Web Analytics: KPIs – Understanding Conversion Rate

With Digital Marketing, the advantage over traditional marketing is that user behaviors can be tracked or evaluated in real time. There are a number of Key Performance Indicators (KPIs) that can allow for effective goal and campaign measurement. Typical Key Performance Indicators may include time on site, new vs. returning visitors and bounce rate. For a deeper level of tracking, many marketers track website conversions. Today I will discuss Conversion Rate and why it is important.

What is Conversion Rate?

Before I discuss Conversion Rate, I will first define the terminology. A Conversion happens when customers are interested in products or services and they complete an action on the website, such as ordering a product or completing a form. Conversion Rate (CR) is the percentage of customers who have completed the action that is being tracked. The formula for calculating Conversion Rate is:

CR = the number of conversions / the number of total ad clicks

Conversion Rate as an example

Your company has created an email campaign to promote a mobile phone. You create an email and send it to 100 members of the company email list. Only some of the members will click links in the email and go to a specified landing page. Of those, 10 members who have asked for more information about the mobile phone will even purchase them directly. We would consider 10 of these customers to have been “converted” successfully. In this example, the Conversion Rate would be 10%.,

Conversion Rate is a key performance indicator that helps evaluate the success of the email marketing campaign. We will illustrate this using a funnel. 100 customers begin the process, but not all of them will complete that action. Only a portion will act, and in the end, even fewer customers will become leads. The Conversion Rate represents the ratio of the number of people that completed an action, or purchase, to the number of people who originally clicked on the email campaign.

Why is Conversion Rate important?

Conversion Rate is always useful regardless of industry. Monitoring this KPI can help determine if the Return on Advertising Spend ( ROAS) is profitable. CR will alert you to problems that may arise from marketing campaign and provide you with actionable data. Optimizing your marketing campaign will allow you to be more responsive to ever-changing business conditions.

Even though you have created a conversion, you need to continuously analyze each campaign. This will help to determine what motivates a customer to complete a call to action and keep converting.Conversion Rate is a KPI you should regularly check to help you keep your digital marketing plan on track.