Conversion Rates: Make the most of your visitors!
With spending on various forms of Internet Marketing rocketing over the past few years and the prediction by many that this trend will continue, is it time you checked to see if you are making the most of your visitors?
What is a conversion rate?
The term ‘conversion rate’ relates to a simple calculation that takes the number of sales (conversions) and divides it by the number of visitors to the store / business.
If 100 people visit your website and this makes 2 sales then: 2/100 = 0.02 this is the conversion rate of the ecommerce store. To turn this into a percentage, which is easier for most to work with, we simply multiply the result by 100, so 0.02 * 100 = 2%.
Conversion rates are not purely an Internet / ecommerce concept, they have been used in traditional marketing campaigns for a long time to indicate the effectiveness of promotions, ad campaigns and many other related concepts.
What is your conversion rate?
To work out your conversion rate you need to be able to monitor your website visitors using some form of statistics or analytics package. You then use your actual sales data to perform the calculation.
For example if your website logs show that your store had 7000 visitors last month, and your sales records showed 120 sales through your site then the calculation would be:
120/7000 = 0.0171 or 1.71%
Some things should be considered at this stage.
Depending on your stats / analytics package, the figure you use for your visitors could vary. Don’t use ‘hits’ as this generally registers a ‘hit’ every time a user views a page or an image. See individual instructions to decide the correct number to use.
Make sure your sales data is correct, use only sales that are generated through your website. Any sales made which have bypassed your website should not be included as these will artificially inflate your conversion rate. These types of sales could include a sale generated over the phone directly from an advert, or an ‘in-person’ purchase from a bricks and mortar store.
How do you know if your rate is good or bad?
A conversion rate without anything to compare it with is pretty useless. In an ideal world you would know what your competitors and industry leader’s rates are. This would then indicate whether any increases could be made on your site. Unfortunately this data is hardly ever available.
An extremely wide generalisation is that a ‘decent’ ecommerce site has around a 2% conversion rate.
Rates vary depending on the actual sector you’re in, highly niche sites could have rates as high as 12-14% and beyond, however sites this niche may not be able to attract massive amounts of visitors.
Actual figures for sectors are published in various places, including the Conversion Chronicles website. Below are some figures directly from there:
- Fashion/apparel - 2.2%
- Travel - 2.1%
- Home and Furnishing - 2.0%
- Sport / Outdoors - 1.4%
- Electronics - 1.1%
Remember, these are averages which will include good and bad examples of websites. If you currently measure up well against these figures it doesn’t mean that you should stop there.
Is it worth spending your time on?
YES.
Let’s take a look back at our pretend ecommerce site. It currently has a conversion rate of 1.71% and last month made 120 sales.
Let’s also suppose we could increase the conversion rate to 2%. Now, by attracting the same amount of visitors, 7000, we would generate sales of: 7000 x 2% = 140! That’s an extra 20% in sales without attracting (or paying) for any further traffic.
If each sale is worth £100 after costs, that means an extra £2000 profit every month!
Okay, so how do I raise my conversion rate?
Here is the tricky part. There and lots of factors which all go towards determining your conversion rate, some obvious, others not, here is a brief overview of five common factors:
Price
- Arguably the one of the most important factors is the price of your products. Are you competitive against your rivals? If another site is selling the same products at a cheaper price then they could well be taking your business.
Copy
- Sales copy, the actual text on your site encouraging visitors to purchase has to be strong. Overloading a site user with too much information is as much of a turn off as giving them no information. Great website copy can have a massively positive impact upon conversion rates.
Checkout Process
- The time directly after a visitor adds an item to their shopping basket is where many sales are lost. Is the shopping cart easy to use? Are you forcing a user to create an account to make a purchase? Is making a payment straightforward or convoluted?
Trust
- Trust is another major factor in the sales conversion process. Without it a visitor will rarely make a purchase, even if your price is good. Many smaller factors help create (or break) trust including, first impressions, visible security measures, terms & conditions, physical trading address listed, etc…
Returns Policy
- Having a clearly stated returns policy could be classed as a part of the trust issue, however it is so often a factor in determining a sale that it deserves a high amount of attention. Would you personally buy something from somebody you have never met, without any guarantee that you could send it back if it’s faulty / not suitable?
Note, this is certainly not an exhaustive list and many other factors will influence a potential customer on deciding to make a purchase.
Taking it further
For many small – medium ecommerce sites simply covering the basics with regards to site usability will see an improvement in conversion rates.
Once you’re confident your site has implemented best practices the next step to take conversions further is usually A/B testing or Multivariate testing.
A/B Testing
Website visitors are split into 2 randomly selected groups and are shown a different version of the same page. On the second version perhaps a different product photo is used, or the sales copy changed.
Conversions from each type of page are recorded to determine which layout gives the best conversion rate. Once you are happy to make a change, you begin the process again, perhaps changing the location of the ‘buy now button’.
The end goal is to create a page that converts as many visitors as is possible.
Multivariate Testing
This is a more advanced version of A/B testing. The principle is that for a certain page you select a number of factors that you wish to modify to try and increase sales, the variables.
For example, on a sales page you could decide to test changes in:
- Product images
- Sales copy
- Buy now button
- A promotional offer such as free delivery
- Location of key product information
The multivariate software then works out all the different combinations of the changeable factors and produces them ‘on-the-fly’ for randomly selected visitors. Again, conversion rates are recorded and, with a little tweaking here and there, you can create the ultimate sales conversion pages.
It goes without saying that more advanced conversion rate techniques can be expensive to implement, however for a heavily visited website even a fractional increase in conversion rates can be worth tens of thousands in extra revenue.
Medium – Large ecommerce site example
Following is one further example of how an increase in conversion rate could affect a medium - large ecommerce website:
Search engine optimisation and pay per click campaigns are both highly effective ways of attracting interested customers to your website, however, with increasing competition and therefore ever increasing costs, it really is important that your website is doing the most crucial part of its job effectively, generating sales.
Further resources
Google Analytics – Free website analytics package offered by Google, formally known as Urchin.
http://www.google.com/analytics
Google Website Optimizer – Another Google freebie, full A/B and Multivariate testing package.
http://services.google.com/websiteoptimizer/
Conversion Chronicles – Dedicated conversion rate articles and resource website.
http://www.conversionchronicles.com
Conversion Report – Our very own conversion report service. <- Blatant Plug...
http://www.darrenatkinson.co.uk/ecommerce-report.asp
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Darren Atkinson @ June 7, 2007