In this post, we will see an important metric in online marketing called “conversion rate”.
so, what is conversion rate?
Conversion rate = (Number of Goals Achieved)/(Total Visitors)
why is this important to track?
In my previous blog on leads (marketing), I mentioned it’s important to track number of people interested in your products/services but along with that it’s important to provide context while reporting on Leads – this is where conversion rate comes into picture and provides the necessary context. Conversion rate can tell us the Quality of the leads & visitors that you get from your online marketing efforts.
Let’s take an example of an e-commerce site:
An e-commerce site decides to increase their monthly online marketing budget and they see a spike in the number of visitors – so that’s great, right? They should continue to increase their marketing budget, right? Well – that might not be true. While the number of visitors may have increased how do we know that increased number of visitors results in increased revenue? It all depends on the quality of the visitors that’s being generated – so how do you quantify the quality of the visitors? That’s right – conversion rate with the goal: number of visitors clicking “buy” button. So you want to make sure that with increased online marketing budget 1) Conversion rate is good or better 2) Number of visitors/leads have grown.
This was a basic scenario helping you appreciate the power of tracking the conversion rate for your online marketing efforts.
Now, If your marketing funnel is more complex then you might also create multiple conversion rate metrics to track conversions at each stage of a marketing funnel. This is VERY powerful. Here’s an Example:
Conversion Rate #1: (Number of Leads)/(Number of Total Visitors)
Note: your marketing team would define a “lead” based on their criteria(s) like downloads a newsletter, submits a contact us form, favorites a product, etc.
Conversion Rate #2: (Number of Actual Customers)/(Number of Leads)
Note: Conversion Rate #1 is great to evaluate effectiveness of marketing campaigns and conversion rate #2 is great to evaluate sales effectiveness.
How can you capture this data?
A good web analytics tool (like Google analytics) should help you track your conversion rates.
In this post, we saw that tracking conversion rate is very important metric to track your online marketing efforts.