Conversion rate, is the measure of how effective your website is at converting your traffic into taking action.
Conversion rate is seen as a critical measure on the success of your website. The higher the conversion rate the more of your visitors are taking action/purchasing on your website.
Typically your returning visitors or existing customers will have a higher conversion rate. New audiences will have a lower conversion rate.
This is not a problem, as long as the amount of revenue they generate is higher than the cost of getting those visitors to the website, also known as cost per acquisition.
The 3 secrets What, Why and How
What is it?
The number visits who ended up taking action on your website.
It is typically expressed as a percentage and is calculated by dividing the transactions or actions by the number of visitors.
1,000 (transactions) / 10,000 (visits) x 100 = 10% conversion rate
This would give you the overall conversion rate for your website over a given period of time.
For you to really understand where you are doing well vs. badly (against the industry average) look at your conversion rate by channel, device and ideally for paid media, by campaign.
For the Online Advertising’s Guide definition go here.
Why should I measure it?
Monitoring conversion rate is the easiest way to understand how effective your website is. Conversion rate on its own however is useless. It will indicate WHAT is happening but it will not indicate WHY.
Overall if your rate is low, you require more visits to your website to generate leads or revenue. This is especially important in costly channels, such as Google Search, ,Display advertising or Paid social channels.
The lower the conversion in these paid for channels the higher your Cost per acquisition will be.
For example, you are a Ecommerce business selling products at £75.
If you spent £1,000 per month on Google search and each click cost £1, and had a 1% conversion rate, your Cost Per Acquisition would be: £100.
By improving your conversion rate to 2.5%, your Cost Per Acquisition would be: £40.
You can quickly see how much of an impact conversion rate has on marketing profitability.
How to diagnose it
However do not underestimate the effort required to diagnose why conversion rate is going up or down. On the face of it conversion rate is a single metric, but there are a number of factors which can influence it.
To carry out the diagnosis you will need:
- Your visitor traffic
- Number of transactions
- Across all channels where you can track a conversion
Step 1: Look at the traffic and number of transactions by channel.
Step 2: Divide the number of transactions by channel to the traffic by channel to get the Conversion rate.
Step 3: Compare the rate vs. the previous period (year on year or month on month) to understand if this is getting better or worse.
Step 4: Identify if the cause of the change in conversions. Compare the rate by looking further into the data. This could be a change by device, channel or campaign.
Step 5: To diagnose the change, look at what metric caused the change (based on device, channel or campaign) look at the change of Bounce rate, time on site, pages viewed, Add to cart rate or Cart completion rate.
Once you have these “diagnosis metrics” look at which ones have changed the most over the same period of time. See below for an example Analysis The Crank View.
Best ways to Diagnose Conversion rate to reduce your marketing costs
Where can I see it?
The screenshot is from Google Analytics and shows where you can the sessions and transactions on your website. It also highlights the conversion rate by channel. From here you would typically dig into the data to understand how conversion changes over time by device, within these channels.
See our video to learn how to diagnose conversion rate
Want to know how good your conversion rate is compared to others?
Conversion Rate Ecommerce example below
Best ways to diagnose Conversion Rate to generate more revenue
In the graphic we took conversion data for desktop across 3 key channels. We compared this year on year to see the change.
We were then able to also look at the website behaviours and if these impacting the rate.
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90 Days to higher conversions using your data
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It is calculated as a percentage for example 3.5%.
To get your rate take the total number of transactions/actions and divide this by the total number of visits.
Conversion rate % = transactions / visitors x 100
Here is a useful calculator which will help you get to your conversion rate.
Looking at the conversion rate by channel (where you traffic came from) is hugely valuable. It will allow you to refocus .your budget on channels which are performing well.
The best source of conversion is your data, based on your historical performance.
However using external industry data is very powerful to compare yourself against the competition and to understand how much headroom and opportunity you have left to grow.
There is not single answer to what is a bad conversion rate. However if you look at your cost per acquisition this is a good indicator or marketing profitability.
Conversion rate is one of the biggest metrics which affect cost per acquisition.
For example, you are a Fashion business selling products at an average of £70 on your Ecommerce site.
If you spent £10,000 per month on Google display advertising and each visit cost you £1, and had a 1.5% conversion rate, your Cost Per Acquisition would be: £67.
Given your average order value of £70 you are making £3 marketing profit, before any overheads or cost of goods.
In this example the conversion rate would be deemed bad or underperforming.
You could reduce your costs and focus on media which was either cheaper or better performing. However you could also marginally improve your conversion rate.
By improving your conversion rate to 1.8%, your Cost Per Acquisition would be: £55, giving you a marketing profit of £15.
The above is looking purely at overall website averages. This is a useful indicator, but doesn’t really help you. It is best to look at conversion by channel, device and campaign (when paying for traffic).
Using your data is a good starting point and looking at your own Year on Year change. This will at least provide you with an indicator of your improvement or decline over time.
But knowing how your conversion rate compares to your industry is also useful. It allows you know if you are doing well and if you have opportunity to focus elsewhere. For example on growing your website visitors, average order value or cost per acquisition.
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