No matter what kind of business you run (online or physical store), it's important to monitor and optimize your conversion rate. Without solid conversion rates, you can drive all the traffic in the world to your business but you're still not going to achieve the growth you desire.
Now you might be asking: What is a conversion rate? What is a good conversion rate for my particular industry or business? How does my conversion rate compare to other businesses? How do I improve it?
Simply put, we can define conversion rates as the total number of users who buy a product or service from your company divided by the total number of visitors to your store, website, or mobile app.
Conversion rates and how you calculate them will differ depending on your business, where and how you track conversions, and ultimately your goals. If you run an eCommerce site, you should be extremely focused on the percentage of visitors who buy a product. The direct to consumer eCommerce shoe giant, All Birds would love if you signed up for their newsletter but at the end of the day, they want to sell you a pair of shoes.
Alternatively for SaaS businesses conversion rates can refer to a few things, but usually, it refers to the percentage of trail users that become paying users. When someone signs up for a Sturppy 14-Day Free Trial, we aim to blow them away by our customer service and power of the platform so that when the trial runs out, upgrading to our Starter or Pro plan becomes a no-brainer.
Here's the formula → Conversion Rate = Total number of conversions / Total number of visitors * 100. For example, if you run a lemonade stand and 50 people buy a glass of lemonade from 1,000 people who stop by your stand, your conversion rate would be 5%, since 50 / 1,000 = 5%.
Simple enough right?
Again, tracking conversion rates is going to differ from business to business. The easiest conversion rates to track are for businesses that operate online (SaaS, eCommerce, etc.).
The most accessible free way to track conversion rates for your website or online store is to use Google Analytics. If you don't already have Google Analytics setup for your business on your website, I'd suggest you invest a little time and do it. There are a ton of benefits of having Google Analytics installed beyond just tracking conversion rates.
Comparing your own conversion rates to industry benchmarks allows you to understand whether your performance is up to par or if there's room for improvements. The below conversion rates come from a 2021 study from our friends over at Ruler Analytics.
Conversion Rate Optimization (CRO) is the practice of increasing the percentage of users who perform a desired action on a website. Desired actions can include purchasing a product, clicking "add to cart", signing up for a service, filling out a form, or clicking on a link.
Conversion rates are essential for evaluating the performance of your website, mobile app, or even your physical store. Having a desirable conversion rate means you turn traffic into more actual sales. Therefore, understanding the implication of conversion rates helps you improve your business strategies.
Conversion rates are also effective in measuring your marketing campaigns, especially on social media channels, as they are accurate and reliable metrics. Reviewing conversion rates, you can find the number of people responding to your social media post and the percentage of them contacting you to make a purchase. With this knowledge, you can create a better social media marketing approach.
For example, an online shop spends $2,000 to advertise its website and attract 1,000 visitors. Among the visitors, only 400 make a purchase. With a higher conversion rate, 600 out of 1,000 visitors become customers. Essentially, the shop gets more customers from the traffic. It can either reallocate its marketing expenses for the same number of customers or reinvest the revenue into advertisements for more traffic.
In short, the higher the conversion rates, the better your business benefits from traffic. However, you should also consider the nature of your website traffic. For instance, there are different traffic sources, and organic traffic is of more value than ad clicks. Precisely, people who perform organic searches on search engines are more likely to purchase something from your site than those who accidentally click a banner.
Depending on the type of your business, there are different kinds of conversion rate measurements. However, you can derive from the basic formula to calculate conversion rates. The five common kinds of conversion rates are as follows.
To improve your conversion rates, refer to the tips below for online channels. You can test multiple recommendations and see which works best for your business.
Conversion rates imply the efficacy of your website content. If 5% of visitors purchase something from your website or leave their contact information, your site is 5% effective. Conversion rates also reflect ROI because a rise in conversion rate means you have a better ROI or more revenue.
A preferred conversion rate varies by industry, but a typical one falls between 2% to 5% across the board. You should research the specific conversion rates in your industry to ensure your comparison is valid. For example, electronics and business services usually have higher conversion rates than industrial equipment.
Let’s break down the elements underlying conversion rates. Various factors impact your website conversion rates, some of which are as follows.
Among them, user experience is a crucial factor. You should pay close attention to your overall conversion rates and individual visitor actions simultaneously. In particular cases, high conversion rates may result in a negative user experience, including popups, intrusive interstitials, or misleading messages for conversions.