Conversion Rate

Quick definition: a conversion rate is a calculation that tells you how well you are converting traffic into revenue on your website, app, or digital platform.

Key takeaways:

The following information was provided during an interview with Debra Adams, a key member of Adobe’s Global Center of Excellence.

What is a conversion rate?
How do companies count conversions?
How do companies measure traffic to their sites?
What are the different categories of conversion events?
What is an eligible visit or visitor?
What are some conversion rate best practices?
What is a funnel conversion rate?
What is a good conversion rate?

What is a conversion rate?

In the digital marketing field, a conversion occurs when a user completes a desired action or goal on a website, online app, or other digital platform.

This can be an event (a.k.a. conversion event), such as a purchase or form submission , or a metric such as the number of return visits within a given time.

There are many types of desired actions that a user can take, but some are more significant than others. In the context of digital marketing and engagement, a desired action is one that is valuable or represents success to an online business or customer.

Examples include completing a purchase, creating a new user account, watching a video , or signing up for a subscription. These actions indicate that a website or app user is interested in, engaging with, and/or acquiring your company’s goods or services.

A conversion rate tells you how well you are converting traffic into revenue on your website, app, or digital platform. It is a critical marketing metric.

In its simplest form, a conversion rate tells you how well you’re converting traffic into revenue from your website, app, or other digital platform.

It is the percentage of conversions per visit or visitor, depending on how you count your traffic. Here are the most common formulas:

The choice of which conversion rate formula to use depends on the question that you want to answer about your traffic and its conversion behavior.

While the above formulas calculate the percentage of conversions per visit or visitor, the following formulas calculate (a) the percentage of visits during which conversions occurred and (b) the percentage of visitors who converted.

These calculations are often more useful because visits or visitors can be targeted.

The choice of formula also depends on which set of visitors or visits you want to understand. The following equations provide a useful breakdown when you want to understand the conversion behavior of new vs. returning visitors.

Another example shows the percentage of desktop versus mobile visitors who converted.

The choice of how to define the visitors, visits, and conversions used in your conversion rate calculation requires you to be clear about the business question you want to answer.

For example, suppose that we run an a/b test on the Tools product category page on a website for a retail hardware store. The test version (Experience B) of the Tools product category page shows a special discount offer for tool purchases.

The control version (Experience A) is the default Tools category page, which does not show the special discount offer.

Our goal is to determine whether a higher percentage of visitors converted by purchasing tools after viewing Experience B with the special discount offer compared to those who saw Experience A, the default Tools product category page without the special discount offer.

First, we want to determine the number of visitors who saw the Tools product category page in each test experience:

If, instead, we had used a count of all the visitors to the site and not just those who saw the Tools product category page, our visitor number would not be relevant or accurate because it would include people who did not see or respond to the test experiences.

This would artificially inflate the visitor count (the equation denominator) and result in a conversion rate that was lower than it should be for the test audiences. It is important to properly constrain the count to the relevant data set to answer the right business question more precisely.

Likewise, we want to constrain the conversion count to tool purchases and not all purchases because we are only showing a special discount offer for tool purchases.

If we expanded the set of conversions to include all purchases, we would artificially inflate the conversion count and the result would be inaccurate and irrelevant.

Using the appropriate definitions for visitors and conversions, the test resulted in a higher conversion rate when the special tools discount offer was seen in Experience B, with a lift of 49 percent.

How do companies count conversions?

There are at least three ways to count conversions, depending on what you want to understand about the conversion behavior and rates of your users. You can count straight conversions, count visit conversions, or count visitor conversions.

The straight conversion metric counts the number of conversions that occur within a reporting time period. In a conversion rate calculation, it is used to determine the percentage of conversions per visitor or visit, depending on your preferred traffic metric.

For example, if there are 25 orders placed and 125 total visits by unique visitors, then the conversion rate equation will be 25 orders over 125 visits. The result will be .2 orders per visit, which when multiplied by 100 is a 20 percent conversion rate.

A straight count of conversions is not always the best or only metric to use in a conversion rate calculation because one visitor may place more than one order during a reporting time period or during a visit.

If this happens often, it can artificially inflate the conversion count (the equation numerator) and, consequently, skew the conversion rate result.

This problem often shows up when analyzing click conversion events, where visitors can easily click on a specific offer link or button more than once per visit.

If this occurs frequently, it will look like the click conversion rate is higher than it is, with no indication of the number of visitors who clicked or the number of visits in which a click occurred.

Adobe recommends you use the visit or visitor conversion rates either alone or in conjunction with the straight conversion rate calculation.

Companies instead could count the total number of visits by unique visitors during which a conversion occurred within the reporting time period.

An example is the number of visits during which unique visitors purchased a subscription in April. In a conversion rate calculation, this metric is typically used to determine the percentage of total visits that were conversion visits.

The final common metric counts the total number of unique visitors who converted during the reporting time period. An example is the number of unique visitors who submitted a lead generation form in the first half of the year. In a conversion rate calculation, this metric is used to determine the percentage of all unique visitors who converted.

How do companies measure traffic to their sites?

How you determine the value of the equation denominator depends on how you measure traffic on your digital platform based on your business type, business goals, and KPIs.

The two main methods for measuring traffic are by visits and by visitor. If there is an opportunity for a visitor to convert during each visit, as is the case on a typical retail site, then use a count of the number of visits on your platform.

If your main goal is to enable a visitor to complete an action or goal that is most likely to occur once and not be repeated in subsequent visits, such as creating a new user account, count the number of unique visitors to your platform instead.

It may be the case that you choose to use a count of visitors even when there is an opportunity to convert during each visit. This occurs when it typically takes more than one visit for a user to convert.

For example, visitors to a travel site that want to book a reservation on a cruise ship can sign up for the cruise during any visit to the site. But visitors often view a travel website more than once to learn about available cruises and conduct research prior to booking.

In this case, it makes sense to use a visitor count to calculate traffic conversion rates rather than visits. The resulting value will better reflect the actual behavior and intent of the cruise travel seekers.

It can be useful to track multiple conversion rate calculations – one that uses visits as the denominator and one that uses visitors as the denominator.

This will provide a more complete picture of how and when your traffic is converting on your platform and is the method Adobe recommend.

What are the different categories of conversion events?

The value of a conversion is determined by the significance of the action or goal relative to the business objectives and its degree of impact on the business bottom line. The two main categories of conversion events are macro-conversions and micro-conversions.

Macro-conversions are primary conversion events that are closely tied to the bottom-line revenue goals and KPIs of the business. Examples include a completed purchase, a submitted lead-generation form, or a subscription signup.

Macro-conversions are significant, are directly tied to revenue generation, and have a high impact on the success of the business and the website, app, or digital platform.

Micro-conversions are secondary conversion events.

Often, they represent critical steps along the path to a macro-conversion, such as clicking on a product search result, viewing a product page, clicking the button labeled “Add to Cart,” and then viewing the Shopping Cart.

None of these represent the primary goal of submitting an order, but they are key actions that indicate intent and lead to completion of the primary goal.

Micro-conversions may also be conversion events that are correlated with or facilitate a macro-conversion but are not necessary steps along the macro-conversion path, such as watching a product video.

While a user does not have to watch a product video in order to purchase the product, there may be a high correlation between product video plays and product purchases.

What is an eligible visit or visitor?

An eligible user is one who qualifies or who is presented with the opportunity to take the desired action or complete the goal.

For example, to determine a visit conversion rate for retail purchases on a mobile phone app, only mobile phone app visitors would qualify, and mobile phone app visits and conversions would be counted.

What are some conversion rate best practices?

It is important to remember that any conversion rate calculation only pertains to the time period being reported. It's recommended that you measure your conversion rate at consistent intervals so that you can effectively detect and track changes over time.

Weekly or monthly reporting intervals are common. To properly track conversion rates and rate changes over time, make sure to count traffic and conversions the same way during all measurement periods.

Pay particular attention to conversion rate changes and when they occur. Try to identify the cause of the changes — they may be seasonal or due to business activities or marketing efforts that drive higher or lower traffic or conversion counts.

As an example, a business notices that their conversion rate has increased dramatically over the past 30 days. By looking at the Order Discount data in the Analytics tool, the business can see that the conversion rate increased but overall revenue was lost due to an increase in the volume of discount orders that were placed.

What is a funnel conversion rate?

A funnel conversion rate represents how successfully visitors move through your conversion funnel from start to finish. It is used to assess how well your traffic is converting once they enter your funnel and to track funnel completion trends over time.

This is often referred to as the “funnel completion rate.”

For example, if the goal is to have site visitors successfully complete a purchase, visitors will need to proceed through several steps in the checkout flow to complete the order and buy their product.

Often, there is fallout from page to page as visitors exit the funnel and decide not to finish the process. The funnel conversion rate tells us the percentage of visitors that successfully reached the purchase conversion goal.

While it is typical to refer to the checkout or form submission flow as the conversion funnel (often referred to as the lower funnel), a business may define a different starting point for their funnel flow.

Some businesses define the entry point higher up in the conversion journey.

For example, a retail business might choose the shopping cart page or the product detail page as the entry point for their funnel rather than the first page of checkout, which is seen after clicking the “Buy Now” button.

Metrics that you need to calculate a funnel conversion rate include the visitors metric and the visits metric.

The visitors metric includes the following:

The visits metric includes the following:

The following metrics calculate the funnel conversion rate:

Calculate the funnel abandonment rate using the following calculations:

What is a good conversion rate?

Conversion rates vary depending on numerous factors, including the industry, type of business, key business objectives, brand, customer segment, conversion goal, time of year, product releases, marketing efforts and more.

For instance, conversion rates at retail companies often spike around holidays like Christmas or when children go back to school. And conversion rates often differ between new and returning visitors.

In general, good conversion rates vary between two percent and five percent, but it is certainly possible to increase your conversion rate through A/B testing, personalization, content marketing, landing page optimization and other effective techniques.

Rather than comparing your company’s conversion rate to other companies and industries, a sound approach is to measure your conversion rate(s) over time, track and understand trends, detect patterns such as seasonal shifts, and investigate anomalies.

If you are looking to optimize your conversion rate, it’s best to start with your current baseline conversion rate and use testing and other methods to improve it from there.

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