Definition: Conversion rate is a percentage of people who performed a desired action (a conversion). A simple example is the percentage of web store visitors who bought a product.
What is a conversion
With conversion rate you want to measure how successfully something works or how often an action is performed compared to how many could have performed it, that’s why anything you define can be a conversion. Here are the most common examples in online marketing:
- Click on a link
- Scroll depth on the web page
- Contact form sent
- Questionnaire filled
Of course, this is not reduced to the digital world. You can also apply the conversion rate to the physical world. For example, if you have a store, you can count how many people came to your store and how many of those made a purchase. So you can make assumptions about how much more you can sell if you attract, say, 5 times as many visitors to your store. However, because our hobbyhorse is marketing automation, we will focus on application areas in online marketing in this post.
Difference between soft and hard conversion
We distinguish between soft and hard conversions, where soft conversions purely measures visitor behavior, such as a download or a click on a link. Hard conversion, on the other hand, is strongly linked to the fact that you as a company get something out of it. This can be a purchase, but also the contact details (a lead), which you can use to bring the contact into the next phase of your marketing funnel.
Now you can ask yourself why you don’t just measure hard conversions. After all, with a soft conversion you have no direct benefit as a company. With soft conversions you measure the steps to hard conversion. After all, if you’re not getting purchases or registrations, you need to figure out why it’s not happening. Soft conversions help you figure this out.
For example, let’s say you have a lead magnet at the end of a really well designed and written website, but no new leads are coming in and you just don’t know why. Now you could configure a soft conversion that measures how many of the visitors also scroll down and thus see the lead magnet as well. If you notice that no one actually scrolls down to the form, you’ve gathered valuable information that you can use to make further adjustments. If everyone scrolls to that point, you know that visitors will at least see it and you can look for more opportunities.
How is the conversion rate calculated?
Calculating the conversion rate is easy. Take the number of conversions, divide it by the number of visits and multiply this number by 100. Example: If there were 2000 visits to your website and 80 times the contact form was filled out, you have a conversion rate of 4% (80 ÷ 2’000 * 100 = 4%).
Short-term and long-term conversions (impressions vs. unique users)
In our calculation, we divided the number of conversions by the number of visits (impressions). However, there is also the measurement value Unique Users, which can be used instead of impressions. A unique user can have multiple impressions, which changes the conversion rate. So what is best to take?
As with so many marketing questions, it depends on what kind of conversion you want to measure. If your conversion is a click on a CTA, then we’re talking about a short-term conversion. Here it makes sense to add every impression. But if you want to measure how many people are converted into customers from the trial, then it makes sense to take Unique Users as the measurement point. This is then also a long-term conversion. So in the end, it all comes down to conversion.
What is a good conversion rate?
A good conversion rate depends on many different factors, such as the industry, the type of conversion (hard or soft conversion), whether it’s desktop or mobile, what time period is being measured, and many more. Because of all these factors, it is difficult to make a general statement. However, our experience shows that a conversion rate between 1% and 3% is considered average. Whereas you can assume a good conversion rate at 2% to 5%.
It doesn’t sound like much, but let’s assume you sell a service for CHF 500.-, bring 2’000 visitors to your website every month and 2% of these visitors make a purchase, you are at CHF 20’000.- revenue per month.
What factors influence the conversion rate?
Probably the most important factor is addressing the right target group. If you sell winter clothes and your target audience is families in the south of Italy, you can have a bomb website, but the sales will not improve.
If you know your target group well, you also have to make sure that you address them through the right channels . Let’s stay with the example of winter clothes. You’ve created the personas and know full well that men 35 and older will buy your winter clothes in bulk. Now it’s about placing your product via advertising. You keep hearing and reading about TikTok and how easy it is to sell on this platform (Instagram is so outdated after all) and put your advertising budget entirely on TikTok, since it seems to be a safe horse. However, the results just don’t really come. That’s because TikTok is the wrong channel for men 35 and older. With only 11%, they are underrepresented on this platform.
The ads on TikTok are thus turned off and then after a better research it became clear that you should run the ads on Facebook after all. Advertising has started and the click numbers look good. However, everyone seems to give up at checkout and abandons the process. Not only the product, but also the whole offer must be good and as few hurdles as possible should be set. If most willing buyers are from Germany, for example, but the payment options are limited to Twint, few to no sales will be recorded. So always make sure that the entire customer journey is optimized for the target group.
Last but not least, the usability of the website is very important. Actually, it can’t be said often enough. The whole experience on the website must be very good. If the so-called UX is not right, your bounce rates will jump up faster than you would like.
The factors summarized and expanded with other possible factors:
- The target group
- The channel
- The Customer Journey
- Usability (UX) of the website
- Brand awareness
Why are conversion rates important?
The most important reason why you need conversion rates: it’s the only way to properly evaluate the effectiveness of your marketing campaigns. You can thus not only evaluate the successes of your Campaign, but also compare them and use this information to make decisions that are not based on your gut feeling. Conversion rates also let you calculate ROI (return of investment) if you want to scale.
Further, soft conversions in particular can help identify valuable visitors. You can then target them specifically with ads to improve your hard conversions.
Done right, you can evaluate the success of your Campaign, calculate your ROI for scaling, identify valuable visitors, test the effectiveness of your content, and make strategic decisions. Conversion rate is therefore an important link in your marketing strategy.
Conversion rate optimization
The conversion rate measures the success of your marketing measures. If you don’t want to throw your money out the window, it is recommended that you take a close look at this rate and consider how you can optimize it. Finally, the end goals are always more leads, more customers, or lasting customers. To achieve more quality conversions, you need to look at the entire customer journey and measure and optimize at each stage in your marketing funnel.
So you start with your inbound activities, such as Google Ads or social media. Then move on to your website until you get to your most important hard conversion at the very end. Measure all the important KPIs and try to find out where you lose the most users. There will then be your first point of reference.
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