Why do Conversion Rates Matter?

In all my years of consulting, ecommerce website success boils down to three priorities: increase your traffic, improve your conversion rate, or increase your average order value. Today, I’ll talk about why conversion rates matter.

Defining Conversion Rates

The conversion rate is typically calculated by dividing the number of conversions by the total number of WEBSITE traffic (or a website visitor). Conversion rates can be evaluated at each level of the conversion funnel, but I don’t recommend going outside of a someone who has actually entered a page on your website.There are several other ways to calculate your conversion rate. One is to include only unique visitors. Another is to focus on the lower end of your funnel-like people who have items in their shopping cart. The conversion rate might skyrocket when people have items in their cart, guiding you to a goal of increasing the number of people who add items to their shopping carts. This can be aided by website prompts that remind visitors that they can (or should) add an item to their cart. You may also want to define several different types of conversion rates. For instance, ecommerce websites obviously have the final confirmation purchase, but you may also have a website visitor ask you to alert them when an item is in stock. This is what you might call a “pending sale.”

How to Track Conversion Rates

Google analytics is a powerful ally in your quest to track conversion rates. Google makes defining goals and conversions easy and fast. Ecommerce websites equipped with Google Tag Manager can accelerate the process. Visually, you can use a heat map to help you see holes or leakage in your conversion funnel. There are several services online that make it easy to install heat maps. Heatmaps allow you to see where users are clicking and scrolling. Some heat maps can help you see where your customers are looking. This can help you identify improvements to your website’s design.
What Levers Affect Conversion Rate (a.k.a. Conversion Rate Optimization)?
There are many things you can do to improve your website’s conversion rate.

1. Speed – For starters, make sure your website is FAST. Slow websites make visitors think your website is old and unreliable. Many people don’t have the patience for it.
2. Mobile-friendly – With the advent of “one-click” check out, PayPal and Amazon buttons, and many other speedy ways to provide payment information, you can expect a lot of the barriers to mobile orders to crumble. Make your website easy to navigate on a phone.
3. Navigation – your products should be easy to sort and should be sortable by a variety of attributes. Sometimes, that might mean having separate product pages as some attributes do not span every product category.
4. Website design – I can almost guarantee that every website visitor wants to think the least amount possible. They don’t like thinking. Your website’s design, from layout to color, should reduce the amount of brain power. Where should the “Add to Cart” button be? Right underneath the product name, price, and short description. Where should the “View Cart” icon be? Top right corner of the website (and maybe underneath the “Add to Cart” button. What primary and accent color should I add to the site? Well, that depends, but the accent color should be attached to important elements that lead to conversions like the “Add to Cart” button and the product name text.

When should you focus on conversion rate?

There’s no magic number for conversion rate. Is it 4%? 10%? 0.5%? It depends on two other numbers. Can you guess what they are? Cost per visitor and average order value! It all starts with a budget. How much money can you spend on paid traffic? Not just Google Ads, but paid marketing that has a line item on your budget.

How much traffic is that bringing to your website?

The next question is how much money do you need to be making (on average) from each website visitor in order to make your money back? And how much is everyone spending on each transaction? Assuming your ecommerce website was built with basic website optimization, these two numbers can help you determine a good conversion rate.

What conversion rate do you need to make money?

I can’t do the math for you here, but a short meeting with me can help us get to the right number. In general, high-cost items can tend to have a long buying cycle but should not lower the conversion rate too much if you are using the unique visitor versus ALL visitors.
I can’t cover everything about conversion rates here, but this is a good launching pad.