In the real-life Mad Men days, before there was actionable data to rely on, businesses trusted their guts – or more often they trusted “the HiPPO” – the Highest Paid Person’s Opinion. The term “HiPPO” was coined by Google analytics expert Avinash Kaushik and it represents a common phenomenon found in many businesses today.
The office HiPPO makes the final decision and quite often that decision is based on gut feeling, not data. That’s usually a costly mistake.
It’s amazing that even today, knowing all that can be learned by testing user behavior, some businesses still ignore the need to gather and analyze data – and instead put their faith in someone’s high-paid opinion.
In his book, CRO expert Peep Laja says, “I’ve been in this business for many years – but when I have to predict the winner in a test, I get it right about 60-70% of the time. Only slightly better than flipping a coin.”
Can you imagine running your business by flipping a coin? Yet, that’s what businesses are doing when they accept opinions over facts.
Consider the story of Ron Johnson, former CEO of JC Penney. He was brought on to reinvent the 113-year-old retail chain, but his unwillingness to review the data cost JC Penney dearly. According to Forbes, focus group data informed Johnson that his new ideas weren’t what the brand’s customers wanted, but he refused to listen. He rejected the existing data (or acknowledge the need to gather new data) and relied on his gut instinct. Sadly, his brand lost 25% of its value– nearly $1 billion – in 2012.
Here’s the saddest part– it didn’t have to go down that way!
The stakes are far too high to rely on instinct and luck when you can test for success and then act. Assumptions tend to get us into trouble without testing them first. Laja says you must, “turn your unsupported and baseless opinions into data-informed, educated hypotheses.”
The expanding data trend and why A/B testing matters
Computer science pioneer Grace Murray Hopper summed it up perfectly, “One accurate measurement is worth a thousand expert opinions,” I doubt a woman with such a prestigious computer programming background ever put much faith in assumptions.
So many businesses are now waking up to the importance of acting on data. Business intelligence driven by Data is here and the focus is shifting to conversion rate optimization (CRO). Marketers need to know what their customers are doing and why, so they can reduce friction to increase engagement and revenue.
This trend is clear. Big Data is big business. In fact, IDC predicts, “the overall big data and analytics market will reach $125 billion worldwide. Spending on rich media analytics will at least triple in 2015.”
Actionable data is crucial for businesses today and CRO is extremely effective when it’s based on accurate data, not untested assumptions. “CRO generates more sales for the same amount of traffic you’re currently receiving. Instead of sinking additional money into PPC ads or other digital marketing methods to drive more traffic, you’re able to more efficiently convert your current traffic into leads or sales,” explains Neil Patel and Joseph Putnam in The Definitive Guide to Conversion Optimization.
And that means guessing won’t cut it. Simply put, A/B testing arms businesses with a better understanding of user behavior and preferences so they can optimize for better conversions.
Testing has become available to companies large and small
Smaller businesses have not always had the resources necessary for thorough testing, but they do now. Demand for this business intelligence, according to TrustRadius CEO Vinay Bhagat, has led to “low-cost, easy-to-use tools that have propelled a broader spectrum of companies to analyze website traffic and experiment with website changes. It’s therefore no surprise that companies of all sizes are increasingly investing in CRO software and skill sets.”
These new tools include:
- Analytic tools that tell businesses where visitors come from
and what they do on their site
- Heat-mapping tools that show where people click and scroll
- Page speed tools that show businesses where their performance can be improved
- Tools that mimic business sites and offer a testing environment
- Landing page builders that allow these pages be created and tested quickly
What was once a time-consuming and resource-intensive process has been made much faster and simpler. With these new testing capabilities, why let anyone make important business decisions based off gut feelings or opinions, no matter how much they’re paid?