Conversion rates are not a new concept by any means. However, many small businesses that have a website or blog don’t bother to pay attention to conversion rates, which are a key metric. If your website or blog plays a major part in the sales and marketing process for your business, it is important that you regularly monitor the conversion rate of your web presence. Here is some information about how to calculate the conversion rate for your site.
|SEE ALSO: How to Increase Website Traffic|
What Is a Conversion?
A conversion refers to any action that you can define. Some examples of conversions include purchases, contact form submissions, phone calls, social shares, newsletter signups, downloads, playing a video, and the amount of time a user spends on a site. Even though there are many easy and efficient ways to track conversions, many small businesses simply guess where the vast majority of their new customers or clients are coming from. This is because these small businesses don’t bother to track conversions.
If you want to know exactly how your sales funnel is performing, you need to know your conversion rate. Knowing the conversion rate will also help you understand which marketing avenues are providing the highest return on investment (ROI). That way, you will be able to focus on these marketing avenues more in the future.
The simplest definition of the conversion rate is that it is the percentage of users on your site who successfully perform a certain goal. For example, a conversion rate could be the percentage of users on your site that sign up for your email newsletter or purchase a product. A website or blog can have many conversion rates based on different metrics. This quick formula will help you calculate your site’s conversion rate: # of Goal Completions/ Total # Visitors = Your Conversion Rate.
What is a Lead?
In order to understand how to calculate a website’s conversion rate, you should also have a good understanding of leads. A lead refers to any person or entity that may want to buy the product or service you’re offering. One lead can be better than other leads. Essentially, leads are not created equal. Therefore, you want to focus more so on the quality of each lead rather than the quantity of leads.
Chances are, you’ve heard of the term “hot lead” and “cold lead.” A “hot lead” is considered more ready to buy while a “cold lead” will likely need to be convinced to purchase your product or service. Accordingly, a hot lead or a warm lead is going to be of more value to you than the average cold lead. Leads relate to conversion rates because having a large number of quality leads will allow you to boost your website’s conversion rate.
What is The Value of a Lead?
The value of a lead is how much the lead is worth to you. For example, if you sell exercise equipment at the average price of $400 and you manage to get a sale from a lead, then said lead will be worth about $400 to your business. Keep in mind that a lead can be very valuable to one person and not valuable at all to another person.
Of course, not all of your leads will end up with a sale or your business. Out of ten leads, you may only be able to turn four of them into a sale. Therefore, your conversion rate would be 40 percent. Therefore, for every ten leads, you can expect to make about $1,600, or the equivalent of four sales at $400 each. This is because you are making four out of ten sales. This would make the value of a single lead $160 ($1,600/10).
Here is a formula that will make it easier for you to calculate the value of one lead:
- Lead Value = Value of Sale / Number of Leads
However, it is important to keep in mind that real-life examples will be more complex. For example, there will be some leads who are more qualified than other leads. Also, you want to focus on profit rather than just revenue.
How to Calculate Conversion Rate
If you know which conversions that you want to monitor for your website, you will be able to calculate a conversion rate. For example, you can define a conversion for your site as the sale of a product or service. Even if you don’t have a website that is viable, you will still be able to monitor the number of leads and sales that you get, which will allow you to determine the conversion rate.
#1. Understand Why You Should Value Conversion Rates
Before you start calculating conversion rates for your website, you should have an understanding of the importance of conversion rates for the success of your site and business.
The vast majority of small businesses monitor the traffic of a website to measure the success of their web presence. The most commonly used metric is the total number of visitors received per month. Google Analytics is a great tool to monitor the number of visitors a website receives per month. In general, if a small business owner sees they’re getting thousands of visitors every month, he or she will feel that the marketing efforts employed are effective. If the business owner decides that the amount of traffic is insufficient, the marketing strategy will be tweaked to boost traffic to the site.
However, if you simply measure traffic without knowing the conversion rate of your site, you will not have an accurate picture of the performance of the website. One option that you have is making changes to your marketing efforts to boost traffic to your site. The second option you have is focusing on optimizing your website or blog to ensure more visitors perform the actions you want.
If there are already people visiting your website or blog, you want to improve your site’s conversion rate to in turn boost your business metrics. Let’s say 1 percent of all your visitors convert into buyers. You stand to make a lot of money doubling or tripling your conversion rate. If you choose to focus on boosting your site’s traffic, you may gain more traffic but the traffic may not convert. Improving your conversion rate will ensure your site’s performance improves with time. Your marketing is ineffective if you are unable to convert your traffic into buyers or subscribers.
#2. Figure Out What You Want to Measure
You want to determine what website metrics that you will measure in order to figure out the conversion rate of your website. Here are some ideas for website metrics that you want to measure:
- Bookings for consultations
- Requests for more information
- Purchases of a product or service
- Signups for free offers or email updates
- Signups for free trials
- Purchase a specific product or service.
- Downloads for eBooks or white papers
#3. Use Google Analytics to Monitor Your Conversion Rates
A common misconception is that measuring conversion rates is difficult. However, the truth is that monitoring conversion rates can be done with a tool that most small businesses already use. This tool is Google Analytics. The Goals feature of Google Analytics will allow you to create goals for your website to track conversion rates for various actions. In order to create goals for your website, you need to do the following:
- Have a good idea of the goals you want to monitor and measure
- Create a landing page or thank you page that the visitor will arrive on once they perform the action. You can use a tool like LeadPages to set up such a page for your website. Be sure the page is directly attached to the goal. You do not want to send your traffic to the page or this will skew the data.
Setting up a goal on Google Analytics should only take from you 10 to 20 minutes. Google published a short tutorial that you can follow to set up a goal. There are also video walkthroughs available online.
Google Analytics allows you to set up many types of goals. The goals you should create for conversion rate measurement is URL destination goals. Once you have the essentials down pat, you can make event-driven goals and goal funnels. These type of goals will provide you with advanced data. This advanced data will be able to tell you how conversion rates compare depending on the source of traffic. For example, leads that come from paid searches will probably lead to higher conversion rates. This is because the advertising is incredibly focused. Traffic from the use of local keywords or keywords with significant commercial intent should also lead to high conversion rates.
Undoubtedly, the conversion rate is one of the most important website metrics. Therefore, if you want to ensure the success of your site, you should start monitoring its conversion rate. For more information about how to calculate conversion rates, don’t hesitate to contact us.