Practical Ecommerce

Show-Me-The-Money Conversion Ratios

When I begin an ecommerce optimization engagement, there are four key ratios that I immediately look for. And as strange as it might sound, the site’s overall conversion ratio is not one of them — at least not directly.

To be fair, the four ratios that I’m primarily interested in are actually sub-components of the site’s overall conversion ratio. However, these more-specific ratios provide me with a lot more information than I could ever get from the overall percentage alone. As I perform my initial diagnostic assessment, understanding these four ratios allows me to very quickly develop a solid understanding of where the biggest opportunities for profitable improvement are located.

In effect, these four ratios “show me the money.”

While each of these ratios would require its own article to fully explain, I’ll cover the basics here: What each ratio is measuring; what levels represent potential red flags; and even some of the root causes and problems I often encounter.

The Visit-to-Decision-Page Ratio: 60 Percent

A “decision page” is where your visitors are presented with an offer, such as a product or service, its associated benefits and features, its price, and a call to “buy” or “add to cart.” It often helps to think of these pages as the pages immediately preceding the shopping cart.

Dividing decision-page visits by overall visits gives you the percentage of visits where your offers are actually being presented. Or conversely, you can see the percentage of visits that leave your site before even getting into a position to evaluate your offer.

Given the nature of site traffic these days, a certain amount of fallout is expected. But a ratio of lower than 60 percent is often a serious red flag. Inadequate ratios at this point in the funnel typically indicate poorly targeted or wasteful traffic generation; entry pages that are bloated or slow; and/or inefficient product selection tools or navigation design.

The Decision-Page-to-Cart Ratio: 30 Percent

This ratio represents the next step in the sales funnel: The transition from decision pages to the shopping cart. Dividing cart-addition visits (that is, the number of times a product or service is added to a cart) by decision-page visits gives you the percentage of visits where the presentation of your offers is resulting in a demonstration of purchase intent.

A visit to a decision page is, by its very nature, a fairly qualified visit. As a result, a ratio of less than 30 percent converting to the shopping cart stage should draw your attention. Low decision-page-to-cart ratios can be an indication of strategic problems with your offer—uncompetitive pricing levels, inadequate product options or feature sets, shallow information, or poor value articulation.

The Cart-to-Checkout Ratio: 60 Percent

Next up is the ratio that represents the percentage of shopping carts that are taken forward to actually start checking out. Typically, this is the conversion rate between the shopping cart and the first step of your checkout process. This is yet another level of qualification as prospects at this stage are getting dangerously close to becoming actual customers.

As visitors use the shopping cart for a variety of reasons (e.g. to estimate “landed” order totals), some level of abandonment is again expected. But ratios of less than 60 percent usually warrant a closer look. Root causes behind apparent fallout at this first checkout step can include slow SSL, poor cart presentation, uncompetitive shipping rates, unexpected sales tax, coupon code confusion, and overly aggressive cross-selling and up-selling.

The Checkout-to-Order Ratio: 75 Percent

This last ratio is likely the most difficult ratio to look at because it represents the percentage of initiated checkouts that actually result in a completed order. Understandably, losing orders at this late stage of the sales funnel is extremely frustrating and hard to accept.

Ratios of less than 75 percent at this deepest part of the funnel should trigger a focused diagnostic effort. There are a number of underlying causes to consider: Slow-loading SSL pages, limited payment options, forms with usability issues, unnecessary process steps, required registration, and inefficient database queries, just to name a few.

When it comes to improving ecommerce performance, it can be very difficult to know where to start. It can also be a challenge to make sure you’re addressing the real issues and problems. But those tasks become a whole lot easier when you break the ecommerce funnel down and begin measuring the transition points within.

Practical Ecommerce
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Comments ( 9 )

  1. Legacy User May 15, 2007 Reply

    That's a great technique, basically taking the complex conversion ratio and dividing it up into manageable pieces.

    I struggle with getting that kind of detailed data aggregated into meaningful chunks. Any suggestions on website analytics that can provide such analysis would be helpful.

    — *Steven Johnson*

  2. Legacy User May 15, 2007 Reply

    Nice article. Your method is clearly structured to produce the kinds of information that provide a "sequential" process that will allow for much more accurate diagnoses as changes are made to optimize each page through the selling process.

    Being able to find the bottlenecks and then tweak each page to get the best results and get the process working – and then having the evidence at hand – is invaluable.

    Very structured and logical – nice work.

    Thanks

    — *Dan Marshall*

  3. Legacy User May 24, 2007 Reply

    Hello Lynda –

    Without knowing what your current bounce-out rate is for your checkout_login page, it's difficult for me to estimate the impacts of not forcing user-registration on your site specifically. However, I'll try to provide some information that might help…

    In my e-commerce optimization practice, I've seen the removal of forced user-registration increase next-step page conversion by as much as 30%. Again, there are a lot of factors that come into play with different sites.

    A recent abandonment study conducted by Jupiter Research showed that 24% of shopping cart abandoners did so because they didn't want to register with the site. Keep in mind that these are abandoners at the shopping cart — if the study were limited to just checkout abandonment, one might expect the percentages to be much higher.

    Another approach is to do a breakeven analysis. Take the development fees being quoted to remove required registration and work backwards to calculate how much of a ratio-improvement you'd need to see for the investment to positively pay off.

    If your calculations show that you're going to need a 60% increase, that's probably not reasonable in a short period of time. But if the calculations show that you'd need a 20% increase, that's much more achieveable.

    If you'd like to discuss the issue further, feel free to contact me through my site at bdxi.com.

    Rafe VanDenBerg
    Business Development Xcellerator, Inc.
    BDXi.com

    — *Rafe VanDenBerg*

  4. Legacy User May 18, 2007 Reply

    Has anyone seen stats on what the rate of abandoment is with a required registration checkout vs. a guest or open checkout? We are struggling with the cost of switching to guest check out (our developers quoted us more than a few thousand dollars to do so) to see if it will result in significant increases in cart completion.

    thanks
    Lynda
    Delight.com

    — *Lynda Keeler*

  5. Legacy User December 19, 2007 Reply

    By the math above, your example site would have a conversion rate of 8.1% which is extremely high in any ecommerce vertical. How did you come up with your metrics?

    — *Chris Leebelt*

  6. Legacy User January 8, 2008 Reply

    Hi Chris —

    When you say that 8.1% conversion is extremely high in any e-commerce vertical, I assume that you're referring to the industry averages being published by a number of sources.

    As averages, those numbers are a blend of the good, the bad, and the ugly in any given category. And the lower-end of the distribution really pulls those numbers down in a big way.

    The benchmarks we use for diagnostic purposes are based on our optimization work and they strive to balance conversion efficiency across the funnel with profitability considerations. Granted, our clients are likely very motivated and probably not reflective of the average in this respect. But for those interested in above-average performance, these benchmarks are achievable aims.

    Is it possible to go much higher? Certainly. There are more and more e-commerce companies focusing hard on their conversion funnels and achieving very high ratios as a result.

    But in our experience, higher is not always better.

    When we see overall conversion going much north of 10-12% for a company with relatively "normal" margins, that's a big red-flag for us. It's usually a sign of sub-optimal pricing or targeting criteria that's far too tight. Either way, we usually find that profit-dollar gains are being sacrificed for those really high ratios.

    We strive for the most-profitable conversion ratios — and not necessarily the highest ratios — and that's reflected in our diagnostic benchmarks.

    Hope it helps,

    Rafe VanDenBerg
    http://www.eCommerceXcellerator.com

    — *Rafe VanDenBerg*

  7. Legacy User June 14, 2008 Reply

    Your article was very informative. We are in the process of establishing a new venture in the education vertical. Can you shed any light on expected conversion rates for a company that will just be starting out? Should the benchmarks be the same?
    Thanks in advance.

    — *Gabriela*

  8. kkm5848 September 29, 2009 Reply

    What is the source of the ratio targets that are being presented?

  9. Dave T August 14, 2014 Reply

    Hey Rafe,

    Great concise article. Wondering how these benchmarks ratios have changed over the past 7 years. Thoughts?

    Cheers!
    Dave

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