Business administration knows several hundred so-called key performance indicators ( KPIs ). These are metrics that can be used to measure progress, capacity utilization, profitability, success and countless other factors within an organization. In online retail, hardly any other KPI is given more importance than the conversion rate (CR).
In this article, you will learn what the term means and how to calculate your own conversion rate. We will also show you which factors have a negative impact on your conversion rate, how you can optimize it and which values you should base your calculations on.
What is the conversion rate?
The conversion rate is a term from marketing and is mainly used in the online sector. It measures how many visitors perform a desired action, russia email list for example, make a purchase.
Definition and meaning of the conversion rate
The conversion rate is one of the most important KPIs in marketing. A conversion refers to the transformation of a target person from status A to status B. The conversion rate then sets the number of people in status A and B in a percentage ratio.
So when a person comes to a website, marketing basics for small self-employed people they are initially in status A: ‘website visitor’. They like the offer, so they sign up for the email newsletter. This person then moves to status B: ‘newsletter subscriber’ – a conversion has taken place.
Reading tip: Successful with B2B? In our B2B shop guide we show you what is important.
The formula for calculating the conversion rate
Based on the previous example, the conversion rate can be calculated using the following formula:
Newsletter registrations : website visitors × 100 = newsletter conversion rate (in %)
Of course, denmark business directory the conversion rate can be calculated for many other aspects of online business. It can be defined as the proportion of people who click on an advertisement , fill out a questionnaire, leave a review or read a blog article.
Calculating Conversion Rate in E-Commerce
In e-commerce and online marketing, the term conversion rate is used almost exclusively for the ratio between the number of visitors to a store and the number of those who actually buy something. The basic formula is:
Buyers : Shop visitors × 100 = Conversion rate (in %)
However, this formula is very imprecise and needs to be adapted specifically to the online situation. Accordingly, it is not recommended to stick to it.
What is completely ignored here is that many customers visit a store several times before making a transaction. For example, during their lunch break on their smartphone to check an offer and in the evening at home to look at the product images in peace on the big screen and conveniently enter their contact details on the keyboard.
This formula therefore makes more sense:
Buyers: Unique visitors to the shop × 100 = Better conversion rate (in %)
Cookies tell you whether a visitor to your website is a repeat visitor or a unique visitor. There is only one small problem left: how much time should pass before you classify a customer as a unique visitor again?
A period of one day has become generally established. However, this number is not set in stone. Especially with very high-priced goods, it often takes several days for customers to make their final purchase decision. Your personal reset should therefore always depend on your offer.
Reading tip: Do you want to bring your products to your customers via multiple sales channels ? We’ll show you what’s important.
Why is the conversion rate so important in online trading?
Every conversion has a direct impact on your sales. Only sales bring money into the till. Unfortunately, it is of no use to you if your shop is visited by 100,000 website visitors every day, but the number of actual buyers is negligible. The conversion rate is therefore important in online marketing, as it has a direct impact on your sales.
In addition, the conversion rate in e-commerce analytics allows you to draw conclusions about numerous other aspects of your online presence. A poor conversion rate could be an indication that your marketing is not working, that website visitors find your offer too limited or too confusing, or that there are technical problems in your shop.
The conversion rate is actually the mother of all KPIs. Which leads us directly to the next question:
What is a good conversion rate?
A good conversion rate depends on many different factors. In June 2022, the online marketing agency WordStream took the trouble to calculate the average conversion rate of thousands of US online shops. The researchers arrived at a value of around 2.5 percent. Other studies provide similar figures.
However, there are sometimes considerable fluctuations in the conversion rate between different sectors. Online pharmacies have an average value of around 10.6 percent – if you have a headache, you don’t hesitate to buy painkillers. Travel and tourism shops, on the other hand, have to make do with 0.4 percent, because when on vacation in particular, people are busy comparing prices and hoping for last-minute bargains.