Practical Ecommerce

Measuring Conversion Success

An ecommerce site with 6 to 9 percent of its visitors making purchases can be considered a success, according to conversion experts.

With an industry standard hovering around 1 to 2 percent, most sites are failing to capture all the business they can have. Once a company makes a commitment to boost its conversion rate, there are several key areas it needs to monitor to measure whether its efforts are successful.

Conversion rate

This is the percentage of visitors that turn into a lead, sale or some other desired outcome. A retail site is frequently considered a success when its purchase conversion is in the high single digits, but for lead generation sites, numbers in the high teens are considered good. An average retail site is converting about 1 to 2 percent of visitors and an average lead generation site is doing 5 to 6 percent.

Keep in mind that meaningful conversion data from ecommerce businesses are difficult to attain and the aforementioned averages are considered general guides. Comparisons are difficult because sites offer such distinctive products and services, and many companies define conversion so differently. It’s possible that circumstances could generate a conversion rate pushing 50 percent, depending upon the product and how conversion is measured.

How can you calculate a purchase conversion rate? It’s simple. Using your site’s analytics package, locate the number of unique visitors during a given period and divide that by the number of sales transactions during the same period.

If you are 2 percent or less, the good news is that you have plenty of room to grow your business.

Increasing the number of transactions by one or two percentage points can make a substantial impact on your company’s bottom line. If you have 10,000 unique visitors per month and you’re generating 100 sales transactions per month (1 percent) with an average sale of $90, boosting your site’s purchase conversion rate one percentage point generates an additional $108,000 annually. Getting your conversion rate to 5 percent increases sales by $432,000 annually so it’s easy to see why improving a conversion rate is so critical.

Now you’re ready to ask the next question: “How much are you willing to invest to generate several hundred thousand dollars more each year”

What’s important to know regarding conversion-rate management is that you’ve already done a significant amount of the work getting people to your site. The traffic is there. You simply need to invest in the strategies and tools necessary to convert visitors to customers.

Home page abandonment rate

This is the percentage of people that exit your site upon landing at the home page. Attracting the wrong types of customers or problems with a home page often results in a high home-page-abandonment rate of 25 percent or more, Practical eCommerce columnist and conversion expert Mat Greenfield said.

Bryan Eisenberg, co-founder of Future Now Inc., said ecommerce businesses have a short time to keep the attention of a shopper.

He says about 10 percent of visitors leave a site after the first click, but many of these visitors constitute either accidental traffic or are unqualified buyers. You probably wouldn’t have converted them anyway.

An astounding 55 percent however, have dropped off after the second click, and 80 percent of the visitors have left after the third click.

A well-constructed site with strategically placed calls-to-action can help address site abandonment issues.

Cost per sale

Divide the advertising costs by the amount of sales to calculate the average cost per sale. What should your average number be? There’s no set answer to that question.

Kevin Gold at Enhanced Concepts, Inc., says ecommerce owners must simply determine how much a customer is worth to their company for a single transaction as well as the potential lifetime value of a customer.

“Just set an objective, and make it a financial objective,” Gold said. “Work toward meeting that objective. Each site’s goals may differ so much that it’s very complicated to compare conversion rates.”

Gold said successfully managing the cost per sale component could pay significant dividends for the business owner.

“Many business owners don’t know their cost per action or cost per lead,” he said. “It’s astounding how many don’t know. When talking about a customer’s lifetime value, you may take loss in front (to get the customer), but if you can keep him, he’s worth a lot. A pay-per-click keyword costing $8 may be expensive, but if you keep the customer it attracts, you get that back in spades.”

A basic analytics package can gather data to help an ecommerce site measure conversion rates and site abandonment. It’s important to have an analytics tool that shows a customer’s individual activity so you can learn how the buyer becomes engaged or disengaged during the buying process.

In the end, however, measuring success is simple.

“You have to view your site as a one-shot deal,” Greenfield said. “People visit and either make a purchase or they don’t.”

Practical Ecommerce
Practical Ecommerce
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Comments ( 3 )

  1. Legacy User June 12, 2007 Reply

    So how to increase this conversion rate??

    Increase price? Or better keyword targeting??

    — *AR*

  2. Legacy User June 26, 2007 Reply

    Mitch-

    Nice article. I've always wondered what average conversion rates are. My problem is different. I convert (retail site) around 20%, but only attract 200 unique visitors/day.

    Any suggestions on increasing traffic beyond obvious PPC oe SEO?

    Thanks

    Matt

    — *Matt*

  3. Legacy User June 26, 2007 Reply

    Any suggestions on increasing traffic beyond obvious PPC oe SEO?

    Build 100 more sites selling the same stuff with different layouts…

    — *mark e*

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