The Anatomy of a $97 Million Page: A CRO Case Study
In this post, we share a CRO (Conversion Rate Optimization) case study from Protalus, one of the fastest growing footwear companies in the world. They make an insole that corrects the mis-alignment suffered by roughly 85% of the population. Mis-alignment is the cause of most back, knee and foot pain. Back pain alone is estimated to be worth $100 billion a year.
Summary
• We (with Protalus’ team) increased direct sales by 91% in about 6 months through 1-click upsells and CRO.
• Based on the direct sales increase, current run-rate revenue, the ‘Virtuous Cycle of CRO’ fueled growth rate and revenue multiple for their industry, we estimate this will add about $97 million to the company’s valuation over the next 12 – 18 months*.
• A concrete example of the Virtuous Cycle of CRO: Before we increased the conversion rate and average order value, Google Adwords was not a viable channel. Now it is, opening a whole new floodgate of profitable sales! Ditto for at least two other channels. In part due to our work, Protalus’ annual run-rate revenue has grown by 1,212% in less than a year.
* Protalus’ core product is differentiated, patent-protected and high margin. They also have a strong brand and raving fans. In the Shoes & Apparel category, they are most similar to Lululemon Athletica which has a 4x plus revenue multiple. While Nike and Under Armor engage in a bloody price war and margin-eroding celebrity endorsements, Lululemon commands significantly higher prices than its peers, without big name backers! Business gurus Warren Buffett and Charlie Munger often say that the true test of a defensive moat around a business is “Can you raise prices without hurting sales?” Protalus has this in spades. They have raised prices several times while simultaneously increasing units sold—from $39 to $49 to $59 to $69 to $79 to $99 to $119.
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