What comes to mind when you hear “conversion rate”? If you have doubts about what it is and why it is becoming more and more important in any e-commerce strategy, you have come to the right place.
In the following lines I will try to explain what is the conversion rate, how can you calculate it, what is it for and even how can you optimize it to reach the ideal level for your business. are you coming with me?
What is the conversion rate?
The conversion rate is the metric that indicates what percentage of users make a purchase. It is one of the most important indicators to evaluate the success of an e-commerce and is key to knowing how well a website works.
For example, if your store had 1000 monthly visits last month and of those visits, 10 converted into sales, the conversion rate of your online store is 10/1000= 1%.
It is necessary to distinguish between two different metrics: the sales conversion rate and the marketing conversion rate.
What is the sales conversion rate?
The sales conversion rate is the metric used to evaluate results, specifically of purchases made. The objective is to calculate the conversion of different channels or strategies and the way in which they impact buyers, either by encouraging them or lengthening their purchase process.
The sales conversion rate is a relevant metric that is necessary to know in every business and it is useful to separate it from the marketing conversion rate, especially for those companies that combine offline and online sales methods. This value is essential to evaluate closing actions and strategies or those focused on the lower part of the sales funnel.
What is the marketing conversion rate?
The marketing conversion rate is the metric of users who have carried out a specific action, whether by visiting the website, downloading a coupon or ebook, subscribing to the newsletter or asking a question through the chat.
In itself, as its name indicates, the marketing conversion rate is focused on measuring and analyzing promotion strategies, attending to the first two stages of the sales funnel or buyer’s journeysuch as attraction and consideration.
It is very useful to know the effectiveness of the calls to actions or of the landing pagescan contain both offline and online strategies, although more and more businesses are turning to digital campaigns because of the ease of obtaining quantitative results and achieving better performance of the marketing budget.
🚨 Eye! It is possible to combine the sales conversion rate and the marketing conversion rate that is implemented in your business, that is, it is possible to know how many sales were achieved from a campaign on social networks if at the time of configuring your campaign you have assigned the sales value in the user’s conversion path.
For this reason, we could say that the sales conversion rate and the marketing conversion rate are similar, complementary metrics and even having them well established can help us to know more about the purchase process of our users.
What does the conversion rate measure?
Actually, depending on the formula you use, the conversion rate can measure:
- The percentage of visitors to a website who will make a purchase;
- The number of possible sales in a certain period of time;
- The approximate number of subscribers to a newsletter;
- The proportion of users who could download an ebook or app.
It all depends on the factors that you include in the formula and the way in which these are linked. The conversion rate is even useful to be able to forecast the efforts you would need to reach a certain sales goal or the budget needed to reach the number of leads or registrations on a web page.
Why is conversion rate so important?
The conversion rate is super important in a business since it allows us to know precisely if everything is working correctly in our company or if there is something that prevents customers from making their purchases.
The conversion rate is important because:
- It allows us to know if our communication strategy works;
- Gives us clarity about the operation of our website or online store;
- It helps us understand if a promotion was attractive to the user;
- It gives us the opportunity to improve our return on investment.
Now I explain each of these points.
Lets us know if our strategy works
A low conversion rate can be the indicator that helps us know that the messages in our campaign or our ads on social networks were not relevant to the user and we may need to make changes in the benefits or in the way in which potential buyers They interacted with the piece.
It gives us clarity about how our online store works
Imagine promoting your newest items. Knowing how many clicks that banner got would help you know if those articles were relevant to visitors or if they passed them by. The conversion rate becomes one of the most relevant indicators to know if the messages on our site work or if they need to be improved.
It helps us understand if a promotion was attractive to the user
Suppose you pay for a set of ads on Instagram mentioning a 15% discount on your online store. Knowing the conversion rate of these pieces will help us know if the promotion was attractive, if you captured the interest of users and if this channel is relevant for future campaigns.
It gives us the opportunity to improve our return on investment
In the end, the ultimate goal of measuring the conversion rate is to know where and how to direct the efforts of your business, not only in terms of money, but also in terms of time. Knowing which channels suit you, which ones give you a better conversion rate and how you can achieve more sales with the least effort, are among the greatest benefits of knowing this metric.
How is the conversion rate calculated?
Since we have talked about the advantages of knowing the conversion rate in a business, now let’s go to the core point. How to get the conversion rate?
To calculate the conversion rate there are two methods that I will now explain to you:
Conversion rate (general formula)
For this formula, you must take into account all the visits that your online store receives as well as the visits of the same user. For this reason, this is the least accurate formula. However it is a good way to get an approximation:
Conversion rate = (Number of conversions x 100%) / (Number of visits)
For example, an online store that sells pet accessories got 100,000 total visits and 100 purchases in one month. Therefore: conversion rate = (100 x 100) / 100,000 = 0.1%
Conversion rate (advanced formula)
With this formula, the conversion rate is more precise, since you will only be measuring unique visits, that is, if a user enters your store several times during the day and in the end only makes a purchase (which happens more frequently than usual). you imagine), your stay only counts as one visit.
Advanced conversion rate = (Number of conversions x 100%) / (Number of unique visits)
For example, an online store that sells candles got 10,000 unique visitors and sold 120 candles. Therefore: advanced conversion rate = (120 x 100%) / 10,000 = 1.2%
You can apply both formulas depending on what you want to measure, substituting the values, for example, if you want to obtain the conversion rate of an ad on Facebook, you must substitute the number of conversions for the number of clicks and the number of visits for the number of impressions.
What is the best formula to calculate the conversion rate?
The best formula to calculate the conversion rate is the one in which the data is closest to reality, in the case of the two formulas that we have talked about, the best formula is the advanced one, since it gives us more approximate numbers to the actual behavior of users.
When making this formula, make sure that the number of objectives obtained (clicks, leads, visits, downloads, subscriptions or sales) is verifiable, as well as the base number of actions (unique visits, impressions, appointments). You can rely on tools like , , wave .
What is the ideal conversion rate?
The ideal conversion rate is one that exceeds that of the industry, that is, we cannot speak of an ideal conversion rate since it is a metric applicable to many companies and various sectors, as well as to multiple materials, efforts and strategies. however, we can speak of a good conversion rate when it exceeds that of the usual behavior of users.
For example, or global standard that varies from 1% to 4%. However, it can change depending on certain factors, such as the type of products, prices and even the month of the year, since . In addition to varying depending on the country you are in, since technological adoption and banking are macro factors that also influence user behavior.
The sectors that had a higher conversion rate in 2020 in Mexico were:
- Pharmacies with 3.8% conversion;
- Supermarkets with 3.6% conversion;
- Video games with 3.1% conversion;
- Pets with 3.1% conversion;
- Culture with 2.1% conversion.
How do I know if my conversion rate is good?
To know if your conversion rate is good, you can focus on these actions:
- Do a benchmark.
- Compare your conversion rate against last year.
- Check heat maps.
- Do satisfaction surveys.
Now I explain each of them.
do a benchmark
A benchmark is a comparison in which the metrics or results obtained from other companies are taken as a reference to compare them with those of your own business and thus be able to make improvements and optimizations.
This is one of the best ways to know if you are average, below or above the competition. You can rely on marketing reports, specialized magazines or studies dedicated to e-commerce to obtain this data. It is possible to obtain an average or an industry standard, by sector or even by effort, that is, the conversion rate of a social media advertisement or a subscription to a newsletter.
Compare your conversion rate vs. last year’s
If you have the data, you can compare your business year against year, to find out if sales increased or if the objectives to be analyzed obtained better results than in the previous period.
This action is helpful to know how you were before and how you are now when you don’t have a comparison of the industry or sector you work in, and it is even a more local way of analyzing your conversion rate and measuring your results.
It is necessary that you take into account if you made any substantial changes to your website, if you carried out an advertising campaign or SEO optimization in order to analyze whether these changes impacted your results in visits and/or sales.
Check heat maps
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