What is a Good Conversion Rate?

By Todd Jamieson, Special to Overdrive

A frequent question I’ve had from many clients over the years has been “what is a good conversion rate?” This is a difficult question to answer for many reasons. Before I dig into why that is exactly, lets talk about what a conversion rate is.

In the web world, we could define this in many ways. The easiest would be “the percentage of people who go somewhere you want them to go on your site.” In e-commerce sites, this generally means that they make a purchase.

If we wanted to express this mathematically, we could use the following formula:

 

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One Response to “ What is a Good Conversion Rate? ”

  1. Justin Roff-Marsh on

    In isolation, a conversion rate is meaningless. Furthermore, if you don’t have numeric measures for the overall process, focusing on conversion rates may do more harm than good.

    So, if you’re measuring your conversion rate on a landing page (click-through to form submission), this information is only meaningful if you also know the percentage of form submissions that become opportunities, and the percentage of opportunities you ultimately win.

    Even these numbers are meaningless unless you also know your cost per click-through and the contribution margin generated by an average sale.

    But even with all this, you’re still one step away from true meaning! You have to confirm that your metrics are relatively stable (standard deviation) and that your past results are actually an indicator of future results (you haven’t changed anything fundamental).

    Many executives I work with lack an understanding of the mechanics of their overall sales function. They do a bunch of interesting stuff and sales appear — but there’s no formal model.

    So, if you find yourself asking the meaningless “so what’s a good conversion rate?” question. Stop right there and focus on developing an understanding of the design and the dynamics of your sales (and promotional) machine.

    Reply

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