What is Conversion Rate? Explained

Conversion rate is a term used in marketing and business to refer to the percentage of visitors to a website or users of a product or service who take a desired action. This action could be making a purchase, filling out a form, subscribing to a newsletter, or any other goal that the business has set for its website or product.

For example, if a website receives 1000 visitors in a month and 100 of those visitors make a purchase, the conversion rate would be 10%. This means that 10% of the website's visitors took the desired action of making a purchase.

Conversion rate is an important metric for businesses to track, as it can help them understand how effective their marketing and sales efforts are at driving desired actions from their target audience. Improving conversion rates can lead to increased revenue and growth for the business.

Conversion rates are often used to measure the effectiveness of marketing campaigns. If a company has a low conversion rate, it may indicate that the marketing message or website design is not effectively persuading people to take the desired action. In this case, the company may need to make changes to improve the conversion rate.

There are many factors that can influence conversion rates, such as the quality of the product or service being offered, the clarity and effectiveness of the marketing message, the ease of use of the website, and the trustworthiness and credibility of the company. By analyzing and optimizing these factors, companies can often improve their conversion rates and increase their revenue.

Conversion rates are the standard by which we measure many key moments of a customer’s experience. For example, let’s look at every step when conversion rate relates to gaining a new customer:

1. Seeing an ad and clicking on it
2. Landing on a page and then providing their email address
3. Going from providing email to starting a trial
4. Transitioning from the trial to becoming a paying customer

A progression of steps or stages that a user moves through is referred to as a funnel, in this case it would be an acquisition funnel. At each stage of the funnel users either convert or not. There are more moments after acquisition where conversion rate is important as well, but acquisition is the main context. Conversion rates and acquisition funnels such as this go hand in hand.

How to calculate Conversion Rate

To calculate conversion rate, take the total number of conversions and divide that by the total amount of traffic or interactions on your offering. The most common formula for calculating conversion rate is:

conversion rate = total conversions / total interactions

Calculation example

Imagine a company is running an ad on Google for a new shaving razor. The company’s goal in this scenario is to have users click the ad to visit their ecommerce store. On the first day of the ad running, 100,000 users see the ad, 1,000 users click the ad.

From here we can calculate how well that ad is converting by taking the 1,000 clicks (conversions) and dividing that by the total number of views (interactions):

conversion rate = 1,000 / 100,000 = .01, or 1%

So the conversion rate on this ad is 1%. You will also see the conversion rates for ads called?clickthrough rate (CTR).

Common misuses of Conversion Rate

It’s important to be mindful of how the parts of the conversion calculation are determined. One example is how an ‘impression’ can vary based on advertising platform:

• According to?Google, an ‘impression’ is how often your ad is shown. An impression is counted each time your ad is shown on a search result page or other site on the Google Network.
• According to?Facebook, an ‘impression’ is counted as the number of times an instance of an ad is on screen for the first time. (Example: If an ad is on screen and someone scrolls down, and then scrolls back up to the same ad, that counts as 1 impression. If an ad is on screen for someone 2 different times in a day, that counts as 2 impressions.)

Segment your funnels for different channels so you can see if the conversion rates vary. This is very common and can help you identify marketing channels that attract the right type of person.

Tools for measuring Conversion Rate

• Hotjar?allows you to see how customers are interacting on your web page, showing where users are clicking and what they’re engaging in on your page. This is a great tool for A/B testing page layouts.
• Google Analytics?is one of the most used tools in marketing, and for good reason. It provides a deep, insightful understanding of your site’s users. You can use it to see how you are converting on different keywords and from page to page.
• Heap.io?captures everything your users do on your website and in your app, including clicks, submits, swipes, and views.

Thank you

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