CRO: Revenue is Vanity, Profit is Sanity

Hey there,

Welcome back for another bite to chew on. 

One of the most popular metrics in DTC marketing is conversion rate (CVR). But it probably shouldn’t be.

Now look, we get why people care about this number.

"If I make my conversion rate go up, I make more money, right?"

The answer is - "sort of, but maybe not"

In fact, too much focus on CVR can actually hurt your profitability. That's the surprising thing we learned when we sat down with Drew Marconi, CEO of CRO testing platform Intelligems. 

This is probably why this turned out to be one of our most watched episodes of the pod ever.

Let’s get right into some juicy learnings: 

On the Menu

🥗 Replace conversion rate with this metric 

🥗 How to build your testing roadmap  

🥗 Results that shocked 

So why is conversion rate a stupid metric? 

Because it tells you nothing about the health of the business, how much money you're driving to the bottom line, and whether you're actually going to survive. 

When we first started Obvi, we were just straight up chasing revenue. Topline.  

Because of that, we were overly focused on always boosting conversion rates. We would test offers that included a deep discount plus a gift.

Free shipping? Sure, why not?

I mean, that improves CVR, right?

Conversion went up, but we were losing money. We weren’t focusing on all the other variables and were clueless about how to calculate all the moving parts.  

We also wasted time carefully monitoring another topline metric - ROAS. 

We’d look at a campaign with 33% ROAS and think - okay - what does that even mean? It was just a ratio. It gives you no context about new or returning customers or what you were keeping after your costs were considered. 

It didn’t help that we were using Google Optimize to measure tests which was about as basic as it gets. 

Revenue is vanity. Profit is sanity.

But how do you move toward sanity? 

Start with these three things.

1️⃣  Ensure you track daily profit. 

At Obvi, we maintain a daily tracker that gets sent out by finance in a simple text message. 

It includes financial results from the previous day:

• Revenue (breakout new vs. returning customers)

• Ad spend 

• Projected P&L 

This system ensures total transparency with no surprises about our financial standing. 

2️⃣ Create a plan 

• Start with your business goals 

• Brainstorm all your test ideas for profitably acquiring customers - copy, imagery, LPs, pricing

• Build a model with your unit economics  

3️⃣ Get the right tool to measure your tests against profit per user ⤵️

Tool of the Week 

Here’s how we went from being obsessed with vanity metrics to measuring what matters.

To level up our CRO game, we first needed to level up our approach to measurement.

If we were going to start calling our test wins by profit, we needed deeper visibility into the numbers.

Nobody wants to see the million-dollar screenshot anymore. They want to see what’s going in the bank. 

But we had no way to track all of our business variables and get a clear view of our test outcomes. 

That’s where Intelligems came to the rescue. 

When you start pushing on growth levers - optimizing copy, pricing, landing pages - make sure you are measuring down to profit per user.

With Intelligems, you plug in all of your COGS, discounts, and campaign attributes. From there, you can run tests and easily see results based on profit, not just conversion or ROAS. 

And, honestly? It’s been a game changer for us - we detected a massive opportunity in profit per visitor within the first two weeks of our first price test.

We were also blown away with the data you get in their dashboard. It gives you exactly what you need to be confident in your decisions.

Ready for higher profit? —> Book a demo.

Now that you know about our recommended tool for A/B testing (not just us btw, 4.9 stars on nearly 100 reviews in the Shopify app store), let’s get into how to come up with test ideas. 

How to Build Your Testing Roadmap

If you aren’t testing, you’re already losing. A lot of brands are just stuck on where to begin.

Start here ➡️

What are your business goals this year?

Maybe it’s —> 

✅ I want to grow my recurring revenue with subscriptions

✅ I want to launch a new high margin product 

✅ I want to increase top line revenue by 30%

With your main business goals in mind, start crafting a matrix of tests - break down your customer segments - new, first returning, second returning customer segments. 

Then map out test ideas across these 4 test types:

1️⃣ HEADLINES 

If you are early in the journey of A/B testing, start with headlines.

It’s the easiest way to move the needle fast. 

You can see a significant jump in conversion rates—up to 30%—just by tailoring your funnel and ads to different segments and testing key elements like your main headline.

We might run different ad creatives for different value props:

 👱hair

💅 nails

🏋️ weight loss

💃 joints 

If we start sending traffic to a landing page that elevates the benefit highlighted in the ad, we see a nice bump in conversion.

Personalized, targeted headlines and relevant visuals will likely have a greater impact than a complete redesign.

2️⃣ IMAGERY

In addition to connecting your ad creative and landing page imagery, make sure your images are authentic and relatable to your target audience.

For example, a 35-year-old mom sees imagery that reflects her life, and she instantly thinks, "This product is for me." 

In the past, we used fitness models in our ads, thinking they'd motivate our audience, but it turns out that relatable, real-life imagery resonates more effectively. ⤵️

3️⃣ DESTINATION

Starting off, you’re usually sending all traffic to your home page. 

Analyze the copy and imagery in your top performing ads and test directing traffic to landing pages that contain the same creative elements. 

Different customer segments may respond differently when landing on the home page vs. a product page so test both paths. 

4️⃣ PRICING

Optimizing prices can have the single biggest impact on your brand’s growth. Yet many brands are scared to even try. 

Price changes are emotional. It can be uncomfortable because you love your customers. What if they get mad at you? 

Price is part data, part therapy. But you’ve got to do the math.

Typically if you raise prices, there will always be the squeaky wheels coming out of the woodwork to make you question your decision. 

But consider this.

A successful price increase with a healthy contribution margin could mean you could afford to lose your least profitable (bottom percentile) customers and still make more money. 

Higher prices = more margin = more leverage in your ad account.

Because now you have more contribution margin to play with, it means you can safely absorb higher CACs if needed. 

Before you test anything, you should create a spreadsheet and build a formula with all of your financial inputs:

➡️ MSRP

—------

• COGS

• Shipping cost

• Discounts 

• Processing Fees

• Ad Spend

• Returns/Refunds

—----------

✅ PROFIT

The formula should help you pinpoint your break-even point. This way you can back into your maximum CAC. 

One brand we spoke to was selling a product with a 50% discount. Right there, giving away half the revenue. The margins were very low and the brand needed a $10 CAC or less to be profitable. 

❌ Not scalable. 

❌ Bad assumptions

❌ Not measuring the right metric

Instead of 50% off, how about buy one get one free? In terms of psychology, 50% off and BOGO are perceived as the same value to a consumer. But it’s a completely different cost profile for your business:

50% = cuts your price in half, tanking your margin. If your product is $50, you are now collecting only $25.

BOGO = you get the full $50. Yet you only pay for your product COGS. 

You’ve also just converted that user to a customer with more of your product in your cart. These customers are more likely to return and buy again. 

One reluctant operator we talked into doing this test said it changed absolutely everything about his business. 

Tracking profit is a force multiplier on your ad spend - 

If you can convert paid traffic at a higher rate on bigger cart values with higher profit, you can invest those earnings into more scale. 

So the takeaway is to literally map out all of your numbers and then model out a ton of offers to see what the lowest break-even point is you can afford. 

Then A/B test that against your current offer and watch the profit per session metric. 

Your break-even point is so important. Because if you can lower it, you can afford to run ads less efficiently. 

Maybe you choose to put that profit in your pocket. Or you can spend more and scale faster.

RESULTS THAT SHOCKED 

“I work with hundreds of brands on thousands of tests and I’m always shocked by the results. There’s no single formula that works for all.” - Drew Marconi 

Recipe: free shipping above $150

Result: FAIL. Conversion went down. For this brand, $9 flat shipping won out over free shipping 

Lesson: Test shipping costs and thresholds. Don’t make assumptions and never make customers perform mental math.

Recipe: The $0.99 test - isn’t it cleaner to show $120 vs. $199.99?  

Result:  FAIL: conversion rate drop

Lesson: Always test pricing  

Recipe: A perfume brand tested Instagram reel-style shoppable videos on the home page

Result: Big loser. Conversion rate dropped. AOV - same, 7% drop in profit.

⚠️ But WAIT. When they peeled back the layers and took a deeper cut at the data they saw organic desktop traffic, which made up 11% of their overall traffic performed way better. Conversion up +8% AOV +5%  

It bombed on mobile but soared on desktop with profit 11% higher for that group. 

Lesson: Segment your traffic by device and source. Set up rules-based personalization across your customer segments.

The more tests you run, the more you learn about what didn’t work.

The more granular you’ll get with learnings on what segments respond to different variations of copy, image, price, and offer. 

The best tests thread all your learnings out from previous losers to boost the odds of success of the next test.  

Your Key takeaways 

• Use a daily P&L tracker to keep a pulse on your business. Tests won’t always reach statistical significance so make sure you check profit daily.

• Focus less on vanity metrics like conversion rate, and more on profit per customer. 

• Assess ad margins - calculate your contribution margin for top spending ads to find your break-even point. 

• Don’t let fear prevent you from price testing. It’s the biggest potential lever so don’t avoid it, and don’t let squeaky wheels derail your efforts. 

• Map out all of your numbers and then model out a ton of offers to see what the lowest break-even point is you can afford. 

• Don’t just roll with the averages, segment your customers, traffic sources, and device types to find the winning segments in your tests.

• Set up dynamic UTMs and pull the ad ID into Intelligems for targeted personalization. 

If you missed the episode where Drew, Ron, and Ash cover all these lessons and much more, catch the replay here.  

If you want more from us, follow us on

X/Twitter: Ron’s Twitter Ash’s Twitter 

Instagram: Ron’s Instagram Ash’s Instagram 

And check out the website, chewonthis.io

Have an amazing week!

All the best,

Ron and Ash