Conversion Rate (CR) is an indicator for e-commerce (electronic commerce) that measures how many of a website's visitors perform a desired action by responding to a call of action. This can be a minor conversion, such as turning forum visitors into registered users or bigger ones, like transforming visitors into buyers. Conversion rates thus indicate the success of an online marketing campaign. This is especially relevant for e-commerce because when hosting ads on your website, the conversion rate shows how attractive it is for advertising partners and sponsors.
Calculating the conversion rate
To calculate the conversion rate, you divide the number of conversions by the number of your total visits. The formula for calculating conversion rates looks like this:
Figure: Formula for calculating the conversion rate, Author: Seobility
To give you an example: An online shop has attracted 786 visitors to its website through an advertising campaign and 25 of them actually purchase the advertised product. In this case, the conversion rate would be 25 / 786 x 100 % = 3.18 %. This would be within the usual range, as recent experience has shown that the conversion rate after marketing campaigns is usually between 1 - 5%. Since returning visitors can distort the result, an alternative approach is to calculate only with unique visitors, i.e. to include each visitor only once into the calculation. If a user were to visit a sales page five times over the course of a campaign, they would only be considered once. You can use statistical tools such as Google Analytics, Adobe SiteCatalyst, etracker, or Matomo to determine conversion rates.
Factors influencing conversion rates
Typical factors that can increase your conversion rate are:
- an appealing website (e.g. in terms of experience, navigation, and usability)
- low prices (when selling)
- availability of goods
- quality and presentation of your offer
- delivery times
- payment options
- a well-managed advertising campaign
- short loading times of your website
- adapting your website to the needs of your target group
This list is, of course, far from complete. All factors that contribute to an advertising campaign's success and thus increase the conversion rate could be listed here.
Metaphorically speaking, you can imagine the conversion process as a funnel. The specialist term for this is conversion funnel. This perspective can be helpful if you want to increase your conversion rate because it can show you where visitors get stuck on their way to becoming customers.
Think of an online shop as an example. A fraction of users will click on the buy button, which is only the first step in converting them to buyers. They must then enter their personal data; confirm that they are informed about the terms and conditions and give their consent. After that they must enter their bank details or select the method of payment, etc. So they have to pass several steps before the sale is actually completed. In each of these steps, some users jump off instead of completing it. In other words, they get stuck in the funnel. As you can see in the picture, it is important to reduce the number of steps customers have to take and make the whole process as short and straightforward as possible. This is the only way to avoid losing users on their way from the first click to the actual transaction.
Fields of application
Online shops and forums have already been mentioned as examples where it’s important to measure and optimize conversion rates. But there are many more areas where it can be profitable to increase conversion rates. For example, this metric is also used to measure and improve the number of newsletter registrations, survey participants, customer registrations, clicks on advertisements, participants in competitions, fundraising campaigns, and downloads. To put it in a nutshell: The conversion rate is always important when you expect something from a website visitor. Therefore, it’s an essential metric for almost all areas of online marketing.