The “conversion rate” is one of the most used terms today by marketers and e-commerce platforms.
And for a good reason.
The conversion rate is an essential performance indicator for all online companies, such as e-commerce.
This is an essential factor for the success of an online store.
Thus, if you know how to calculate the conversion/transformation rate of your business and you can follow its evolution and optimize it, you have all the keys in hand to carry out the following actions successfully:
- Optimize your advertising spend
- Allocate your resources more efficiently
- Determine your profitability
- Hire additional sales teams
On the other hand, you need to know how to calculate the conversion rate of such a marketing action to improve your results and develop your turnover.
For example, you could end up paying exorbitant amounts in advertising to acquire your prospects and finalize a sale, undermining your competitiveness.
In short, knowing how to calculate a conversion/conversion rate and having the keys to improving it is an essential skill for digital marketers and all those of you who manage or own an e-commerce platform.
The conversion rate is thus one of the most critical “metrics” – marketing performance indicators – for e-merchants.
So much so that it’s considered the ultimate lead generation performance indicator by digital marketing consultants.
Increasing your conversion rates is, therefore, crucial to your online business’s success. High conversion rates are the basis for high sales volume and rising turnover.
As an e-tailer or digital marketer, you need to know the meaning and logic behind the numbers and data you track on tools like Google Analytics or software like Optimizely, Crazzy Egg, etc., which will help you track and analyze your conversion rate.
Taking the time to analyze your data and think about what is happening on your online sales platform, website or blog can provide valuable insights into process improvements and marketing techniques. Conversion optimization that you should put in place to boost your sales.
Whether you are new to digital marketing or an expert in the field, this article aims to make you aware of the importance of the conversion rate and its calculation, two essential notions of knowing what is happening on your site. Web and to grow your business.
Now let’s get to the heart of the matter with the definition of the transformation rate.
Definition of conversion rate
In its simplest form, the conversion rate is the percentage of visitors to a website, e-commerce site, or webpage that reach a specific goal that you set.
Most often called “conversion rate”, this ratio is used mainly in online marketing.
It can represent the proportion of purchases on a given website compared to the number of unique visitors who have browsed the site.
As we will see below, the conversion rate can be applied to different activities or actions that take place on a website (downloading trial software, requesting information, registering on a contact list, purchasing, etc.), and companies use different types of ratios to study the results of their website.
Here are some common transformation/conversion goals:
- Make a purchase (become a customer)
- Submit information on a contact form (lead form)
- Subscribe to a newsletter
- Create an account
- Upload content (a white paper, guide, or another form of content)
- All kinds of interactions with your website, for example, time spent on the site, visits or reading of specific pages, number of page views, etc.)
Choosing a specific transformation or conversion goal will depend on the particular nature of your business.
While a purchase goal will be logical and relevant for an e-commerce platform, a content-focused website or blog will instead favour newsletter sign-up as a conversion goal.
These conversions can also be categorized into distinct subsets.
Moz, the brand of online tools specializing in web analysis and SEO, treats transformations/conversions in a particular way, explicitly distinguishing between macro and micro conversions.
A macro conversion is a primary goal, like selling a product, signing up for a service, or getting a quote. In contrast, a micro conversion is a subgoal that facilitates the path of the Internet user or prospect towards the main objective.
For example, adding a product to a cart or signing up for an email list are two actions that can be considered micro-conversions.
Now that you have a good idea of the usefulness of the conversion rate let’s see how to calculate it.
How to Calculate Conversion Rate
It’s time to address the main topic of this article: the calculation of the conversion rate.
This calculation is relatively simple, even if math isn’t your strong point.
Here are the three conversion rate formulas that you can use to get an idea of the success of the marketing actions you put in place on your website or e-commerce:
- Conversion rate = Total number of modifications/Total number of sessions * 100
- Conversion rate = Total number of changes / Total number of leads * 100
The existence and validity of 3 different formulas to calculate your transformation rate has a foundation.
The best way to calculate the conversion rate depends on what you define as a conversion event or action and how you plan to measure your traffic.
The numerator of your calculation will measure your conversions as defined by your conversion rate goal, while the denominator will be what you have defined as your total traffic pool, which is usually the number of sessions, the number of unique visitors or the number of leads.
To see more clearly, here is an example of calculating the conversion rate:
An example of calculating the conversion rate
In this example, you manage an e-commerce site that sells surfboards or any other product of your choice.
The conversion — or transformation — goal here is to move your website visitors through a sales funnel and convert them into customers by getting them to make a purchase.
Say your website gets 100,000 unique visitors in September, and you sell a surfboard (your conversion event) to 5,000 people.
What will be the conversion rate?
Your conversion or conversion rate is, therefore, 5%.
So, calculating the basic conversion rate formula is easy, but it’s worth going a little deeper and seeing how the conversion rate affects your bottom line and, therefore, your profitability.
Building a sustainable and profitable business is the number 1 goal for most entrepreneurs and e-merchants.
And increasing the conversion rate is one of the main levers to ensure your business becomes profitable over time.
Continuing with our previous scenario, let’s imagine that the company that markets surfboards generates its inbound traffic from a PPC (pay-per-click) campaign with Google Ads.
If the average CPC (Cost per click) is €0.50 and the company spends €50,000 to generate 100,000 visitors, how can you know the profitability of its marketing strategy?
The answer to this question lies in the conversion rate.
At a conversion rate of 2%, the business can make a profit of $50,000, and if it can increase that conversion rate to 10%, it makes a massive difference in the return on investment.
Thus, we note that the company can generate €50,000 in additional profits each time the conversion rate increases by 1%, which is considerable.
Another thing you need to consider when calculating the conversion rate is the value of a lead or a click.
Your current conversion rate determines how much you can spend on a lead or click. You can start spending more on paid advertising campaigns if you improve your conversion rate.
The chart below shows how ROI changes when you increase your CPC bid at a constant 2% conversion rate. The only primary variable that changes here is the average CPC.
With a conversion rate of 10%, you can afford to pay the total price for your CPC while maintaining positive ROI for your campaigns.
You could spend up to $5 in CPC before you hit the red.
Finally, it should be noted that for most companies, the conversion rate calculation must be established over consistent periods that depend on their situation and the maturity of their business.
Typically, businesses measure their conversion rate on a weekly or monthly basis.
As your traffic increases or your business evolves, the conversion rate calculation can be measured more frequently and adjusted like any other variable.
What is a reasonable conversion rate?
This question inevitably comes up when we discuss calculating the conversion rate and which interests all digital entrepreneurs.
In reality, what is considered a good transformation or conversion rate varies wildly, depending on your sector of activity, your audience and your website (e-commerce platform, blog, non-commercial website, etc.)?
According to a recent US study of over 60,000 landing pages, a 10% conversion rate is considered good enough for lead generation landing pages, which, in truth, puts you above 90 % of your competitors.
Looking at the 2021 figure for French e-commerce, we see that the transformation rate is 2.96%, a figure higher than the overall transformation rate, i.e. all business sectors combined, which is 2.3%.
It is also interesting to see that the e-commerce conversion rate varies greatly depending on the device used.
With conversion rates of 3% on desktop and just 1.6% on mobile, while users are increasingly using their smartphones to browse and search, they are validating by ultimately most of their purchases on their desktop, preferably.
Go further with more specific conversion rates.
So far, we’ve covered conversion rate calculation in its simplest form. Our definition of conversion rate is a performance indicator that tells you how well you convert your traffic across your entire website or online store.
But there are several more specific types of conversion rates you should be aware of:
The overall conversion rate
This conversion rate looks at your site traffic and measures your success toward a conversion goal. For example, it could be a conversion rate that tells you what percentage of visitors to your website sign up for a paid account or something else entirely.
The conversion rate per channel
Does your business rely on multiple channels to drive traffic to its website?
The conversion rate by channel gives you a breakdown of your conversion rate.
This helps you identify performance differences depending on the traffic source, whether Search Engine Marketing with the Google search engine or Social Ads with ads on the Facebook social network.
On-page conversion rate
On-page conversion rate helps you identify your top-converting landing page(s), allowing you to direct your traffic to those high-converting pages first.
The conversion rate per ad or campaign
When you deploy several ads or campaigns simultaneously, it can be interesting to see which registers the best conversion rates and to act accordingly, i.e. to increase your PPC budget for such or such ad, or at least contrary to reduce it.
The conversion rate by keyword
Some keywords perform better than others, and benchmarking conversion rates based on keywords can help you identify keywords that generate less volume but a higher conversion rate, for example.
In this case, it may be worth reallocating your budget to these high-performing traffic sources.
How to implement conversion rate measurement on your website?
Now that you know almost everything about conversion rate, it remains to be seen how you will implement its tracking.
To track conversions on your website, there is an essential and accessible tool, Google Analytics. There are other solutions like Kissmetrics, Crazy Egg or Unbounce that can help you with this task.
Then, to take full advantage of these tools and software, you need to install a tracking pixel on your web pages, identify the web pages you want to track in some way and define conversion events. This can be adding a product to the basket, a simple view of a product, a click, etc.
Finally, once the data starts coming in, it’s time to leverage it to impact your strategy. By frequently reviewing this data, you will be able to make the right decisions and improve your conversion rates.
To finish this article, let’s see what you can do to optimize your transformation/conversion rates.
Five tips to optimize your conversion rates
Here are five essential things you can do to start your conversion rate optimization (CRO) process.
CTAs (Call-to-action) should be at the heart of your conversion rate optimization process.
CTAs, also known in French as “calls to action”, guide visitors to your website to take them to the next step, whether it is to subscribe to your newsletter or make a purchase.
Here are some tips that will allow you to optimize your CTAs:
- Make sure your CTAs are well-placed on your web page and visible
- Choose short and punchy CTAs
- Use strong words that invite action
- Preferably use text CTAs with the appearance of a button, as they look more natural and generate more clicks
2- Contact or registration forms
Contact or registration forms collect valuable information about visitors who visit your website. Nothing prevents you from using this helpful information for future communication and marketing activities.
By using specific CRO tactics, it is possible to optimize your forms for conversion.
First, make your forms visually appealing. Try to create something more original than a classic email capture form, and try new devices, such as “gamification”.
The length of your form is also an essential factor. The shorter your paper, the more likely your leads will fill it out.
So, limit the length of your form by including only essential fields.
Finally, it is preferable to position your form above the fold of your web page (the part visible to the Internet user when arriving on the page).
Either way, it’s a good idea to use A/B testing to see what works best for your website.
3- The structure of your website
One of the golden rules for successful conversion rate optimization on your website is to make it easy to navigate.
Try to keep the site structure simple, logical, and enjoyable, and always make it easy for people to find what they’re looking for.
If your website structure could be more optimal, hire a UX designer to improve your site’s overall design and UX performance.
4- The loading speed of your website
The page loading speed of your website is fundamental to minimizing your bounce rate and maximizing your conversion rate.
Most Internet users only stay on a website for a maximum of a few seconds if they notice that the loading time exceeds a few seconds.
Images and videos are often the main culprits for slow loading speeds, so this is where you should start your conversion rate optimization.
Use image compression tools to reduce their size and make loading easier.
You can also use a content delivery network and caching to optimize your site’s loading speed.
5- The design of your landing pages
Landing pages are also an essential part of conversion rate optimization, as most conversions occur from these types of pages, and this is often where new visitors to your website land.
When designing your landing pages, consider using a mix of text and images, positioning your CTA in the centre of your page, and placing your form strategically.
Structure it so that everything is perfectly harmonized.