Conversion rate is one of the most common metrics used by marketers, salespeople, and business professionals.
It is often talked about and taken on the surface as an important metric or key performance indicator (KPI) for most companies.
However, it can also be misapplied, misunderstood, or incorrectly established for use as a key metric.
It’s important to review conversions, conversion rates, and metric usage regularly.
It is even more important that any new initiative has the metric well defined and understood before positioning it as a key KPI.
In this guide, I’m going to dive deeper into what conversion rate is, how to calculate it, why it’s important, and ways to improve it.
What is conversion rate?
Google provides one of the most concise definitions of conversion rate:
“Conversion rates are simply calculated by taking the number of conversions and dividing it by the number of total ad interactions that can be tracked for a conversion during the same time period.”
Now, let’s get into what it all means.
Conversions
Unlike some business and marketing metrics, understanding conversion rates requires some self-definition.
Start by defining what a conversion is, which can mean different things to different types of brands and organizations.
You can have more than one conversion type. As a goal, you can consider it in a marketing funnel or customer journey. Or, it could be a firm financial metric that your business relies on.
The first step is to clearly define what a conversion is to you.
One of the most common definitions I see refers to someone who becomes the leader of a business that focuses on generating leads through their website.
Another applies to e-commerce businesses, where the conversion is the completed sales transaction.
Other common definitions include certain engagement metrics for businesses that rely on advertising revenue generated by page views.
Secondary types of conversions come from events, engagement, and other things like email signups that help support your funnels, customer journeys, and overall sales processes.
Conversion rate
The conversion rate is %.
In high-level terms, it tells you the % of people who came to your site and took the conversion goal action you set.
Some sources provide benchmarks for specific industries or areas to help you understand a good conversion rate and provide some objectivity.
I’m not telling you to copy your competitors, but I think if you want to value conversion rate, you need internal and external research to validate where you stand and where you want to be.
Relate this to your personal research, target audiences, marketing funnels and customer journeys.
Chances are you know what you want your site visitors and audience to do.
How many of them do you want to make? How big is the universe of your target audience? What is realistic about the total number of visitors you think you can get?
Find answers to these questions and chart your conversion goals and conversion rate goals.
How do you calculate conversion rate?
Conversion rate formula
The formula for calculating the conversion rate is simple:
Conversions/Visits* = Percentage of conversions
*I have to include an asterisk, though, as some definitions may not be so straightforward.
You can also call these “clicks” or “sessions” or look at them more granularly.
My definition here can be adapted depending on the language and definitions used by your analytics platform and other KPIs.
An example conversion rate calculation for my site (a marketing agency providing services to clients) with inputs and calculation:
August 2022 website visits: 1,122. August 2022 contact form submissions (my conversions): 61, 61 conversions/1,122 visits = 5.4% conversion rate.
do it right
Again, you define the conversions to size.
It could be a common conversion goal like submitting a contact form, something more secondary, or something more obscure.
This part can also be a bit customized or variable for you.
You can see it as clicks to a website from a specific channel or ad campaign.
You can be really granular with the segmentation of your data, the filtering of sources and channels, and even the definitions themselves.
This becomes especially variable or personalized if you’re tracking specific actions that lead to a conversion goal and how granular you want to be.
Make sure the definition of what you’re counting as a conversion and what you’re counting as a total audience (clicks, visits, or some other “total” metric) is represented in a meaningful way.
Why do I need to be able to calculate the conversion rate?
First, where do you measure and track your conversion rate? You can use Google Analytics, other analytics suites, or any data you have to calculate manually.
Google analytics
If you rely on Google Analytics (GA), you’ll want to make sure you have your “Goals” set up correctly and test them. Conversions are recorded based on the goals you set.
Out of the box, Google has no context about what a conversion is for you and no ability to calculate a conversion rate for it.
If you’re using GA, dive into setting up and testing your conversion goals to make sure things are in place before relying on the metrics you see (if you’ve inherited the settings) or moving forward with any measurement plans and improvement
And, speaking of mapping, tracking and measurement are critical.
You want to make sure that your technology stack and tools can help you properly track visits, conversions, and overall conversion rate according to your definitions and goals.
Getting it right is critical, whether it’s Google Analytics or third-party reporting tools.
Segmentation and filtering
In addition, you can segment as many levels as you like with examples such as:
By conversion type (if you have more than one). All website traffic. By source or channel. By pages/actions/session events. By campaign or initiative.
There are many more segments and ways to filter and split your conversions and conversion rate reports.
You want to be able to calculate your conversion rate and drill down into traffic segments and your audience to help you understand where you can improve.
What is a good conversion rate?
Calculating conversion rates and having the data is one thing; using it to make improvements is where the real work begins.
Improve conversion rates
You can look for improvement in two major areas, and I highly recommend evaluating both.
One is the traffic sources and influencers that drive visitors to your site.
This includes advertising, referrals and any activities and awareness campaigns you have that generate traffic.
The other area is what influences the traffic that has already arrived at the site: things like UX/UI evaluation, message review, calls to action, and the ways users navigate and interact with the site.
Improvement in this area is often called conversion rate optimization or CRO.
Optimization of traffic sources
For the traffic you’re sending to your site, you can see the targeting, ad creative, and keywords you’re organically ranking for—the ways your ad targeting and creative make a first impression or direct traffic to the site. .
There are a variety of optimization and refinement tactics to focus on higher quality traffic and aim to increase your conversion rate by getting more qualified visitors from external sources you influence.
Be careful, though, that you have a good idea of your customer’s journey and don’t eliminate awareness-focused or top-of-funnel traffic (eg traffic tied to thought leadership).
Increasing your conversion rate is important, but make sure you’re targeting well enough to keep targeting the top of the funnel, awareness level visitors, and sources.
Conversion rate optimization
Now, look inward at the traffic you already have.
This is where most people start researching CRO tactics. Web analytics can help you see where people leave, bounce, and don’t reach your conversion actions.
Beyond that, great heatmap and CRO tools will give you insight into UX and UI issues and how people actually interact with your site versus how you intend yours to design
By focusing on CRO and putting a strategy in place, you can evaluate everything from site speed to content, messaging, and user interface.
I highly encourage you to do so.
conclusion
Conversion rate remains a valuable marketing metric.
Understanding it, defining it for your organization, measuring it and improving it is important.
Whether you have a small business or an enterprise-level website, you’re likely concerned about specific conversion goals.
In short, for conversions and conversion rate, understand it, define it, measure it and improve it.
Yes, we all want more traffic. And maybe a static conversion rate is fine if you add more traffic.
However, wouldn’t you like more traffic? i a higher conversion rate?
It is possible to have both, and it is crucial to understand which levers to pull to influence them.
More resources:
Featured image: eamesBot/Shutterstock
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