Conversion Rates in Context

Conversion rates tend to be a hot topic among e-commerce and marketing professionals, and with good reason. Simply put, a website’s conversion rate is the metric showing the percentage of visitors to that site who took a desired action, whether that happens to be making a purchase, registering as a user, filling out a survey, or writing a product review. For example, if a site records 100,000 visitors over a one-month period, and 3,000 of them complete a purchase, the site’s conversion rate comes out to 3 percent.

The digital marketing community immediately becomes interested when a company claims a high conversion rate or a boost in its conversion rate. However, to talk about conversion rates as a positive requires consideration of the context for the figures. What constitutes a good conversion rate, and how much did it cost a company to achieve this rate? Who exactly are the customers doing the “converting,” and what was their status before they “converted”? In addition, how does a company decide how much to pay for any particular conversion rate? Will it base its budget strategies on the cost for each action or the cost for every customer acquisition?

While a company’s conversion rate can be a powerful tool in determining its performance, there is no agreed-upon way to measure it. Data involving the number of minutes spent at a site or the number of unique visits tend to be far more standardized.

A company must first decide what it wants to achieve, and that will determine what to measure. If a marketing professional wants 5 percent of visitors to a site to watch a two-minute video all the way through, he or she will need to track more than just the number of visitors clicking on that video.

When thinking about another firm’s conversion rate statistics, managers will need to remember that they can make no valid inferences about one company’s performance over another’s without first understanding the context surrounding the metrics.