What is Conversion Rate? How to Calculate and Improve Your Conversion Rate

What is Conversion Rate? How to Calculate and Improve Your Conversion Rate | Disruptive Advertiisng
January 17, 2018 By Site Optimization

Conversion rate…it might sound like some sort of religious metric, but in reality, it’s one of the best ways to measure the performance of your advertising campaigns.

Unlike click-through rate or cost-per-click, conversion rate describes how good your marketing is at getting people to do what you want them to do (we call this “converting” in the marketing world). Generally speaking, the higher your conversion rate, the better your marketing is!

In this article, we’re going to discuss what your conversion rate is, how to calculate it and—most importantly—how to improve your conversion rate.

What is Conversion Rate?

To put it simply, your conversion rate is the percentage of visitors to your website or landing page that convert (aka, do what you want them to do). Depending on your business goals, a “conversion” could be almost anything, but here are a few common types of conversions:

  • Making a purchase
  • Submitting a form (contact us form, lead gen form, etc)
  • Calling your business
  • Engaging with your online chat
  • Signing up for a subscription (either paid or free—like a newsletter)
  • Registering on the site
  • Downloading something (software trial, eBook, mobile app, etc)
  • Using something (new/advanced feature on your software or app, simply using your software/app for a certain amount of time)
  • Upgrading their service
  • Engaging with your site in some way (time on site, repeat visits, number of pages visited)

There are plenty of other conversion actions people can take on a site, but this should give you a feel for what a “conversion” is. Basically, a conversion is a measurable action that progresses a potential customer towards becoming a paying customer in an important way.

How Do I Calculate Conversion Rate?

Calculating conversion is actually fairly easy. All you have to do is divide the number of conversions you get in a given time frame by the total number of people who visited your site or landing page and multiply it by 100%.

Conversion rate = (conversions / total visitors) * 100%

For example, if your site had 17,492 visitors and 2,305 conversions last month, your conversion rate is 13.18%. Easy enough, right? In fact, if you set up your tracking right, most online advertising (eg, AdWords, Facebook Ads) and analytics platforms (eg, Google Analytics) can actually show you your conversion rate right in their interface.

However, if you just want to quickly calculate your conversion rate, I built a handy little calculator for you. All you have to do is enter your traffic and conversions and the calculator will take care of the rest:

One of the great things about conversion rate is that you can be as specific or as broad with your conversion rate as you want to be. Here are a few different types of conversion rate you can use and ways you can use this data to examine performance:

  • Overall conversion rate (how well does your website convert traffic from any source?)
  • Marketing channel conversion rate (is AdWords traffic or Facebook Ads traffic more likely to convert?)
  • Page-level conversion rate (which of these pages is better at converting traffic?)
  • Campaign conversion rate (did my targeting changes improve anything?)
  • Individual ad conversion rate (do I need to change my ad copy? does this ad drive more qualified traffic?)
  • Keyword conversion rate (which keywords deserve more budget?)

Obviously, this list just scratches the surface. Conversion rate is a great metric for evaluating the performance of almost any aspect of your online marketing. Driving clicks is great, but if those clicks don’t end up doing something that is beneficial for your business, something needs to change.

Conversion Rate vs Click Conversion Rate

Now, you might be thinking, “But what if the same person converts multiple times? How does that affect my conversion rate? Should I count that as one conversion or multiple conversions?”

Those are all great questions. To deal with the whole “total conversions vs converting visitors” problem, marketers use different terms to describe each situation.

As we discussed above, conversion rate is the number of conversions divided by the number of visitors. To see what percentage of visitors converted (regardless of how many times they converted), you divide converting visitors by total visitors and multiply by 100%. We typically call this your “click conversion rate”.

Click conversion rate = (converting visitors / total visitors) * 100%

Again, with the right conversion tracking in place, most online advertising and analytics platforms allow you to view your click conversion rate, but here’s another calculator you can use to calculate your click conversion rate:

For many businesses, their conversion rate is virtually identical to their click conversion rate, so we’ll focus on conversion rate in this article. However, click conversion rate can be handy in situations where you get a lot of repeat conversions and want to see what percentage of your actual visitors are converting.

Getting Meaningful Data

One thing to keep in mind as you calculate your conversion rate is the quality of your data. For example, I have seen campaigns and pages with a 100% conversion rate…which seems great until you realize that they only had one visitor.

If your traffic sample isn’t very big, it’s hard to trust your results. If 5% of 20 people convert on your site and one of them converted by accident (it happens), is your page working very well? Probably not, since your only conversion was an accident.

On the other hand, if 5% of 10,000 people convert and 5 of them converted by accident, your conversion rate drops from 5% to 4.95%. That’s still fairly dependable data.

Since every traffic source has a certain amount of natural randomness (accidental conversions, people who meant to convert but didn’t, random periods of high or low conversion rates, etc), the only effective way to look at your conversion rates is to use a sufficiently long timeframe.

Of course, like most other conversion rate-related concepts, there is no “right” timeframe for every business. Many marketers like to use a month as their go-to timeframe, but if you’re a big site like Wal-Mart, you might only need a day to get meaningful data. If you only get a few hundred visits a month, it may take 6 months to really get a feel for your conversion rate.

What is a Good Conversion Rate?

As you can probably imagine, conversion rates vary considerably depending on your traffic quality, industry, business, what you’re selling and even the specific conversion action you’re tracking. As a result, while you can find broad conversion rate statistics out there (like this handy study conducted by Unbounce), what qualifies as a good conversion rate for you will ultimately be specific to your business and your marketing campaign.

In addition, it’s important to remember that a conversion is not always the same thing as a purchase. While conversion rate is a handy metric, the goal of most marketing isn’t to produce conversions—it’s to produce sales.

For example, let’s imagine that you are a partner in a law firm that averages $3,500 in revenue per new paying customer with a 50% profit margin. You run 5 marketing campaigns where a conversion is someone who submits a lead form on your landing page.

Here are your results:

Both campaign 3 and campaign 4 have the lowest conversion rates, which means they could need some work. But, none of this data gives us any insight into the profitability of these campaigns. Are these leads turning into sales? We can’t really tell.

To answer that question, let’s take a look at the return-on-investment (ROI) for your campaigns:

All of sudden, it’s crystal clear which campaign is actually benefiting your firm the most. Although campaign 1 had the best conversion rate, it has a much lower than campaign 4. In fact, while campaign 4 produced the most expensive leads, for every $1.00 you invested in campaign 4, you get $7.52 back.

Now which campaign looks like the best investment?

As you can see, while conversion rate data is incredibly handy, it still doesn’t tell the whole story. Even a “good” conversion rate can be bad for business if you can’t turn those conversions into sales. To learn more about tracking and optimizing your ROI and return on ad spend (ROAS), check out this article.

Conversion Rate Tracking

While conversion rate may not be the ultimate measure of success, it is a great tool for tracking performance. But, to calculate your conversion rate, you need to be tracking conversions. As I mentioned earlier, with a little extra effort, you can actually track conversions directly inside of most advertising and analytics platforms.

With all of the possible conversions and platforms out there, covering how to implement conversion tracking is an article series in and of itself, but here is a quick reference list for several big name platforms:

Setting up conversion tracking is easiest if you have a good developer around, but trust me, good conversion tracking is worth the effort. You can’t improve what you don’t understand and if you aren’t tracking the results of your online marketing, how do you know what’s working and what isn’t?

The good news is, tracking and using your conversion rate puts you in a relatively elite group of online marketers, which can give you a big competitive advantage. At Disruptive Advertising, we’ve audited over 2,000 AdWords accounts and discovered that 42% of AdWords advertisers aren’t tracking any conversions:

Does Good Conversion Tracking Matter? [Infographic] | Disruptive Advertising

Share this Infographic On Your Site

Can you say, “golden opportunity”?

And that’s not all. Of the 58% of AdWords advertisers who are tracking conversions, only half of them actually have good conversion tracking in place (you know, the kind you can actually use to improve your online marketing…).

If your competition doesn’t have good conversion tracking in place, they can’t optimize their campaigns for maximum profitability. But, if you are tracking conversions, you can optimize your campaigns and blow past the competition!

In fact, according to Hubspot’s State of Inbound report, 97% of inbound marketing campaigns fail without good analytics. So, if you’re tracking conversions and using that data effectively and the competition isn’t, who do you think is going to win in the long run?

Conversion Rate Optimization

Knowing what a conversion rate is and how to track it is one thing, but what do you actually do with your conversion rate data? More importantly, how do you improve your conversion rate?

Conversion rate optimization (CRO) is the process of optimizing your landing page and website to—you guessed it—produce more conversions from your traffic!

The great thing about CRO is that it helps you get the most out of the traffic that you already have. For example, even without increasing traffic to your site, improving your conversion rate from 1% to 2% will double your conversions.

Can you see why CRO is such an important part of your online marketing strategy? If you’re not optimizing your conversion rate, you are wasting money.

Testing Your Website

So, how do you get at all those lost conversions? It’s not as difficult as you might think. Here are a few ways to start doing CRO today:

1. Create a Dedicated Landing Page

If you are doing any sort of paid advertising (AdWords, Bing Ads, etc), you should be sending your traffic to a dedicated landing page. There are so many good reasons to do this, but the biggest reason is page optimization. If you’re going to pay to get traffic to your site, you want to send them to a page that is designed to sell.

Landing pages are also the easiest type of page to do CRO on. So, if you’re still sending your traffic to your homepage, this is the first place I’d start. For more information about landing page creation and testing tools, check out this blog post.

2. Come Up With a Hypothesis

All good CRO tests start with a hypothesis. But, to put your hypothesis together, you’ll have to make some educated guesses about which site elements have the biggest impact on your conversion rate and profitability.

Here are a few areas you can look at first:

  • Headline. Your headline needs to sell and sell hard. 80% of your audience won’t get past your headline, so—even if you don’t test anything else—you should at least test your headline.
  • Offer. Your audience isn’t you, so they don’t always respond the way you think they will. Try different descriptions and layouts to see what resonates best with your prospective clients.
  • Call-to-action. Like your offer, the right call-to-action (CTA) may take a few tests to discover. Try more descriptive CTAs or different button sizes.
  • Media. Sometimes a new picture or video can make all the difference.

Once you’ve got a hypothesis and two page designs to assess, all you have to do is get your test running!

3. A/B Test

The easiest way to start doing CRO is the A/B test. If you’ve got traffic coming out your ears, you can do some really cool (and complex) multivariate testing, but for most companies, A/B testing is the easiest and most effective way to go.

To run an A/B test, all you have to do is set up two different variants of a page and split your traffic between them. Half of your traffic goes to variant A and half goes to variant B.

To split your traffic, you’ll need the help of some sort of CRO software. If you’re serious about CRO, there are some fantastic, albeit expensive ways to run your A/B test. But, if you’re just starting out, here are some cheaper options to try first:

  • Google Content Experiments. This is actually free, so you really don’t have any excuse for not testing; however, it doesn’t give you real-time results, so it may not be a great option for everyone.
  • Unbounce. If you only need to A/B test a landing page, Unbounce is the way to go. It’s a powerful and easy-to-use system that allows you to quickly create and test a variety of landing pages.
  • Optimizely. This is a more expensive option than Google experiments, but it also has some extra features that provide additional CRO insight.
  • Visual Website Optimizer. VWO is slightly cheaper than Optimizely and has a very intuitive interface, so it’s one of our favorite CRO platforms at Disruptive Advertising.

Each of these testing platforms will give allow you to test different versions of your website or landing page and see which version has the best conversion rate.

Testing Your Traffic

In addition to testing your website, another great way to improve your conversion rate is to test your traffic. Obviously, if most of your traffic comes from organic search results on Google, that’s not really an option, but if you happen to be running any sort of pay-per-click campaign, you have a lot of control over who is visiting your site or landing page and why.

This is important, because the wrong traffic won’t convert…even on the perfect page.

So, how do you make sure you’re sending the right traffic to your landing page? Here are 4 things to consider.

1. Do Your Homework

Before you even start working on ad copy or a landing page, you should first take the time to do a little research on your target audience.

Here are a few things to consider:

  • Have you advertised to this segment before? What worked? What didn’t?
  • If this is a new audience for you, talk to some people in your target audience. Run a couple of ideas past them. Often, what works for you doesn’t work for your audience.
  • What’s the best way to target your audience? Are there certain intent-based keywords they use? Certain interests on social media? Do they have a certain income level, fashion preference or other defining trait you can use to target them?

Once you’ve nailed down these details, use them to build your targeting strategy. A little bit of forethought can help you avoid wasting a lot of money.

2. Create the Scent

Unbounce’s Oli Gardner is fond of saying that landing pages should “maintain the scent.” In other words, the content of your marketing material should match the content of your landing page.

The reverse is also true. If you want to market a particular product or offer to a specific audience, your ads need to connect the needs and interests of your target audience to what they will find on your landing page.

In effect, you need to “create the scent.”

Ideally, your message should be so well crafted that only people who would be interested in the content of your landing page will click on your ad and—when they actually hit your landing page—they should immediately feel like they’re in the right place.

3. Get Granular

Expanding on the previous point, it’s perfectly okay to have different marketing material and different landing pages for each type and subtype of audience. Remember, each audience has different reasons for coming to your landing page and will respond to your page in unique ways. So, the more audience-specific you can make your ads and landing page, the more likely they are to convert.

Depending on your advertising medium, there are a variety of ways to do this: single-keyword ad groups (SKAGs) for PPC, social media targeting options, YouTube interests, etc. Just remember, the more granular your ads and landing pages, the better your conversion rate will be.

4. Pay for What Works

Finally, as you identify traffic sources that have consistently poor (especially unprofitably poor) conversion rates, either change something or quit spending money on that traffic source. You don’t have to keep investing in the wrong traffic!

Instead, create a testing budget for exploring new traffic or targeting opportunities and focus most of your budget on known winners.

And, since you’re now pointing the right sort of traffic at your landing pages, you can expect your A/B tests to really start producing. You’ve got the right audience on your page, make sure the user experience is irresistible!

Conclusion

Conversion rate is one of the most important marketing metrics. Unlike click-through rate, conversion rate tells you what percentage of your traffic is actually doing what you want them to do. You can buy all of the clicks you want, but if those clicks don’t convert…something is wrong.

Now that you know what conversion rate is, how to use it and how to improve your conversion rates, it’s time to put conversion rate data to work for you!

By the way, if you’d like help setting up conversion tracking or optimizing your conversion rates, let me know here or in the comments. I’d love to help.

How do you feel about conversion rate? Do you think it is a useful metric? Would you add any tips to this article? Leave a comment and let me know!

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Aden Andrus

Director of Content Marketing
Over his career, Aden has developed and marketed millions of dollars of successful products. He lays awake at nights figuring out new marketing tactics and is constantly upping Disruptive's internal marketing game. He loves to write, dance and destroy computer monitors in full medieval armor.

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