Establishing Good Metrics: Conversion Rate

Good metrics - conversion tracking

No matter how stellar your eCommerce marketing strategy may seem, it's impossible to evaluate it without the right metrics. A website conversion rate (CVR) is one of the most important metrics that help you understand whether you are achieving your marketing and business goals.

Calculating CVR, comparing it to your competition's metrics, and keeping it as high as possible is on the agenda of every eCommerce retailer. Let's take a closer look at how to approach your conversion rate and make it work for you.

What is a Conversion Rate?

A conversion rate is the percentage of website visitors that take the desired action (e.g. buy the product or sign-up for a newsletter). For eCommerce websites, the conversion rate is easy to calculate.

For example, 500 visitors visited your website in January, and 10 of them completed a transaction. Your January conversion rate is 10/500x100 = 2%.

The higher your conversion rate is, the better your marketing campaign is working, and the more money your website is making.

Campaign Planning

Knowing your conversion rate can help you estimate net profit. Let's consider a simple example.

An eCommerce retail company FlowerShop is launching a PPC campaign. For each flower bouquet it sells, the retailer nets $100. When planning the campaign, the marketing team has the following information:

  • PPC ads will bring 10,000 visitors to the e-store

  • The estimated conversion rate is 2%

With this conversion rate, the company plans to see 200 purchases per month. Accordingly:

  • Gross profit — 200 x $100 = $20,000

  • Cost of the PPC campaign = $5,000

  • Net profit = $15,000

The conversion rate can help you evaluate the approximate marketing campaign ROI, allowing you to plan the marketing budget.

Now, let's say your conversion rate is 3%:

  • Gross profit — 300 x $100 = $30,000

  • Net profit = $30,000 — $5,000 = $25,000

Do you see how significantly the conversion rate affects your company's bottom line?

What is a Good Conversion Rate?

Conversion rates vary tremendously. They depend on many factors, including industries, regions, seasons, devices, and many more. 

For example, in the last quarter of 2020, the average conversion rate for eCommerce shoppers who use mobile phones in the USA was 1.57%. Meanwhile, in Great Britain, the conversion rate for mobile consumers was 2.87%.

The channels you use for your campaigns can also yield different results. For example, on Google Search Network, the conversion rate across all industries is 2.70%. On Google Display Network, it's 0.89%. Meanwhile, on Facebook, it can be as high as 9%.

Seasonality is important too. The highest conversion rates for eCommerce retailers usually occur in December, during the holiday season.

Conversion Rates by Industry

In August 2021, the global eCommerce conversion rate was 2.73%.  When segmented by the industry, it looks like this:

  • Arts and crafts — 3.21%

  • Pet care — 3.01%

  • Health and well-being — 2.92%

  • Food and drink — 1.76%

These figures change slightly every day. By the end of September, they are going to look different. However, industries with the highest conversion rates usually stay the same throughout the year.

How to Determine Your Good Conversion Rate

How do you know which conversion rate to aim for? Look at the competition. Running a competitive analysis is one of the key tactics your marketing campaign should focus on.

While you can't always get exact figures, checking out your competition's strategy can help you gain insight into their conversion rate.

Even if it seems obvious that you should aim above the industry average, don't forget about nuances like devices, region, product, platforms, and other factors that contribute to the rate.

Analyse your own data to see what your current rate is and what rate you need to improve your company's bottom line. Take it one step at a time.

What Affects Your Conversion Rate?

No matter what your conversion rate is right now, it's usually possible to improve it. To do so, you need to evaluate the factors that affect this metric:

  • Website performance — a poorly performing website (slow loading time, randomly loading images) can increase your bounce rate, sending your CVR tumbling down. Starting this year, website performance is a direct Google's ranking factor. That's another important reason to review it.

  • Website design — a poorly designed website can confuse your visitors. If it's anything less than intuitive, the consumer may not be able to complete a purchase. Clashing bright colours, complex purchase forms, and unclear navigation tend to force visitors to bid your website farewell.

  • Urgency — capitalizing on FOMO (Fear of Missing Out) is an excellent way to drive conversions and stimulate impulsive buying. If your CTAs and website content don't take advantage of this trick, your site may not achieve the highest possible conversion rate.

  • Customer support — if accessing your support reps is complicated, your abandoned cart rate will grow much faster than your CVR. Some eCommerce retailers rely on not-so-perfect chatbots. Doing it too heavily may turn consumers away.

  • Product data — the modern-day consumer expects detailed data about each product they are buying online. If your product information is lacking, consumers tend to turn away, thus affecting your conversion rate in a negative manner.

  • A/b testing — when it comes to paid ads, design is everything. You may have stellar content and a smart bidding strategy, but your ads could not be yielding conversions. The reason is the lack of proper a/b testing.

By evaluating these factors, you can create an effective strategy to improve your website conversion rate.

Working on Your Website Conversion Rate

A good conversion rate is key to high sales volume. By calculating, monitoring, and raising the CVR, you are improving your company's bottom line. Since many factors affect the conversion rate, you can always tweak something to help it grow.

Knowing your conversion rate can help you improve your marketing campaign, raise its ROI, and avoid poor advertising decisions.

Would you like to learn more about increasing your CVR? Contact our team at any convenient time.

Steve Crowe