What's Your Conversion Rate?

You can measure any number of metrics, as thousands exist for you to choose from. In most businesses, though, one metric stands out as the first you should really get a handle on: your conversion rate.

What Is Conversion Rate?

At its most base, conversion rate is the rate at which non-customers convert into customers. But you cannot compare your customer base to the entire world's population, so to narrow it just a bit, conversion rate refers to potential customers (prospects) converting into paying customers. For online businesses, it could mean converting web site visitors into paying customers, or email list prospects into paying customers. Both are conversions.

Determine what your world of potential customers that you have had contact with looks like first, then you can determine your conversion rate.

Why Does It Matter?

If your business seeks money, which most do, conversion rate directly determines how much money you make compared to how much you could be making. You likely will not reach a 100% conversion rate, but knowing how well you perform will guide you towards making different choices. It also guides the choices you make already. If you run a website and get a 6% conversion rate from leads you receive from Facebook, but a 9% conversion rate on those that find your site through searching Google, you might find it wiser to spend some dollars on Google AdWords than on Facebook Advertising. The converse could also be true. If you don't know your conversion rate, though, you might be likely to spend half your budget on both,

How Do You Calculate It?

Conversion rate often gets measured against campaigns, or against a particular activity targeting a group. Perhaps you run an ad campaign. Or you send an email blast to your list. Or you actively target Facebook users. The conversion rate against those would be the total number of sales (count, not dollars) from that source divided by the total number exposed. So if you send an email to 100 list subscribers and 8 purchase the product, that's an 8% conversion rate.

Breaking It Down

Once you understand and put the basics in place, you can grow more granular with your metrics. Let's take the same example above. You sent an email to 100 list subscribers and 8 purchased. However, 50 read the email and 19 clicked on the link. So your conversion rate was 8%, but among those that read the email it was 16% and of those that clicked on the link, it was 42%. This level of breakdown lets you identify where you can improve, first in getting people to read your mail and second in improving the number of clicks on your link. You may see your percentages shift but your overall sales will increase.

So what's your conversion rate? It all starts with something to sell, doesn't it. Here's hoping you all have a great week.