymagazine.com/disc-inc-/rob-laporte/one-time-vs-ongoing-seo. If you have already done the first 20%, then, in order to ascertain how much more SEO is worth doing, you’ll probably need consulting by a pro with long experience doing SEO for many different businesses. Below I discuss a fascinating trend in the use of software for predicting and managing SEO investments according to the 80-20 rule.

Does the 80-20 Rule Apply to Social Media?

Social media doesn’t have even a hypothetical maximum investment of time, and without a sense of that 100% investment, one can hardly estimate the first 20%. Social media results are less predictable and more volatile than CRO, PPC, and SEO because of the tipping point phenomenon. One brilliant and timely video or a few hours of social bookmarking or blog marketing on the right content could go viral, bringing tons of publicity and subsequent revenue. Conversely, a ton of mediocre work could produce paltry results. Inspiration in social media is probably more important than in CRO, PPC, and SEO. The creative flair that has propelled traditional ad agencies becomes front and center again as social media reaches into many dimensions of marketing. This article’s length precludes deep analysis of the 80-20 rule in social media, and I look forward to reading (or co-authoring) an article on this topic in the future.

Does the 80-20 Rule Suggest Pay-for-Performance (PFP) Deals?

In a longer article I would include examples of spreadsheets by which my firm evaluates PFP and revenue share deals. Such deep analysis often shows that, while a modest 20% investment is certainly worthwhile, one would make much more profit, even if less marginal returns, by investing more like 60%. Yet many marketing managers are reluctant to spend even the 20%, especially in this economy. This situation creates enticing opportunities for agencies to do what great capitalists have always done during depressions or “great” recessions: take more ownership of businesses, in this case by deals that claim a few years of results in exchange for non-paid work up-front. This helps the clients too, by reducing their risk and up-front cost and by aligning incentives, though at the cost of probably paying more in the end.

The 80-20 rule in connection with PFP suggests the prescience and potential of the business model on which software like Enquiste’s Optimizer is built. (My firm has no affiliation with Enquisite, and I’m still in the process of evaluating them).
“Enquisite provides granular, ‘phone-bill’ style reporting that ties all of the search agency’s work directly to results (. . . ). By predicting the volume of possible relevant traffic, Enquisite reveals whether or not a project meets profitability requirements. ( . . . ) Moreover, if your client wants to engage in a pay-for-performance business model, Enquisite offers you the complete set of technologies necessary to set up a success-fee based relationship.” (www.enquisite.com/solutions/seo-agencies/).
Search agencies, enriched by experience and data from all kinds of client histories, are well qualified to ascertain the first 20% in the 80-20 rule and how much more than that 20% is worth doing, while prospects and clients are likely to under-invest. This situation, together with sophisticated software and analytic spreadsheets, creates enormous opportunities for both agencies and clients to reap rewards from an optimum investment point between the 20% and the 100% within the 80-20 rule.