What is a conversion rate?

A conversion rate in an eCommerce context means the number of users that took a desired action. 

This could mean the total number of clicks on a social media banner, the number of people who opened an email, or the number of orders made through a landing page.

The exact definition of a conversion differs from one marketing campaign to the next, and from company to company. 

For one company, getting a customer to submit a form with detailed information about their lifestyle habits might count as a conversion. For another one, the total amount of sales generated might be the best conversion metric. 

How to calculate a conversion rate

In order to accurately calculate conversion rates, you need to know the amount of desired actions taken and the total number of views of a banner, email, or page. 

The basic formula for an average conversion rate is 

C.R. = (conversions / total views) * 100 

But bear in mind that you probably need to do a conversion calculation for many different types of marketing and business activities, like: 

• Page-level conversion rate. Calculating a conversion rate for all your pages individually helps you understand which pages are most engaging to the customers and get them to perform the desired action. 
• Overall conversion rate. Adding up all the traffic your website gets, such a calculation of conversion gives you an overview of how well your whole website is doing.
• Marketing channel conversion rate. You should also compare the different marketing channels that are providing your website with traffic. Is one performing better than others?
• Individual ad conversion rate. Getting down to the nitty-gritty, it’s important to also monitor how individual ads are doing in convincing the customers to place an order, or submit a form, or sign up for a newsletter. 
• Campaign conversion rate. Looking at the way different campaigns perform helps you understand whether you should tweak your ad targeting around to get better results.
• Keyword conversion rate. Online, it’s important to know what customers are looking for. You could be missing out on a lot of quality traffic by not showing up in search engines because of a poorly converting keyword.

Let’s take an online shop for example. 

In a month, the eCommerce website gets visited by 10 000 people. Out of those people, 577 people make an order. The shop’s overall conversion rate would be 5,77%. 

Maybe the shop is running two active marketing campaigns: a social media ad campaign on Facebook, and a Google ads campaign. But it also gets some organic traffic from search queries, too. 

If the organic traffic totals 30% of the shop’s traffic, then the marketing campaigns are bringing in 70% of the traffic or 7 000 visitors. 

If 500 people of those who made an order found the online shop through the Facebook or Google ad, the overall marketing campaign conversion for this month would be 7,14%. This can be further split between individual ads, the marketing channels, and even keywords used.   

Why good conversion rates are super important

Simply put, the better you can target your marketing campaigns and the more people you can convince to take the desired action (or to convert), the better return you will make on your marketing investment. 

Online marketing costs are rising due to increased competition, so the better you can make your investment (in this case, your ad) work for your benefit, the more money you will save. 

Advertising campaigns are not the only places where you should look for good conversion rates. The user experience and user flow of your eCommerce website can also play a huge role in whether the users who find your page are able to make a purchase. 

Making sure that your website is neat and easy to use at all times, combined with well-converting marketing campaigns will help you beat the competition and save money.

What is a good conversion rate?

That depends on what industry you’re in. But in general, an average online conversion rate sits around 2-3%, regardless of your industry. 

Some sectors, like finance, have a higher average conversion, but a general rule of thumb is that if you’re achieving a 5% or 10% conversion rate, you’re doing a good job. 

You shouldn’t be anticipating more than a tiny percentage of those visiting your website to actually carry out a purchase or other action you deem as their goal. 

Many will click away or return at a later date to buy, so you should focus on growing the number of people visiting your store. 

There’s power in volume. Getting 3% (30 people) out of 1000 people to buy doesn’t equal to big revenues for an eCommerce store selling mid-range products. But if you’re getting 3% conversions from 100 000 monthly visitors, you’re suddenly looking at 3000 people making a purchase. 

A good conversion rate also depends on the value of the product or service you’re selling. If you’re selling insurance, a new customer would sign up for at least 1 year and pay around $20 per month, so $240 in total. 

Let’s imagine that for each new customer, your profit margin is 50%. That means that out of $240, all of your costs are $120, and the remaining $120 is the profit you make on each new customer. 

If you spend $2000 on a single marketing campaign, you need to gain at least 17 new customers from that marketing spend to be profitable. This means a conversion rate of 0.85%, but in this case, conversion means a new insurance contract signed for a year. 

Average eCommerce conversion rates by industry

Overall, sectors like finance, B2B, and legal services can expect conversion rates between 2% and 5%.

And if you’re running an eCommerce store, particularly for apparel or clothing, you should accept an average conversion rate of around 2%. 

But the conversion rates within eCommerce also varies from one eCommerce industry to the other. 

Some fields average a conversion rate between 3-4% for search engine traffic. This is true for eCommerce industries like: 

• Business and industrial sectors (3.71%)
• Computing and electronics (3.16%)
• Real estate (3.40%)
• Tourism and travel (3.95%)
• Hobbies and leisure (3.39%)
• Sport and fitness (3.83%)

And others can yield conversion rates as high as 4-5%, including: 

• Arts and entertainment (4.51%)
• Home and garden (4.26%)

And the vehicle industry can expect an average conversion of a whooping 7.98%. 

Knowing the average conversion rate for your industry helps you understand how your eCommerce business is performing in comparison to your competition.

Good conversion rates for landing pages

Landing pages are highly subjective when it comes to defining a good average conversion rate. 

Overall, the median average falls at 2.35%, but the top 25% can see conversions of 5.31% and above. The top 10%, in turn, should be expecting conversion rates of 11.45% and higher.  

Your conversion rate should be subject to your return on investment and overall marketing spend. Comparing conversions rates without context isn’t useful either. 

A landing page collecting email addresses for a newsletter subscription and a landing page for completing a purchase measure different things. 

A new user for an email database is important for more long-term marketing purposes, whereas a new purchase has a direct impact on the short-term sales results. 

What is conversion rate optimization (CRO)?

When you’re systematically putting different processes in place to improve your conversion rates, you’re optimizing your conversion rate. 

Optimizing your overall conversion rate means that you understand how your visitors move through your website, what actions they take, and what’s the main reason that’s stopping them from converting. 

How to optimize your conversion rates

Once you have an idea of what your current conversion rate is, and where your industry average sits at, you can start optimizing various aspects of your eCommerce website and your marketing processes.

You can get started with conversion rate optimization in a couple of ways:  

Your landing page

Take a good critical look at your landing page and the way it’s designed. Is the main intention of the page crystal clear to the visitor from their first landing? 

The truth is that the better your landing page looks, the better it will perform and convert your traffic. Look at the colors you’re using, the layout of the page, and ask yourself if it’s clear from the page what the desired action for any visitor should be. 

Website speed

With the rapidly diminishing attention span of most people, the loading time of your website can be a huge reason for lost conversions. 

The longer a visitor has to wait for your pages to load, the more likely they are to close the tab and move onto something else. 

You can optimize your loading times by checking the sizes of your images and talking to your web hosting provider: you might be due a hosting upgrade.

Website copy

Words are just as powerful as your overall page design. It’s a skill to be able to write persuasive copy that convinces the reader to make an order, buy the product, or book an appointment. 

Look at your headlines; are they attention-grabbing and interesting? 

Pay attention to the formatting of your copy, as well as typography; is your copy easy and fast to read, even in a hurry? 

Check the writing style and tone of your body text. Are you addressing your audience the right way? Don’t use jargon and industry-specific slang, but try and keep your message clear and easy for anyone to understand. 

Navigation and site structure 

The main focus of your site structure should be an easy and simple navigation process for the visitors. The more your business grows, the chances of your site becoming complex increase. 

The more complex a website is, the more likely it is that your visitors get confused, lost, or simply bored and leave the page.  

When optimizing your website structure for conversions, ask yourself: 

• What’s the purpose of this page? 
• Is it taking the users towards the action I want them to take?
• Is the site easy to navigate, or are there pages or sections where a user can get lost? 
• Are there any errors or bugs that break the browsing flow and result in lost conversions? 

Forms 

Depending on the product or service your business is selling, you might rely heavily on forms in your sales process. The long and more complicated your forms are, the more likely you will be to lose conversions. 

As part of your CRO, pay attention to things like: 

• Number of fields. The fewer fields, the more likely your users are to fill out the whole form. 
• Form design. The better your form looks, the easier it will be to attract users to fill it out.  

Call-to-action (CTA)

Optimizing your CTAs could have a dramatic impact on your conversion rates. A call-to-action is a request or a prompt for the visitor to take a particular action. 

This could be subscribing for a newsletter, booking an appointment, signing up for a course or a webinar, or making a purchase. 

Most CTAs are displayed as buttons across websites, banners, and newsletters. The color, position, and the text all play a role in how well a particular call-to-action is working. 

Sometimes changing just one word or using a bigger or bolder font can increase your conversions. 

A/B testing 

A/B testing is also sometimes referred to as split testing, and it’s an important tool to have in your CRO arsenal. When running A/B tests, you’re trying out two or more ideas to see which one performs the best. 

For example, let’s say you’ve decided to create three versions of a contact form that you want to optimize for better conversions: 

• In form A, you’re focusing on reducing the number of fields in your form. 
• In form B, on the other hand, you keep the original fields but redo the design of the form. 
• In form C, you combine the design and the fewer fields. 

Split testing is a powerful way to make informed and data-driven decisions when optimizing your conversions. The method can be easily applied to a number of different aspects of your CRO, too.