Conversion rate
If you run an e-commerce business or use your company’s website to attract and engage with customers and prospects, it’s important to know how to calculate and track your conversion rate. It will offer insight into the effectiveness of your website’s user experience and your sales and marketing efforts.
“A website conversion refers to an action that a customer—or potential customer—takes that aligns with your business objectives. A conversion could be making a purchase online, downloading a catalogue or requesting a call from a sales representative,” says Gwendolyn Ung, Senior Advisor, Demand Generation, BDC.
Other conversions include:
- subscribing to a newsletter
- submitting a contact inquiry
- downloading an informative guide
- scheduling a service
- enrolling in a rewards program
- registering to become a member
- clicking on a popup
What is a conversion rate?
In the context of your website, conversion rate is the percentage of visitors who take a desired action. It is calculated by dividing the number of actions completed by the total number of site visitors.
For example, if ABC Co. has 100,000 visitors to its e-commerce website in a three-month period and 1,000 of those visitors make a purchase, its conversion rate is:
1,000
100,000
= 0.01
That would mean ABC Co. has a 1% conversion rate.
It’s helpful to create a definition of success for each action. The formula for calculating conversion rate is the same, no matter what action you’re measuring, so it’s simple to drill down to how specific actions are performing.
Gwendolyn Ung
Senior Advisor, Demand Generation, BDC
What is a good conversion rate?
According to e-commerce platform Shopify, average e-commerce conversion rates are about 2.5 to 3 per cent.
However, acceptable conversion rates can differ dramatically depending on factors such as:
- your industry
- your location
- the value of your products or services (e.g. $25 t-shirts vs. $250,000 manufacturing equipment)
- the conversions you’re measuring (e.g. purchases vs. newsletter subscribers)
- the type of device your prospects are using to convert (e.g. computer, tablet, phone)
Smaller ticket items are easier to sell and require less risk for e-commerce businesses. As a result their conversions are typically higher than for B2B businesses that sell high-value products or services that require developing a relationship with prospects. While a higher conversion rate seems more attractive, one conversion for a B2B company could represent hundreds of smaller purchases for an e-commerce business. Knowing your business and the value of your conversions is critical as you set goals.
It’s also important to note that you might have different conversion rate goals for different actions. For example, B2B businesses may aim for a higher conversion rate for requesting a quote than downloading a guide.
When there’s revenue involved, you want to keep a closer eye on conversion rate. If you typically generate $30,000/day on a product and one day you see it’s down by several percentage points, you can take action right away.
Gwendolyn Ung
Senior Advisor, Demand Generation, BDC
How is a conversion rate measured?
There are different steps for tracking the effectiveness of your website. Most businesses use a software tool such as Google Analytics that can calculate your conversion rate for you. You can measure conversion rates within given time periods and according to different actions:
- by all actions taken by visitors to your website
- by specific actions on a particular page
A website’s overall conversion rate will typically be higher than its e-commerce conversion rate, which refers only to purchases or orders.
“It’s helpful to create a definition of success for each action. The formula for calculating conversion rate is the same, no matter what action you’re measuring, so it’s simple to drill down to how specific actions are performing,” says Ung.
For example, if ABC Co. had 150 visitors to their website in one month and 30 people made a purchase, 5 people hit the ‘contact us’ button and 10 people downloaded a lookbook, they could measure conversion rate for each action—and overall.
| Conversion rate for 30 purchases | Conversion rate for 10 lookbook downloads | Conversion rate for 5 completed ‘contact us’ forms | Overall conversion rate |
|---|---|---|---|
|
30/150 = 0.2 20% conversion rate |
10/150 = 0.0666 6% conversion rate |
5/150 = 0.03 3% conversion rate |
45/150 = 0.3 30% conversion rate |
“It makes sense to separate these actions to measure different conversion rates because the goals are likely different for each action. While a conversion rate of 30% is excellent, it doesn’t tell the whole story. The business owner would value conversions in the form of purchases over completed ‘contact us’ forms,” says Ung.
How frequently you measure conversion rate will depend on factors such as your industry and the type of products you sell. If you’re an e-commerce business with high competition in the marketplace, you’ll likely want to measure often so you can see what’s working. If you’re a B2B business, the volume of individual online actions may not matter as much over a shorter period of time.
“One of the ways to think about improving conversion rate is to watch how it trends over time. This helps you understand if there is an anomaly or whether your conversion rate varies based on seasonality. For example, if the conversion rate for purchases was 22% last month and it’s 20% this month, you might consider comparing it with last year, tweaking something on your website to optimize that rate, or just watching it for another month before making a change.”
Calculating conversion rates by actions or pages will allow you to assess the attractiveness and effectiveness of your offers and the user experience of individual pages of your website. You can experiment with different approaches by making small changes and measuring again.
“When there’s revenue involved, you want to keep a closer eye on conversion rate. If you typically generate $30,000/day on a product and one day you see it’s down by several percentage points, you can take action right away,” says Ung.
What is conversion rate optimization (CRO)?
There are lots of levers a business can pull to improve their conversion rate—for both overall visits and specific actions. Conducting a website analysis, measuring, tracking and working to optimize conversion rates go together to help you generate more leads and sales via your website.
“CRO is about ensuring that the user experience and website processes are fully optimized,” says Ung.
Benefits include:
- Higher revenue: Larger conversion rates translate to more sales or leads without escalating your advertising budget.
- Elevated ROI: Enhanced conversion rates result in a more substantial return on your marketing investments.
- Better user experience: Improved customer experience, which contributes to loyalty and referrals.
Strategies to optimize your conversion rate
Here are some tactics to consider as you work to improve your conversion rate:
1. Improve website usability
Make sure your site loads quickly, is intuitive and easy to navigate and is optimized for mobile devices so visitors can complete actions quickly.
Advanced action: Use AI-driven chatbots to guide users through your website, providing instant assistance and boosting conversions.
2. Enhance content quality
In the context of content marketing, you can create compelling calls to actions (CTAs) to inspire visitors to complete an action and provide valuable content that’s relevant to your ideal customers. Use high-quality images and videos to engage visitors.
Advanced action: Deploy content management systems (CMS) that automatically adjust content based on user behaviour, enhancing personalization and engagement.
3. Do A/B testing
Test different versions of your web pages to see which elements perform best. AI tools can automate this process, allowing for real-time optimization.
Advanced action: Contrast different landing page designs, test disparate headlines/visuals and CTAs.
4. Personalize
Use customer data to personalize your visitors’ experience. AI tools can help you analyze user behaviours and patterns to provide product recommendations and create targeted promotions that encourage purchases and loyalty.
Advanced action: Segment audiences to deliver tailored messages based on client profiles to increase the probability of conversion.
5. Demonstrate credibility
Provide transparent contact details and display customer testimonials, secure payment options and security badges to show your visitors that you’re a legitimate business they can trust.
Advanced action: Automate the collection and display of verified customer reviews.
6. Offer promotions and incentives
Propose discounts and exclusive offers throughout the year and use design elements to accentuate promotions and novelties.
Advanced action: Implement reward programs to incentivize repeat business.
Optimizing your conversion rate is essential for growing your business. By identifying and applying appropriate CRO strategies and continuously measuring, tracking and testing conversion rates, you can improve sales and leads.
Ultimately, successful CRO lies in perpetual experimentation and refinement. Pay attention to how competitors are working on CRO and stay up to date on the latest trends and tools to consistently improve.
Next step
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