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
Conversion Rate
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.
For example:
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.
1
The list of channels, how people got to your website, over a period of time.
2
The total number of sessions/visits to your website. Note, this counts if an individual/visitor, visits more than once.
3
The total number of actions, in this example transactions, which have been performed by those who visited.
4
Dividing the transactions by sessions will give you the conversion rate illustrated here. At the top of the page this is the average overall for the website. Channels (underneath) which are below this number are underperforming.
5
Bounce rate is one example of a metric which will help you diagnose why conversion rate is over or underperforming.
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See our video to learn how to diagnose conversion rate
Want to know how good your conversion rate is compared to others?
To get your results:
- Choose your industry
- Type in your conversion rate
- And hit “Benchmark me”
Conversion Rate Ecommerce example below
Sources
We created a conversion rate benchmarking tool so you can see how you fair against others.
We split this down by industry so you can see the conversion rate average in our tool.
We sourced industry benchmark data from the following places to build the conversion rate benchmark:
How to determine where your conversion rate problem lies
Looking at your overall average conversion will hide what is really going on. To understand where the problem lies, drop on your share of visitors, add to cart, purchase and revenue share.
Where the red bar is lower than the green bar the device is performing well.
Where the red bar is higher than the green bar, you are getting a great share of traffic to revenue and there is a problem, so focus on this device’s conversion rate.
1
Desktop is performing well overall. The share of traffic (Red bar) is lower than the green bar indicating there is a good conversion rate. It is good and therefore you could drive more traffic to desktop devices.
2
The tablet visitors are well optimised and there is little need to focus on conversion rate on this device.
3
In this example the focus needs to be on mobile to understand why there is a conversion rate problem. The red bar is higher than the green bar indicating a drop off in revenue from visitors on mobile.
Dig down further into your conversion rates
To further validate your hypothesis around device performance look at your overall conversion rate and compare this by device.
Devices which have a lower than the overall conversion rate need to be looked at.
1
This is the overall conversion rate for the whole website, irrespective of device. Use this as your baseline to understand if your devices are over or underperforming.
2
Desktop is over performing outstripping the overall website average.
3
Mobile devices are under performing which need further investigation as visits on this device are converting less than than overall website average.
Learning how to find your conversion rate problem
In the graphic we took conversion data for mobile 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.
Turns out there was a huge problem for the Google Shopping campaign. This had a terrible conversion rate. This was impacted by the high bounce rate. After further investigation the google shopping campaign was advertising products that were out of stock and advertising certain products at the wrong price.
1
This is the list of the metrics to firstly understand the conversion rate against RPU (revenue per user) and CPA (cost per acquisition). The other metrics help identify why things might be happening.
2
This is the list of channels or sources of traffic (where visitors are coming from). All traffic is the overall website average, for mobile, and can be used as a comparison.
3
This is a reference by channel to understand if the customer spend (revenue per user – RPU) is higher or lower than the marketing spend. (cost per acquisition – CPA). Aim to keep RPU higher than CPA to make a marketing profit.
4
This is the conversion rate by channel on mobile. If the number is lower/smaller than the all traffic it is below the website average and therefore underperforming. In this example paid search shopping is terrible.
5
A potential cause of a drop in conversion rate on mobile is the bounce rate. Here Google Shopping campaigns have had a 7 fold increase in bounce rate. Look at page performance or stock or pricing to see why this is so high on a shopping focused channel.
6
Both the social and email channels are very effective and could have more investment. The social channel revenue was down, but looking across this was due to drop in traffic. Invest in paid social to further boost channel performance.
On the go?
Learn how to diagnose your conversions in our 5 minute audio.
Need to learn more about conversion rate and how to improve yours?
Download our guide on conversion rate to learn more about:
- How to calculate conversion rate
- Where to find conversion rate in Google Analytics and how this varies by source of traffic
- How to diagnose your conversion rate to drive incremental growth and reduce cost per acquisition
People also ask . . .
How is it calculated?
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.
How does my rate compare for Google?
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.
What is a bad rate?
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).
What is a good rate?
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.
Recommended Reading
Below is some recommended content, we have picked out. This content is mixture of resources to help you through to other articles which help understand more about digital.
Download: Budgeting for Marketing research – Our research covers what the leading organisations do to forecast and set their budgets for marketing. Read how they accurately forecast and adjust their budgets to get ahead.
Define: Cost per Acquisition (CPA) – Read about one of the most important metrics when setting your marketing budget. Understand if your website traffic is profitable and how to diagnose the unprofitable channels.
Discover: Resource for senior marketers – See our latest research or white papers to help you get ahead. Alternatively, read our digital marketing glossary for senior leaders to understand the jargon and acronyms of digital.
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