What is a conversion rate?

Conversion rate refers to the percentage of people who complete a desired action after being exposed to a brand’s sales and/or marketing channels, calculated against the total number of interactions (those who visited or viewed your ad, landing page, or other asset). 

Depending on your goals, a “conversion” could be a number of desired actions, including completing a purchase, signing up for a newsletter, upgrading a service, submitting a form, or downloading an asset, to name a few. Ideally, conversions involve users subscribing to your services, engaging with your brand, and spending money on your products. 

What is the formula to calculate conversion rate

To calculate a conversion rate, you simply divide the number of conversions in a given time frame by the total number of people who visited your site or engaged with your service, and multiply it by 100%. 

Conversion rate: Conversions /total users x 100% = conversion rate

For example, say an online ad reached an audience of 100,000 people. If 10,000 of them clicked on the ad banner, – the conversion rate would be calculated as:

10,000 / 100,000 = 0.1 x 100% = 10% conversion rate 

Why conversion rates matter

Conversion rate is a useful metric for measuring the success of a marketing or sales campaign.  

By helping you measure whether your website, marketing assets, or campaign is leading your audience to perform desired actions, you can better assess how to appeal to your prospective customers and hone your efforts accordingly.

Conversion rate can also be used to uncover product issues or problems with the marketing strategy. If a conversion rate is particularly low, it can indicate that a campaign approach needs to be altered or adjusted or that the user experience needs to be streamlined to reduce friction or confusion.  In this way, conversion rate can be used as a tool to drive improvement where needed. 

“A strong conversion rate tells you that you’re doing something right”

Finally, conversion rate matters because it equates to top-line revenue.At the end of the day, a strong conversion rate tells you that you’re doing something right: your users are engaging with your brand as you’d hoped, and your marketing and design is working as intended. 

What is a ‘good’ conversion rate?

Average conversion rates vary by industry, customer type, and the desired actions in question. Research shows that a good sales conversion rate for an e-commerce brand is between 1% and 5%. This means that for every 1,000 people who visit a brand’s website, 10-50 of them actually make a purchase. According to recent studies, the average sales conversion rate for B2B brands is around 2%.

What is a baseline conversion rate?

A baseline conversion rate refers to the current conversion rate of a website or channel before any changes are made to it. Knowing your baseline conversion rate is useful in monitoring how your efforts drive an increase in conversions. For instance, you may choose to run an A/B test with your landing page copy. Establishing a baseline conversion rate beforehand gives you a metric against which to determine the success of your new copy options. 

What is conversion rate optimization (CRO)

Conversion rate optimization, or CRO, refers to the process of enhancing your website or campaigns to drive more leads and guarantee more conversions.

When seeking to optimize the conversion rate of a particular marketing or sales channel, the first step is to analyze the channel’s baseline conversion rate, then make changes to the channel and see how those impact conversions. For instance, on a product page, you may choose to add a button that prompts customers to check out immediately rather than adding a product to their carts for a later check out. From there, you would monitor to see if this change led to more conversions. 

Conversion rate optimization ultimately ensures that all changes to a website, campaign, or product make it easier and faster for users to perform a desired action, leading to a better experience for customers and greater results for brands.