Conversion rate is a very important metric if effectively used.
John Mignano
Here is a point of view on basics and best practices for measuring conversion rate.
Conversion rate as a percentage equals results divided by unique visitors during a particular time period.
What are your results?
From a macro perspective any reason for which your website exists.
Most frequently this is the total number of orders submitted or total number of leads collected or total number of newsletter/email sign-ups.
Now for non-ecommerce websites it can be number of people who completed a task.
A support site this would relate to the number of people who got to a faq or a answer or a knowledge base article (this is just an example okay).
Why use Unique Visitors?
There is a lot of heat around this topic.
Some people measure Total Visitors and others measure Unique Visitors.
Remember trends are important so if you stick to whatever you prefer just be consistent over time and you’ll be fine.
My personal view on why we should measure Unique Visitors is because every session is not an opportunity to get a customer to hit submit order.
Allow me to explain…
Shopping / web surfing is a step-by-step process (fine art and science):
- Visitors come to see who we (the company/business) are
- Visitors leave and go to check out another site read reviews
- Visitors come to see our benefits, then decide to buy or purchase
For simplicity, I’m skipping over a few other steps here.
Measuring Unique Visitors is a better gauge of what is actually happening on your website because it analyzes the step-by-step process…
And this gives you results based on how it is working or not working.
This is conversion rate and web analytics.
More importantly the metric definitions should focus on the results and using Unique Visitors measurement is reality.
Uniqueness is currently measured by setting a long term cookie (shopper_id) most of the time although this is a bit unreliable and not optimal.
After all it is all about consistency and trends.
Time period: If you are measuring weekly conversion rate this is the sum of orders during this time frame and sum of unique shopper_id’s during the same weekly time period.
It is not the sum of unique visitors on a day basis or a sum of daily unique visitor number for a week.
For monthly sum of orders during a month and sum of unique shopper_id’s during this time frame.
It is not recommended to sum daily unique visitors to get a total for month or week.
All of the above might seem to be too much detail just to get started on the metric yet all this detail reflects the importance placed on this metric.
You see how most of the time you don’t even agree on what definition is and how it should be measured. So hopefully it was helpful to you.
Ok so here seven simple best practices related to conversion rate:
# 7 : Start with overall site conversion rate.
There is no other metric directly telling you less about your website than overall conversion rate (assuming you have more than $ 25,000 in sales on your website)…
The overall conversion rate is easy to measure so you should do it, I recommend using the definition above and get it out of your system.
# 6 : Trend over time and don’t forget seasonality.
If you have read this blog for any amount of time you know I love these two steps:
- Trends
- Segmentation (more on this later).
Most definitely trend conversion rate numbers makes all the difference, so what is unique about this metric?
Well, more than other metrics the trend conversion rate is really impacted by seasonality.
Especially time frames from 13 month trends or look at 5 quarters or 8 days.
In each case you will have same period from history to compare with.
That number will give you a lot more context and avoid sub optimal reactions / actions by comparing time periods that have nothing do to with each other.
For example, last month vs this month…
# 5 : Understand exactly what the acquisition strategy of your website / company is.
This is not a report, it is a conversation / investigation with your business partners and it is an extremely important step any analyst needs completed.
Figure out what is your core acquisition strategy and measure conversion rate for those elements.
Is your company heavily into Direct Marketing (email marketing, direct mail etc)?
Are you spending excessively on PPC (Pay Per Click)?
Or maybe you are about to invest a large sum of money on a new affiliate marketing strategy or maybe on SEO.
Do this before you get too deep into conversion rate measurement because it will without a doubt lead to more meaningful analysis from you.
More importantly, you will measure what is strategically crucial to your company/business rather than what your friendly neighborhood web analytics tool is showing you.
# 4 : Conversion rate by top five referring url’s.
This sounds really simple and frankly there is usually a disconnect between what the online marketing strategy is and where the traffic really comes from.
For example…
If you are a complex business with many websites you might not necessarily be measuring conversion rate for your corporate site which might be sending you tons of traffic.
Or measuring from a blog that started to praise you a lot. You get the idea.
I always find “hidden gems” in referring urls and measuring conversion for your top five referring url’s is a great insight.
If you find this report shows you the same as some of the above or below you can stop it. If you are not doing this you are missing out big time.
# 3 : Don’t measure conversion rate by page or link.
In a complex multi-page and multi-link web environment how could you possibly measure conversion rate by page?
For example:
Two people come to your site, one enters from homepage and another at product overview page and you can get to checkout directly from both pages measuring conversion rate “of” each page…this is very misleading info.
Click density (site overlay) report, some web analytic tools show conversion rate for each link on the page.
The metric is for x % of people clicked on this link purchased.
Unless all links lead to the checkout this is a useless piece of information.
In a multi-page complex path web experience, the fact someone saw a page or clicked on a link is not enough to attribute any credit to that page / link in terms of conversion rate.
(If you want to measure value of a page see the approach described in this post and look for the section where we talk about “page influence”.)
# 2 : Segment like crazy.
Most websites convert in single digits (usually low single digits).
With such a small ratio of people converting the insight is hidden deep in your site data and it is extremely critical that you segment “like crazy” in order to find your insights.
This means showing top 5 (or x where you pick x right) segments of conversion rate, we have discussed two above already:
- Referring urls
- Core acquisition strategies (DM, PPC, SEO, Affiliates etc).
That is just a start. You should have indented sub segments for each of the top five.
The conversion rate of top five sub segments for each segment of conversion report so you can really show where the desired results are coming from.
- Top five direct marketing campaigns
- Top five PPC keyword phrases driving conversion
- Top five affiliates etc…
This is not too complex for any top website as all this information will fit on one page. Segmentation is not hard to do.
# 1 : Always show revenue next to conversion rate.
Another extremely simple metric.
We usually create a report showing various conversion rate (like in example #6 above).
Conversion rate just by itself can be misleading in terms of opportunity for any website.
So my recommendation is to show the actual revenue number (leads or newsletter sign-ups, etc) next to the conversion rate %.
What you will find is some of your highest conversion rates don’t bring in most of the revenue.
Typically people see a high conversion rate and think “let’s do more of that”.
The highest conversion rate could be when you give deep discounts (which you can’t do all the time)…
The highest conversion rate could come from segments of customers you can’t find more of (say existing customers).
Providing results driven numbers next to the % gives more meaningful data to your decision makers. Sounds simple yet is very effective.
Never measure conversion rate without a goal.
This is not always possible yet a highly recommended best practice. Having a goal gives context to your actual number.
This forces business decision makers to think about where the revenue (or other results) will come from?
This means you really got to analyze execution strategies and to plan ahead of time as much as possible.
Having a goal guides conversation and analysis and yield insights.
A goal makes you integrated with business decision making process (because almost always the user of web analytics tools is not the one setting goals).
For example, #5 is not so much about the report, which is important to know the social / cultural change in your business.
In Web Analytics goals are hard to find and yet there is enormous pressure from your business leads for insights and action recommendation.
The goal is to create an environment where responsibility for business planning and execution helps push change in the right direction.
Do you agree with the best practices recommended above?
Are there tips and tricks that have worked better for you?
Feel free to share your thoughts, critique and feedback via comments.
