What Is A Conversion Rate and Why Should I Care?

When you’re looking at your site analytics there are a lot of data points – demographics, traffic sources, referrals – but it all comes down to one thing – CONVERSION RATES. Whether you’re a brick-and-mortar store or a website, all of your marketing budget should be measured against your conversion rate.

But what IS a conversion rate? How is is measured and why is it so important?

In a nutshell, a Conversion Rate is the rate at which someone performs a select action.

When someone walks into your store and makes a purchase – that’s a conversion.

When someone signs your petition – that’s a conversion.

When someone donates to your cause – that’s a conversion.

When someone gives you their email address in exchange for an eBook – that’s a conversion.

A conversion is whatever it needs to be for your business – the key when you’re trying to measure your conversion rate is first defining what a conversion means to you. A conversion is different depending upon what you’re trying to accomplish. Just like the examples above, a conversion is specific to your needs – whether it’s the cash to keep your business running or the signatures needed to get something on a ballot.

Once you know what you consider a conversion, then you take the inbound traffic that you’re receiving and do some simple math.
What is your conversion rate
For example:

Jane runs an online store and she has identified her conversion as a completed purchase on her site. Jane did an email drop of 100,000 names. She had a 40% open rate (go Jane!) which means 40,000 people opened her email and a 5% click-through (Jane is really rocking her lists!) which means that 2,000 came to her site through the email drop. Now it’s time to look a little deeper. What did those 2,000 visitors do once they came to the site? Let’s say 250 customers added something to their cart and 50 people completed a purchase.

That gives Jane a few metrics.

1) Orders (50)/Total Email List (100,000) = 0.05% – this is the most basic conversion rate and probably doesn’t tell you much outside of giving you a quick snapshot of the quality of your list. You can probably use this to benchmark a list, but the other calculations below will give you a much better understanding of list performance.

2) Orders (50)/Email Opens (40,000) = 0.125% – this conversion rate will help you understand how valuable it might be to take the steps to increase your open rate.

3) Orders (50)/Site visitors (2,000) = 2.5% – conversion rate for email customers that go to the site (this is helpful when comparing to conversion rates of other referrals). It will also help you understand the overall conversion rate for the landing page you use and then compare it to other landing pages you’ve tested. If you compare conversion rates of landing pages make sure that you isolate the traffic sources for each – once traffic source may love a landing page while another traffic source may not convert at all.

4) Abandoned Carts (200)/Site visitors (2,000) = 10% – this “anti-conversion” metric is helpful as well. This metric tells you how many people added something to their cart but then for one reason or another left your site without completing their purchase. There are different tactics that can help you reach out to Abandoned Carts to attempt to convert them into sales.

Overall it’s key to first figure out what a conversion means to you – and then go about measuring it and then taking the steps to make improvements.