What is a conversion rate?
A conversion rate is the percentage of visitors to your website who complete a transaction. A transaction for an e-commerce site is usually a sale. Transactions can be different for every site and could be a free download, newsletter subscription, donation, quote request or other activity.
Why is the conversion rate important?
Knowing your conversion rate allows you to make smart decisions.
Let’s say you own an e-commerce site that sells t-shirts. Your website’s conversion rate is 5%. The average sale is worth $30 in revenue. Given this information, for every twenty people that visit the site, one person will spend about $30. If you divide the $30 generated revenue by the 20 visitors required to generate it, you will get $1.50. If you were to participate in an advertising effort that required you to spend this amount of money or more per each new visitor to the site, you would either break even or lose money. Knowing this type of information will allow you to invest wisely. If you were to increase your conversion rate or your average sale amount, you could make more money with the same amount of traffic!
Assume that you want to look at a few keywords that are bringing you traffic through the search engines: ‘big money’ versus ‘quick money’. You find that the conversion rate for the keyword ‘big money’ is 40% and for ‘quick money’ is 10%. Assuming you have the opportunity to increase your website’s traffic for each keyword, the keyword ‘big money’ will generate four times the sales as the keyword ‘quick money’.
How do you calculate a website’s conversion rate?
Your website’s conversion rate is the number of transactions divided by the number of unique visitors for a specific time frame.
Conversion Rate = Number of Web Transactions / Number of Unique Visitors
You can have a conversion rate for your website, a keyword, an advertisement, campaign, referring site or any means of traffic generation. To determine the conversion rate for a specific keyword, you would determine the number of unique visitors who came to the site via that keyword within a given time frame. Next, you would determine the number of those visitors who performed a transaction and use the formula above to determine the conversion rate.
How do you track conversions?
If you don’t have access to the number of unique visitors to your site, you will want to start using an analytics tool such as Google Analytics. If you are tracking basic site metrics but aren’t sure how to track conversions, it is just a matter of properly configuring your analytics tool to track them. In Google Analytics, you would use goals or events to track users who took the desired actions.