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Conversion Rates explained

Conversion Rates explained

Conversion rates play a central role within online marketing, but why are they so important? In this blog post, we’d like to take a look at the meaning of the term, together with some practical examples of why you should pay attention to your conversion rate statistics.

What does it mean?

So, what is a conversion rate? In essence, it provides a way of measuring the effectiveness of your marketing efforts. It represents the proportion of website visitors who you are able to “convert” into customers or contacts.

The exact nature of a conversion for a site will vary. Taking an example, for an online retailer, a conversion may simply relate to a sale. If 100 visitors reach the online store, but only 1 of them makes a purchase, then you have a conversion rate of 1%.

It’s not always the aim, however, to make a direct sale from every single visit. Examples of other goals might include:

  • Getting a visitor to give you their contact details.
  • Encouraging someone to sign up for your newsletter.
  • Getting a visitor to download some software, or a specific document that you are providing.

The type of site that you are operating, together with the objective that you are looking for, will have an impact on the conversion rates that you see.

Why should you care about Conversion Rates?

Conversion rates have a role to play in all aspects of marketing activity, from SEO to social. The impact of conversion rates is most easily illustrated in the case of Pay Per Click (PPC) advertising and you may already be familiar with Google Adwords.

Let’s take a closer look at the impact of specific conversion rates, using a relatively model. We have a hypothetical scenario as follows:

An online retailer is selling a service from £200. In order to advertise the service, they are making use of Google Adwords on advertising. On average, they pay £1 to attract each visitor to their store.

Let’s assume that they have a Conversion Rate of 1%. Based on 1,000 visitors reaching the site from Google Adwords, that would mean that they would expect to see 10 sales. They will have paid £1,000 for the advertising and will have produced £2,000 worth of sales as a result. That doesn’t sound too bad and means that they have doubled their money.

What would a slight change in Conversion Rate mean? Well, let’s assume that the Conversion Rate moves upwards, reaching 1.5%. That doesn’t sound like a big change.

Now, let’s look again at the figures: those 1,000 visitors are still attracted at cost of £1,000, but the increased Conversion Rate means that we now expect to see a total of 15 sales. Those sales would have a total value of £3,000.

So, with a Conversion Rate of 1%, that £1,000 spend produced £2,000 of sales (leaving a notional profit of £1,000).

With the Conversion Rate at 1.5%, that £1,000 spend produced £3,000 of sales. That gives a notional profit of £2,000. In effect, the seemingly small movement in Conversion Rate has led to a doubling of profits.

What happens if the Conversion Rate hits the heights of 5%? In that situation, the cost of advertising remains constant at £1,000, but we would now expect to see 50 sales. The total value of those sales would be £10,000.

When people start talking about Conversion Rates, it can seem like a fairly minor metric that’s under consideration. What the above examples show, however, is that it can have a massive impact on the performance of your marketing campaigns. Improvements that appear, at first glance, to be pretty minimal can actually transform your income and profit levels.

What Conversion Rates are reasonable?

It’s useful to be able to benchmark against others within the same industry, although there are some problems associated with doing so. The most obvious issue is that your competitors are unlikely to want to share such sensitive data.

A number of studies have been conducted, with the specific aim of identifying average rates acrosss sectors.

Marketing Sherpa produced some stats on Conversion Rates across sectors. These suggested that comparable rates were as follows:

  • Professional or Financial Services: 10%
  • Media or Publishing: 10%
  • Miscellaneous: 8%
  • Education or Healthcare: 8%
  • Software: 7%
  • Technology Equipment or Hardware: 5%
  • Manufacturing or Packaged Goods: 4%
  • Travel or Hospitality: 4%
  • Retail or Ecommerce: 3%
  • Non-profit: 2%

As they note, part of the explanation for the differences here comes from the fact that there may be some deviation in what is seen to count as a conversion.

The Ecommerce figure (towards the bottom of the list) undoubtedly attracts some attention too. Some work carried out back in 2012 suggested that UK Ecommerce Conversion Rates were averaging out at around 4%. Interestingly, there was also considerable evidence of high rates of shopping basket abandonments. In fact, 8% of all website visitors place something in the cart, but only 4% complete the checkout process.

That abandonment rate suggests that the checkout process itself can certainly have a significant impact on Conversion Rates. Our own experience also suggests that there are considerable differences within the retail sector: buying a mobile phone cover (to take one example) may involve a more immediate decision than is associated with buying a luxury watch.

What impact does the rise of mobile have?

We know that more and more users are accessing sites on smartphones and tablets. So what impact is this having on Conversion Rates? The short answer here would appear to be that Conversion Rates on such devices are considerably lower.

Looking at mobile Conversion Rates in the sporting goods sector (across both smartphones and tablets), for example, we see a lowly rate of 0.69%. Such figures may be a concern, particularly if you have spent a lot of time and money optimising your website for mobile visitors. Was that responsive design really worth the money?

Before you become too despondent, it’s worth remembering that many people search and browse on mobile devices, before making a purchase using a laptop or desktop PC. The reality is that the mobile-version of your site is likely to be contributing to the overall success of your business in this way.

How can Conversion Rates be improved?

We’ll looked at why Conversion Rates are important and we’ve given considering to some industry benchmarks. Looking at your own site, you may see room for improvement. But how exactly do you go about making changes that will truly offer benefits?

We always like to talk in terms of removing barriers. If visitors to your site are constantly encountering barriers to purchase, then it’s likely that they’ll start to look elsewhere. The more barriers that you can remove, the better the chances of generating a sale. Let’s take a look at some specific barriers that may be in place:

  • A site that is not secure. If you’re expecting customers to hand over payment details, then you really need to be able to reassure them that your site offers a secure experience.
  • Difficulties associated with navigation.
  • A failure to provide reassurance via contact telephone numbers and business address details.
  • An overly-complicated checkout process.
  • A lack of information regarding deliveries and returns.
  • A failure to produce enough information about products and services.
  • An absence of quality images.
  • A failure to answer common questions about products and services.
  • A lack of clarity on prices.
  • A website that fails to function properly across platforms, browsers and devices.

Listed above are just some of the factors that can contribute to reduced Conversion Rates. Once you have made improvements, however, it’s clear that you’ll be in position to reap the rewards.


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