Understanding The Formula For Conversion Rates

Published: | By POWR

Understanding the formula for conversion rate metrics is imperative as a business owner. It’s especially crucial if you're trying to work out how to increase conversion rates in e-commerce!

Along with the steps for creating a conversion path, you need to know your current conversion rates and then track that number to know when to tweak your approach if you're not quite reaching your targets.

That might be through checking how many visitors have used your contact form, bought a product, or signed up for an event—but knowing your starting point is critical!

How To Calculate Your Conversion Rate

Although it sounds fiddly, working out your conversion rate is straightforward.

It works like this:

  • Tally up all your conversions within a specified time frame.
  • Divide that by your total visitors during the same period.
  • Multiply the result by one hundred percent, and that’s it!

Let's use an example. Say we get five thousand visitors in a month, and five hundred users convert. Our conversion rate is ten percent (and not looking bad at all).

As a rough idea, the average conversion rate for email campaigns leading to an opt-in landing page is about five to fifteen percent, with twenty to twenty-five percent an excellent conversion result for top-tier marketers.

Can I Refine My Conversion Rate Calculations?

The beauty of conversion rates is that you can play around to find what works best for your company. 

For example, you might want to see:

  • Business-wide conversion rates from all outreach activities.
  • Conversion rates for specific marketing channels.
  • Rates as calculated on a page-level basis.
  • The conversions achieved per campaign.
  • Individual conversion figures for each ad.
  • Keyword-based conversion rates.

This data is hugely influential, so you know which ads work best, which of your landing pages performs well, whether you need to change your advertising content, and where to divide your keyword budget.

It's important because, while click-through rates are great, they don't end up in tangible sign-ups or sales, so your conversion rate shows you how those clicks are stacking up in real-world results.

What Conversions Can I Track?

There isn't a universal way to define a conversion, so it's up to you to pick those business targets. They often depend on your objectives.

A conversion could mean:

  • Buying something.
  • Engaging with a Live Chat feature.
  • Registering on your site.
  • Giving you a call or submitting a contact form.
  • Using an app.
  • Downloading a free trial or an ebook.

Conversions don't just constitute sales, so you can monitor any measurable action you'd like a visitor to make towards becoming a paid-up customer!

What Conversion Rate Should I Aim For In My Business?

We gave a couple of rough averages earlier, but it's essential to point out that tons of factors will impact your conversion rates.

For example, your business type, sector, promotional activities, and traffic quality will all feed into that result.

Once you've polished and perfected your contact forms and have a clearly defined conversion path, the next step is to consider your return on investment to choose where to invest.

If you have a batch of email campaigns, and one has a lower conversion rate than the rest, yes, that's a sure-fire sign you need to put some more work into it.

However, if the conversions each result in a new revenue stream or a new order, and the returns far exceed the cost of the campaign, it's still a profitable exercise!

The trick is prioritizing campaigns with excellent conversion performance, learning lessons about which approaches work best, and keeping an eye on returns. 

Each time you publish new marketing content, you'll be confident that the conversion metrics will hit the bull's eye.

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