How to Calculate Conversion Rate [+ Conversion Rate Formula]
Conversion rate is the percentage of prospective customers who take a desired action in a campaign. Read this post to learn how to calculate conversion rates.
October 30, 2023
Do you want to know the secret to driving more sales and profit?
It starts by tracking the conversion rate.
It's important in marketing to know how many potential customers become paying customers.
But calculating conversion rate can be a challenge.
Take this example: You’re running an ad campaign and see that it has generated 10,000 visits to your website in a month. So far, so good.
But if only one percent of those visitors bought your product, you have a problem. Even though thousands of people viewed your site, only a handful of them became customers.
That’s why tracking and understanding conversion rate is so important. It helps you identify where changes need to be made to drive more sales.
Our brand audit clients often have similar questions about conversions. Here are a few examples:
What is a good conversion rate?
Are conversions only used for sales funnels?
How do you adjust conversion metrics when the same person converts several times?
In this post, I'll answer these questions and more. Plus, I’ll share tips on how to improve your conversion rate and a basic conversion rate formula.
How to Calculate a Marketing Conversion Rate
Conversion rate measures the number of users who have taken a specific action. We can use a simple formula to calculate it as a percentage. Simply divide the number of people who took a desired action by the total number of visitors.
Basic Conversion Rate Formula
Conversion rate = (conversions / total visitors) * 100%
I'll use a website conversion rate example to illustrate.
Let’s say 1,000 people saw a paid advertisement, and fifty visited your site. That means the percentage of visitors to your website is five percent (50 / 1,000 = .05). This is the ad’s conversion rate.
You can apply this formula to any marketing campaign. You can also track the average conversion rate across an entire marketing strategy.
It isn’t difficult to calculate this metric. But it won’t help you hit sales and revenue goals until you know how to use different campaign conversion rate types.
Types of Conversions and Conversion Rates
Before we go any further, it’s important to understand the types of conversions. You also need to know how to use conversion rates to optimize marketing efforts.
A conversion is an event that occurs when a user in the target audience responds to an offer. There are many types of offers. Requests for free trials, signing up for an email list, or product purchases are examples.
Conversion rate measures the percentage of prospective customers that respond to an offer. We usually track this metric over a specified time period.
You can use conversion rate to grade marketing tactics. Here's where the challenge with tracking conversions begins.
Tracking them isn’t difficult. However, it's important to base them on meaningful data. Otherwise, a conversion rate loses its value.
Not all conversions directly result in a new customer. In fact, each conversion goal can vary depending on the action you want prospects to take.
How to Define Conversions for Your Marketing Strategy
The most common problem with conversion rate tracking has nothing to do with basic math. The real issue is with how you define them.
The definition of a conversion will depend on what you’re trying to do. It’s possible for one marketing campaign to have several conversion types. I’ll use a simple illustration to show you what I mean.
Let’s assume you and I would like to track conversions for three different campaigns. The first is a paid advertising campaign. The goal of the ad is to get users to sign up for a free product trial. So, every time someone signs up for a free trial, we’ll count that as a conversion.
Next, we’ll track website sales. A conversion occurs every time visitors buy a product through the company site.
Finally, we’ll track events for our social media awareness campaign. When someone clicks on the link that we embedded in each social media post, we’ll count that as a conversion, too.
Of these three conversion types I’ve described, only one generates revenue. Yet, all three drive sales.
Going further, we should also track micro conversions for each marketing campaign. These are smaller conversion steps that contribute to the primary campaign goal. Tracking micro conversions can help us make incremental improvements to get more conversions.
Click-through rate is an example of a micro conversion. This metric tells us how many people who saw our ad visited the website. The more visitors we get to our site, the more website sales we’ll make. So, optimizing click-through rate would help us improve sales conversions.
The definition of a conversion depends on several factors. But the first step is to decide what success is for each campaign. This makes it easier to set tangible conversion goals that will drive revenue.
To summarize, conversions can apply to several levels of marketing, such as:
Campaign level (i.e., keyword conversion rate for SEO and paid ads or engagement on blog posts)
Channel or page level (i.e., website visitors converted, social media user engagement)
Overall conversion rate (i.e., average conversion rates based on total ad interactions or sales conversion rate)
Conversion Rate and ROI
Now, let’s explore the impact of conversion rates on marketing ROI.
Most brand executives and business owners believe a higher conversion rate increases ROI. But this isn’t always true.
Because conversion rate alone is not the determining factor in the ROI equation.
Think of it this way: marketing costs impact profit. Investing more money in the marketing budget might drive conversion rates higher. But doing so may actually lower profit. Let's look at how this might happen.
Getting more responses for one type of offer may have an adverse effect on another.
For instance, if you want to get more website conversions, you might invest in traffic campaigns. However, getting more traffic may lower other conversion rates. Email subscribers and product purchases are two that come to mind. This often happens when the extra traffic isn’t of high quality.
So, before changing your strategy, consider how adjustments will affect conversion goals.
Increase ROI on PPC ads, websites, and other digital marketing tactics with conversion rate optimization consulting services from The Brand Auditors.
What Is a Good Conversion Rate?
This is another popular question brand audit clients ask. And, as you might expect, they don’t always like our response: it depends.
A “good” conversion rate is based on several factors.
Industry (business type) plays a significant role in conversion rate averages. Some industry sectors are more competitive than others. The more competitive the category, the lower the industry-wide conversion rate will be.
There’s also a direct correlation between conversion type and the prospect’s risk. Low-risk offers (i.e., free offers) convert at higher rates than those that require the customer to invest more.
Of all the factors that affect conversion rates, target audience quality is key. Often, brands increase their conversion rates simply by retargeting a better audience.
Sometimes, brands lack enough data to establish a conversion rate benchmark. As a result, they aren’t sure what their marketing conversion rate should be. This might be the case for companies launching new advertising or email campaigns. In these situations, test each campaign over a short period before setting conversion benchmarks. This process is called A/B testing.
For reference, here are the average conversion rates of some common marketing channel types:
Organic = 16 percent
Paid ads = 2.5 percent
Social media = 0.71 percent
What Data Is Used to Calculate Conversion Rate?
There’s so much data available at the click of a mouse that we can get lost in it all. Data overload creates problems with conversion tracking. The key is to separate the data you need from the data you don’t.
It’s important to stay focused on what matters. Often, brands and marketing teams track metrics that don’t add value to the bottom line.
Social media is a perfect example. Everyone loves to see lots of “likes” when they post something on social platforms. But how do “likes” contribute to a higher conversion rate? In most cases, they don’t.
Many businesses interpret social media likes as a positive brand awareness metric. But in reality, they have little impact on long-term revenue growth. Yet, comments and shares have a positive impact on brand awareness. So, while likes can serve as an indicator, comments and shares are more meaningful data.
Conversion Tracking Data
The conversion goal type will determine the tracking data you need. Here are some of the most common:
Google Ads traffic data can help you track website and mobile app conversions. The Google Ads platform provides data for phone calls, too. These occur when a user clicks on the phone number listed on a webpage or ad.
Google Analytics is a comprehensive resource of meaningful data for websites. Sites connected to the Google Analytics platform gain access to website traffic sources. This lets you review user behavior, page performance, and other vital information.
The platform allows you to track customer behavior and events, such as:
Ad clicks (used for individual ad conversion rate)
Number of unique site visitors from each traffic source
Call to action events
Website pages viewed (also used for lead generation landing pages)
You can use this information to improve marketing campaigns.
Social Media Analytics
Each social channel provides its unique data management platform. Facebook Business Manager keeps in-depth analytics on Facebook ads traffic and content. Pinterest, Instagram, Twitter, and LinkedIn also have analytics dashboards. Most are like Facebook’s dashboard, which displays user engagement and ad results.
Again, the type of data you need depends on the marketing channel conversion rate you want to track.
Other Problems with Calculating Conversion Rate
Sometimes, calculating conversion rate is not as simple as it appears.
How would you count multiple conversions that come from the same person?
Let’s look at how that might happen.
Jill visits your company’s social media page and sees a post that includes a link to your landing page. She clicks on the link and goes to the page but does nothing. The next day, she visits your social media page again. This time, she clicks on the landing page link and signs up for your email list. So, Jill converted three times—twice via social media and once on the landing page.
The question is: should we count this as three conversions or one?
To maintain accurate data, we don’t want to credit Jill with three conversions.
This real-life scenario illustrates how important it is to keep several marketing metrics. Tracking social media and website conversions will give us a more accurate conversion rate. In Jill’s case, click-through rate comes to the rescue. This metric tells us how many people click a link. A page-level conversion rate would show us how the event took place on the website and social profile.
Conversion Rate Optimization (CRO)
Conversion rate optimization (CRO) increases conversions using factors that influence consumer behavior. Marketers use multivariant testing to optimize landing pages and improve the user experience, increasing conversions.
In this section, we'll explore some of the factors that influence conversion actions.
High perceived value is an important factor when it comes to increasing conversion rates. Consumers are more likely to buy a product when they believe it offers considerable benefits versus the price paid. To increase a product’s perceived value, marketers should emphasize its advantages and features.
Providing superior customer service or resources on relative topics can enhance perceived value. By helping customers understand how something works and how to get the most out of it, they’ll feel more confident about buying it.
Availability and Delivery
People want products and services, and they want them as quickly as possible. Brands with no-hassle offers that are available on demand will have higher conversions. This is why many businesses offer same-day delivery, free shipping, or express shipping options. These can make all the difference in a consumer’s decision to buy.
Having an effective delivery system makes it easier to convert customers. For example, offering a tracking number with shipments lets customers track their orders in real time. This gives them peace of mind and builds trust during the buying process. Also, having access to multiple delivery options gives customers more control over their orders.
Curbside pickup can help make buying from local businesses easier. This convenience increases customer satisfaction and encourages them to buy again. Similarly, providing subscribers with loyalty points or rewards for repeat purchases improves customer retention.
All these value-add tactics boost conversion rates.
The quality of your target market is critical to your success. Brands should target audiences that have a higher propensity to buy their products and services.
You can use customer segmentation models to create buyer personas. Demographic data such as age, gender, location, and income level can help brands determine which markets are more likely to convert better than others.
Other Conversion Rate Optimization Tactics
There are other technical steps you can take to optimize ads, such as:
Testing Google Ads traffic types
Testing landing pages for best results (i.e., change images, experiment with benefit claims)
Reviewing web analytics to observe user behavior. This data reveals which pages get more qualified traffic.
Increase Conversion Rate with a Brand Audit
The Brand Auditors uses innovative strategies to help you optimize conversion rates and increase ROI. We can help you with A/B testing, landing page optimization, and more.
Our team of experts has a deep understanding of the latest trends and digital marketing best practices. We work with small businesses and large corporations alike to help them get better results from their marketing strategy.
Click on the button below to find out how a brand audit can help you take your marketing to another level.
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- Increase ROI on lead generation and sales conversions.
- Reduce marketing expenses.
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