How to calculate conversion rates and make every marketing dollar count.
Acquiring new customers isn’t getting cheaper. In fact, customer acquisition costs have increased by 60% in the last five years.
The reality is that the days of third-party cookies and easy ad targeting are gone. Marketers must contend with increasingly stringent consumer privacy laws, meaning brands spend more on attracting customers, impacting their marketing return on investment (ROI).
But you don’t have to spend more today to keep leads flowing through your conversion funnel. With today’s technology, you can squeeze more out of every marketing dollar spent.
And you can do this with conversion rate tracking.
When you know how to calculate conversion rates and track conversions along the funnel, you’ll better understand how effective each leg of the buyer’s journey is. This article will cover the conversion rate formula and best practices for tracking conversions to improve marketing ROI.
What are conversion rates, and why do they matter?
The conversion rate reflects the percentage of users that take a desired action. It’s an essential KPI that helps measure the success of your team’s marketing efforts.
For example, when visitors click through to your landing page, you might want them to download a white paper in exchange for their email address. This download is the conversion—the action you’ve set up for them to complete.
You might have several conversion points along your sales or marketing funnel, whether opening an email and clicking through to your website, calling your business, downloading an app, or clicking on a second link.
But everyone that enters your funnel isn’t going to complete the actions you set up to move them from potential customers to leads and then buyers. Only some will convert. And that percentage of users that do is what marks your conversion rate.
Calculating conversion rates and keeping track of your conversions over a time period is essential because this crucial metric tells you how effective your funnels are.
When your conversion rate increases, you know your funnels are working properly. On the other hand, if your conversion rate goes down, you’ll want to identify what’s causing the friction and resolve it.
How conversion rates impact your bottom line.
Because the conversion rate indicates the percentage of users moving along your marketing funnels, this metric directly impacts your bottom line. Having more conversions means more leads and more sales. The reverse is also true.
But even more important, a higher rate means your marketing campaigns are more effective. In other words, getting a good conversion rate will increase your marketing ROI, meaning you’ll get more results for the same input.
Calculating conversion rate using this formula.
Average conversion rates range from 2% to 5% across industries, and anything near 10% or above is considered good.
While these are helpful background numbers, you can’t start tracking your rate and finding ways to get more conversions until you understand your benchmark.
What’s a good conversion goal for your business depends on many factors, including the types of actions, your audience, and your business niche. As such, you need to calculate conversion rate metrics for your business and then track them over time. That’s how you can continually make conversion goals and use this metric to improve your marketing funnels.
The conversion rate formula.
The conversion rate formula is the number of conversions divided by the number of users. To find the percentage, multiply by 100.
Conversion rate = Total number of conversions / total number of users
Let’s look at an example of the conversion rate formula in action to see how this works:
Say you had 15,000 visitors to your landing page last month, and 300 take the desired action—to fill out a simple form requesting a call back for service from your business. Using the formula, you discovered your month’s conversion rate was 2%.
Conversion rate = 300 conversions/15,000 users = .02 x 100 = 2%
Using the conversion rate formula is one thing, but there’s more to tracking this key performance indicator. You must also set up what conversions you want to track based on your priorities and then analyze your metrics over the same time period.
Here’s how to get started.
1. Define your desired action.
First things first: What action do you want users to take?
If your marketing campaign focuses on building brand awareness and generating more leads, you might look at the bottom and middle-of-the-funnel actions. If your primary marketing goal is to increase sales, you’ll focus on top-of-the-funnel conversion rate metrics.
- Top-of-the-funnel (ToFu) focuses on awareness. Conversions include email open rates and website visitors that sign up for your newsletter. This is where people are exploring your brand.
- Middle-of-the-funnel (MoFu) focuses on evaluation. Conversions include downloading your white paper or ebooks to learn more about what your brand offers. Users are in the consideration stage and willing to dive deeper into your products and services.
- Bottom-of-the-funnel (BoFu) focuses on conversion. Conversions include making a purchase or registering for your event. At this point, users are ready to decide and become customers.
Track conversions at all three marketing funnel stages to gain an even clearer (and bigger) picture. Doing so can help your team understand how to increase those conversions. Some outcomes might be optimizing targeting, improving user experience, increasing personalization, and identifying areas for improvement.
2. Measure your users.
The next step is defining your process for measuring your users.
For example, you can use Google Analytics to measure visitors to a page from an ad to track the conversion rate for that ad. You’d compare the total number of conversions (the number of people who clicked through from the ad) to the total number of users (the total number of people who saw the ad).
You can also use more advanced web analytics tools to break down data by page elements. Sophisticated page analytics tools can show you the conversion rate of specific on-page elements, showing you where users are most engaged on your page and where there are opportunities to reduce friction.
3. Calculate conversion rate metrics.
Calculate the conversion rate using the formula. This manual approach is acceptable if you only focus on a few interaction points. So if you want to see the conversion rate for your landing page, you can look at your website traffic and conversion numbers and plug them into the formula.
If you’re trying to understand the bigger picture and track conversions throughout your funnel, you might want to use software that tracks conversion rate metrics and handles your conversion rate formula calculations. This will save time and reduce the risk of making manual errors.
4. Track average conversion rates.
Once you calculate the rate, you need context to derive meaning. You can look at average rates for your industry, but that won’t give you the insight to make informed decisions about your business’s marketing.
That’s where tracking comes in—you can track your conversion rates over time for the channels or interaction points you decide to prioritize, make changes to improve your conversion rate, and then look at this KPI to see if you’re moving in the right direction.
When rates go up, you know you’re optimizing your funnel and getting more out of your marketing spend. When rates go down, you know you need to devote resources to optimizing areas in your conversion funnel where there’s friction.
Conversion tracking best practices.
Tracking is arguably more important than calculating because you’re analyzing the results of your conversion funnel optimization efforts.
So what can you do to ensure you’re tracking conversions effectively? Here are the best practices every marketer should know.
1. Prioritize conversion metrics that matter.
You can get lost in the numbers if you track too many data points. Instead, think about what conversion actions you want to understand right now, keeping in mind your priorities can change as you hit each conversion goal. Some of the main types you might track could include:
- Form conversions. How many users fill out and submit forms? This conversion rate metric reveals if the user experience (UX) design encourages users to engage with forms. It also shows how much interest there is in your offering, whether it’s a demo, a call-back, a newsletter, or something else.
- CTA conversions. What percentage of users click on your call to action? You would track CTA conversions to understand how compelling your CTAs are and determine how effectively your page design drives users to those CTA buttons.
- Micro conversions. What percentage of site visitors are interacting with elements of your web pages? These might include watching a demo video or clicking through a product or service page. You would track these conversions to see how engaging your pages are.
- Website conversion rates. What percentage of website visitors convert and become customers? This is an overall, big-picture metric that tells you if your website effectively generates sales.
2. Segment your conversion rate data by buyer journey stage.
Do you want to optimize bottom, middle, or top-of-the-funnel interactions? Or all of them?
Segment your conversion tracking by the buyer journey stage. This will allow you to look at the different funnel stages’ effectiveness. It will also give you insight into where there might be friction so you can focus on that area and optimize it.
For example, if your conversion rates are high at the top of the funnel but you know you should be getting more leads at the bottom, it makes sense to dive into your analytics and explore how you can improve the bottom-of-the-funnel UX.
When you segment your conversion rate data, you can make more sense of these metrics and make better-informed optimization decisions.
3. Use the right tools.
You need to use the right tools to track higher conversion rates accurately.
Google Analytics is one of the most popular tools for tracking website performance, including conversion rates. But it has limitations. You can’t see conversion rate metrics for granular on-page activity. Also, you don’t get the same context as you would with an in-depth analytics tool.
The good news is there are other, more in-depth tools on the market today. Quantum Metric, for example, lets you dig deeper with insights into user behavior and demonstrates a clear relationship between web page top-level engagement and business outcomes.
You can gain better clarity with Quantum Metric’s auto-capturing customer insights, discovering and quantifying opportunities across business and tech teams, and top-tier scale, security, and support. All this comes without the need for the sometimes inevitable bottlenecks that come with a customer-centric approach.
With Quantum Metric, you’ll never lose sight of the customer.
Calculating and tracking your conversion rate metrics is vital as this is the KPI for understanding the ROI of your marketing efforts. You’ll also understand what’s attracting your customers, where there’s friction, and what you can do to improve CX and drive more conversions.
You have the information you need to make your conversion funnels more impactful. But you need a robust system to uncover precious insights.
That’s where the all-in-one team at Quantum Metric comes in. Quantum Metric enables you to take your conversion rate optimization to boost conversions to the next level. Explore our page analytics features today to learn how never to lose “site” of your customer.