Should I Spend More On Getting Traffic or Conversion?

I found this question on LinkedIn Answers and decided to write about it...
"Is Conversion Rate Optimization Cheaper Than Traffic?"

Let's say run a car dealership...

used car lot metaphor

Model 1 - Your dealership is located in a high traffic area, right beside a popular mall. This dealership doesn't have any salesperson, except for one receptionist who greets the prospects as they come in. To purchase a car, all the customer has to do is go to the receptionist and provide the information required. The customer then gives the money to the receptionist, then signs the papers to complete the transaction.

Model 2 - Your dealership is located one block away from the mall, and you have two or three sharks--I mean, salespersons, attending to every customer that comes in.

Which of the two models do you think will sell more cars?

I recently bought a "pre-owned" car for my wife sometime before christmas last year. Our plan was to just look at what was available in that dealership, then compare prices with other shops before making a decision.

I was a salesman myself and I was confident that I can reverse whatever sales ploy the salesperson will throw at us.

To make the long story short, we ended up buying a car right then and there.

If there were no salesperson in the shop, we could have easily walked away. If the next dealership had a good salesperson, we would have bought from them even if the Model 1 dealership had better cars and lower prices.

It's the same with conversion.

No matter how much traffic goes through your website, if it hasn't been optimized to convert, almost all of your prospects are going to buy from someone else.

Besides, generating traffic for your website is an ongoing expense. Google is always improving its search algorithms. SEO experts have to learn, run tests, then charge you higher fees for ongoing work.

The only times you optimize your site is before you launch your website, and whenever you notice that your sales chart is starting to point down.