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The conversion rate is the golden writ of marketing. If you ignore it, you don't understand what's going on. If you make it plunge, you're in trouble. And if you seek advice to improve your business, it's one of the first things you're told to work on. So you better know what it means.
A number, expressed as a percentage, that represents how many people continue on to do a desired action. This percentage is especially useful when comparing two different marketing options and deciding which one performed better. A high conversion rate is considered better—on a positive action, like a sale, a high conversion rate means you get more sales.
Divide the number of goal completions by possible attempts. Then express as a percentage. The number of goal completions is usually a smaller number than the possible attempts.
Goal completions / possible attempts = 5 / 18 = .278 = 27.8%
Calculated properly, you can look at a 15% conversion rate and know it is more efficient, and if implemented business-wide, would get you more sales than a 10% conversion rate on a different idea. That means conversion rate numbers are hugely important when monitoring and evaluating the performance of marketing efforts, particularly in acquisition. You'll see them mostly in reference to internet marketing efforts, though the concept can also be applied to offline experiences where numbers are available. For example, of the number of tickets sold for an event, how many people actually attended the event?
A conversion rate can be calculated for nearly anything. For example, for every time my dog sits expectantly at the back door, how often will I open it? Of 18 times he ran to sit at the back door today, I let him out 5 times. That's a 27.8% conversion rate. He'd like us to improve that percentage. After all, if he were cuter or his piteous look more heart wrenching, and we got that up to a 33.5% conversion rate, that means he'd have gone outside 6 times today.
Conversion rates can be either small-scale, or large-scale. Small-scale conversion rates, like the number of page visitors who click the buy button, can help you choose the best landing page. Large-scale conversion rates, like the number of website visitors who go on to purchase a product, can be input on larger decisions, like what types of products to expand.
Because a conversion rate can mean nearly anything, and can be referring to either small-scale or large-scale goals, it's best to always clarify what a conversion rate is when referring to it. It's important to clarify both what the success goal is and what constitutes the audience. For example, call it “Pageview to Purchase Conversion Rate” or “Visitor to Clickthrough Conversion Rate”. Accidentally comparing two conversion rate numbers developed from slightly different data can lead to bad decisions.
A conversion rate is nicely scale agnostic, making it great for tests. You can show option B to only 10% of your customers, but still compare the conversion rates between option A and option B and know which is better. Of visitors who saw option A, 5,000 of them made a purchase. Of visitors who saw option B, 1,500 of them made a purchase. So far, option A sounds good. But here's a conversion chart:
| Option A | Option B | |
| Visitors: | 100,000 | 10,000 |
| Purchasers: | 5,000 | 1,500 |
| Conversion Rate: | 5% | 15% |
In this case, showing option B to all visitors would result in more sales.
It's important not to accept a small-scale conversion rate as final. Sometimes actions you take to improve an early conversion rate can hurt later conversion rates to the point where it's not a win for you. For example, if you have a premium product, but the price is sometimes a sticking point for potential customers, you could try removing the price from the landing page. Say you not only removed the price from the landing page, but added headlines and buttons stressing that the product was “a great deal” and “reasonably priced” and “affordable”. That might drive up your visitors to clickthrough conversion rate substantially. But deep in the shopping cart, when a user finally does see the price, they might change their mind. Your changes to your landing page might ultimately hurt your overall visitor to purchase conversion rate.
And finally, always be aware of sample size. Don't even look at a conversion rate unless you have a large enough sample to bring the standard deviation on a test into an acceptable range.