Conversion Rate: Definition, Calculate, and Increase

Increasing the conversion rate is a goal of many organizations. But what does a conversion rate actually mean, how can you calculate or improve it, and what is a good benchmark?

What is a conversion rate?

A conversion rate has a simple definition: "The number of visitors who take a specific action divided by the total number of visitors." But what is the meaning of that? Within this formula, the 'certain action' is a 'conversion' (such as a purchase, donation, registration, etc.) and by dividing by the total number of visitors, a ratio is created. When this conversion ratio is then multiplied by 100, a percentage is created: the conversion percentage.

Calculate conversion rate

Calculating a conversion rate seems simple. However, when you look deeper into what exactly you are calculating, it often turns out to be more complicated. For example, you have to ask yourself which value you are going to use: users, sessions, or page views. For example, when calculating conversion in the 'Ecommerce Conversion Rate', Google Analytics uses sessions to make the calculation, while AB testing tools such as VWO often opt for users when calculating conversion. How values such as sessions and users are defined and calculated internally in those tools is even more complicated.

Users or sessions

You also have to ask yourself what type of conversions you are going to measure. Is it possible to do an action multiple times (micro conversions such as adding an item to your shopping cart) or is an action normally only done once (macro conversions such as purchases, donations or registrations). It is recommended to work with a session-based conversion rate for continuous (micro) conversions, and with a user-based conversion rate for binary (macro) conversions. This article from Conversionista Users vs. Sessions explains this concept further using various examples.

Examples how to calculate conversion rate

• You get 100,000 unique visitors to your e-commerce webshop per month. Of these, 2,300 subsequently make a purchase. Your conversion rate for this segment (all visitors) is then 2,300 / 100,000 = 0.023. If you then multiply that ratio x 100, you get a conversion rate of 2.30%.
• Your landing page receives 70,000 unique visitors per month from a mobile phone. Of these, 4,100 then subscribe to your newsletter. The calculation of your conversion rate for this segment (mobile visitors) is then as follows: (4,100 / 70,000) x 100 = 5.86%.
• Your microsite gets 24,000 unique visitors every month, who make a total of 3,200 donations in 29,000 sessions. The user-based conversion ratio is then 3,200 / 24,000 = 0.1333 (13.33%), while the session-based conversion ratio is 3,200 / 29,000 = 0.1103 (11.03%).
• Your product page receives 55,000 unique visitors every month. In total they make 92,000 clicks on the thumbnail images. This amounts to a 'conversion ratio' of 92,000 / 55,000 = 1.6727 (167.27%). In practice, however, it is probably smarter to communicate something like the following: "a visitor viewing the product page clicks on an average of 1.67 times on a thumbnail image".

How do you measure a conversion rate?

First of all, you need to determine what exactly you define as 'conversion'. In most cases, the so-called macro conversion is chosen for this. This could, for example, be completing a lead generation form, making a purchase on an online store, or making a donation to a foundation. However, it is also possible to choose a micro conversion such as adding a product to a shopping cart or viewing a certain tab on a page.

After you have determined the conversion goal, you need to investigate how you can measure that conversion. For example, is it a button from which you can track clicks? Or perhaps a display of a certain page (such as the thank you page)? In those cases, it is probably best to use a tool such as Google Analytics for measurement. This way, after saving, you can see the conversion in a familiar context and therefore calculate a relevant conversion rate or conversion percentage. If you measure the conversion in a system other than the web analysis tool, there may be uncertainty about the number of users. Because you need both the number of conversions and the number of users to calculate a conversion percentage, it is smart to get these from the same system.

What impacts a conversion rate?

Almost everything that happens on a website can potentially influence the conversion rate. Even things outside the website, such as what competitors are doing or how well the website fits an advertisement, have an influence. When you look at the website itself, things such as loading speed, user-friendliness, the range of products or services, the prices charged, the design, the texts on the website, the navigation, web forms, and the photos used influence whether you are going to have a high conversion or not. Together with a conversion optimization specialist, you can examine the website using various methods to determine which things have the greatest influence on the conversion rate.

What is an average conversion rate?

A question that seems simple, but in practice depends on many factors.

• For example, 'the average conversion rate' differs per country, device, browser, day of the week, month, etc.
• You should also ask yourself which period you are looking at. For example, the conversion rate of a healthcare comparator over the entire year is on average much lower than if you only look at the month of December.
• Furthermore, it naturally makes a huge difference whether you look at the conversion rate of a micro (soft) conversion or a macro (hard) conversion.
• Yet another factor is the so-called traffic mix, or what percentage of incoming traffic comes from which online marketing channel. For example, a website with an extensive knowledge base will likely bring in more traffic from SEO than a website that does not. The result of this is that the conversion rate of that first website is probably lower. After all, many visitors (during a particular visit) will only be looking for the information in the knowledge base and will not want to make a purchase.
• In addition, matters such as industry and positioning are still of great importance. For example, a website that sells luxury yachts may be extremely satisfied with a conversion rate of 0.1%, while for an online store selling men's shoes this will probably be far below the desired amount.

Benchmark for conversion rates

The company Monetate publishes an Ecommerce Quarterly Benchmark every quarter. Based on billions of sessions on 250+ websites, they report data on average order value, add-to-cart ratio, conversion percentage, and more. These values are then segmented by such things as period, device group, country, channel, browser, and operating system.

Some online marketing agencies will also be able to provide more targeted benchmarks. Consider, for example, an agency that specializes in Dutch ecommerce fashion web shops, which may help dozens of similar organizations. Although significant differences can still be expected in conversion rates (for example due to their positioning or traffic mix), such a benchmark will provide a much more representative picture.

What is a good conversion rate?

As should be clear by now, it is not easy to give a simple answer to this. Actually, this is because a 'good conversion rate' differs per website, just like 'good turnover' does. While an annual turnover of 1 million will be a top year for one webshop, it may be a reason for another webshop to close the business. It is probably smarter to compare your conversion rate internally. This way you can keep the conversion rates of different segments side by side. For example, if your webshop converts 4% of visitors on desktop and only 1% on mobile, this may be a reason to consider conversion optimization for your mobile visitors. Similarly, you can also look at your conversion rate per online marketing channel and try to improve it over time. Please note that for such 'advanced' analyzes it is very important that the data quality in the web analysis tool is good.

How do you increase a conversion rate?

Increasing your conversion rate is very simple: give a free Tesla gift with every order. This is guaranteed to increase your conversion rate, although I suspect that the organization will unfortunately soon be bankrupt. This example indicates that increasing the conversion ratio must be seen in relation to other values, such as turnover, average order value, and turnover per user. A conversion rate in itself actually has no meaning. Instead of setting yourself the goal as an organization that the conversion rate must be increased, it is better to think about what the ultimate goal is.

Increase conversion rate quickly

The best method to increase your conversion in the short term is probably to give a price discount. Ultimately, the price is a factor in almost every purchase and a lower price will in most cases lead to a more interesting offer.

Increase conversion rate over time

Increasing your conversion in the longer term, on the other hand, is a less simple process. This includes things like website analysis, user testing, A/B testing, and similar conversion optimization techniques. These are techniques in which the website and the behavior of visitors are thoroughly examined. This allows the focus to be on increasing KPIs such as turnover per user and not just a (temporary) increase in the conversion rate.

Conclusion

The conversion rate is actually a broad and therefore somewhat clumsy term to work with. It is therefore important to determine in advance how the conversion ratio is defined within your organization. Finally, you need to think through what you hope to achieve as a result of the conversion improvement, and what the most appropriate steps are to get there.