Why Conversion Rate is a Horrible Metric to Focus On

We’ve all seen those lists of the world’s ‘Top 10 converting websites’ and  thought ‘what could I do to get my site to those stratospheric levels?’.

This post explains why you probably wouldn’t want your site to be on one of those lists, and how you can change ‘conversion rate’ from a not-very-useful-at-all metric into a tool to help improve your site.

The post covers 3 simple issues every business needs to review:

  1. What is conversion rate?
  2. Why isn’t it the answer to all of the world’s problems?
  3. What can you do to make conversion rate more meaningful?

What is “Conversion Rate”?

“Conversion rate” is the percentage of visits to your site that result in a “conversion”. For most of us, a conversion is either a sale, or a lead of some kind, typically related to the number of visits or sessions:

Conversion Rate = Number of Sales / Number of Visits

In other words, if your store is visited 100 times and 5 of those visits ends in a sale, you have a 5% conversion rate.

The reason people care about that, and the big idea behind conversion optimization, is that if you can figure out how to increase your conversion percentage, you will make more sales for the same traffic costs.

Why “Conversion Rate” Isn’t the Answer to All Your Problems

Here are 5 reasons you should never take an overall site conversion rate at face value:

1. A Higher Conversion Rate Doesn’t Always Mean Higher Performance

The simplest way to explain this is through an example. Here are the stats for 2 days of activity on an ecommerce site:

  • Day 1: 4% conversion rate. (5000 visits, 200 sales)
  • Day 2: 10% conversion rate. (1000 visits, 100 sales)

On day 2, conversion was more than double the rate from day 1. Yet, reading the actual numbers hidden behind the overall conversion rates, it’s easy to see day 1 was a much better day for the business (assuming all outgoing costs were the same).

2. Not All Visits to Your Site Have the Potential to Convert

When focusing on a headline conversion number, we’re pretending that every visit to our site is a potential sale. While that might be true for a particular PPC landing page, its very rarely true for an entire site.

Visitors may be checking the status of their orders, looking for your phone number, checking your ‘careers’ page, grabbing a link to email to a friend, or any number of other tasks. Focusing purely on improving your overall conversion rate from any given visit ignores all of those other possibilities.

3. Making Your Site More Engaging May Reduce Your Conversion Rate

Let’s say you have a pure ecommerce site, with absolutely no content other than products. Your average customer comes to the site once a month and buys once every two months.

To try and improve this, you add a blog to the site with really engaging content. Suddenly, your average customer is visiting the site twice a week.

To maintain your conversion rate, you’d have to persuade your long, loyal customers to buy once per week, instead of once every two months. In other words, your site has most definitely improved, but it’s very likely your headline conversion rate will go down.

4. Conversion Rates Vary Wildly Based On Visitor Type

A first-time visitor to your site who has never bought from you before, is far, far less likely to purchase than an old, loyal customer. On the opposite side of that, a very loyal customer & regular visitor is far less likely to be swayed to make a purchase because of little conversion tweaks.

Lumping those 2 groups together is like lumping “first time house buyers” into a big pot with “castle owners” & trying to make sense of the strange “average house price” that throws up.

Visitors from different traffic sources / referrers will also differ wildly, as these Monetate retail conversion rate benchmarks show. Direct visitors will tend to convert more highly still since they tend to contain more existing customers. Likewise brand and non-brand search terms, generic vs long tail terms will vary too.

Conversion rates by channel

[Ed’s note: See Dave’s post on analytics segmentation for the many types of visitors]

5. Growing Your Site Will Often Decrease Conversion Rate

Here is another example: Here are 2 alternative tables of numbers for a site bringing in £565k in revenue over the period we’re looking at.

conversion rate table - lower rate

From that we can see most channels convert between 1% and 3%, but visits “direct” to the site & via “email” are far more likely to result in a sale (25% chance & 14% chance).

Now, we decide based on that we’re going to focus purely on the best converting channels. We send out more emails, and we turn off many of the other channels:

conversion rate table - higher rate

As we can see, our overall conversion rate has more than doubled. Revenue is the same, and we’ve probably saved a lot in advertising costs.

That all looks fantastic at first glance. But – we’ve turned off most of the growth channels of the site. Look at the second table again and ask “In a year’s time, will we still be able to squeeze out new sales from our same old email list?”, “Will we be able to win back the customers our competitors have grabbed from us through their PPC & affiliate campaigns?”

How To Use Conversion Rates In a More Meaningful Way

Despite all of these ugly limitations (and more), conversion is an incredibly powerful tool. Here are some tips to make more sense of conversion, and to take meaningful actions to improve your results.

Always take other numbers into account alongside overall conversion rates.

  • Remember an increase in conversion rate can be caused by a vast decrease in visitors coupled with a more gentle decrease in sales.
  • Use it as a question prompt rather than an answer. “my conversion rate has gone up 3%, why?” rather than “my conversion rate has gone up 3% [full stop]”

Use it for very specific tasks

  • Building individual landing pages around conversion really works.
  • Putting together an email with conversion in mind really works.

Break your conversion rate down by channel

  • Generally, “acquisition” channels like non-brand pay-per-click will convert at a far lower rate than your site average. Seeking to improve those rates individually will save you far more (and make you far more) money than treating it as part of a bigger ‘overall conversion’ number.
  • Separate out your channels, figure out which you can impact through conversion optimization, and focus on those instead of your headline conversion rate.

Break conversion rate down by visitor type

  • Split out “new visitors” vs “returning visitors” (or better yet, “previous buyers” vs “never bought before”).
  • Remember that superficial site changes are far more likely to affect new visitors than old visitors. Your existing customers are swayed by brand, service, product quality, delivery, etc. Your new visitors are far more swayed by perception.

Break it down by task

  • If your site has several key tasks (eg. sales, customer support enquiries, leads, account top ups) treat those as separate conversion tasks.
  • If they are important to you, split those tasks out from each other & track work to increase their rates individually.

Focus on microconversions

  • Instead of asking “how can I increase the conversion rate of my site?” & wondering where to look first, break this down into smaller chunks.
  • Start with your most important pages & journeys, eg “what percentage of searches result in a click to a product page? What can I change about our search results to improve that?”
  • http://www.pure360.co.uk Marc

    For me the key part of this post is adding additional conversion goals, all too often its a case of “convert or die”, but we should as marketers be looking at secondary goals like time on site, number of page views and email signups which as you point out support future “full conversions”.

    The trick as far as I can see if getting buy in from the wider business (the board or whoever) that additional goals are worthy of tracking and funding until they become full conversions.

    Look forward to the next post.

    @marcmunier
    pure360
    more than email marketing software

    • Dave Chaffey

      Agree Mark, thanks. Those kinds of goals apply to all types of sites, not just Ecommerce.

      And now we can have 20 goals in Google Analytics, in 4 groups there’s a natural place to track those. Possible groups, I have setup on different client sites which indicate different forms of engagement include:

      * Top level funnel – browse, search, view product
      * Participate – Add comment/rating
      * Subscribe – to Email, FB, Twitter, etc
      * Engagement with site = time on site or number of pages viewed
      * Sales or leads

      • Phil Whomes

        An issue often ignored is the effectiveness of the sales funnel. The bounce and abort rates should be constantly measured and analysed to ensure that you have the most effective process.

  • Jamie

    Some common sense and some useful insight, nicely broken down. Bookmarked, thanks!

  • http://twitter.com/dergal Gerry

    Excellent post – something I have been “banging on” about for ages – I hate metrics including Conversion rate, Bounce Rate and others being taken out of context! I have heard some pretty crazy stories where online managers have bonuses linked to KPI’s which don’t take into account the overall performance.

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  • http://www.allkids.co.uk Elaine

    Excellent post Dan, must admit I’ve been seduced by those headline grabbing stats, until someone pointed out that many of them have returning visitors lured by catalogues and special discounts.

  • http://www.jemms.co.uk Simon Kemp

    Dan,
    An excellent post on this troublesome metric and the widely held assumption that all visitors are buyers. I agree that Product Detail Pages are the most important, and the highest converting pages on a site. That is why we focus on Usability Tools Search UI’s and Database Front Ends that drive Product Page views – it is often an overlooked part of the Customer Experience. See some examples here http://www.jemms.co.uk/showcase. Best Regards, Simon Kemp

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  • http://romansvet.com Roman


    On day 2, conversion was more than double the rate from day 1. Yet, reading the actual numbers hidden behind the overall conversion rates, it’s easy to see day 1 was a much better day for the business (assuming all outgoing costs were the same).

    In my opinion is not correct comparison. If you increased conversion from 4% to 10% on second day then In future when you site again will hit 5000 visitors you will have 500 sales if conversion rate will be the same 10%. so higher conversion = higher performance when conversion is stable.

    p.s sorry for my bad english

    • http://www.mardiros.net/ Carmen Mardiros

      Hi Roman,

      I think Dan’s example was simply to illustrate the need for context (and a lot of it) around conversion rate in order to paint a clear picture of how well you’re doing.

      It would be great if huge increases in conversion rates were sustainable with increases in traffic but conversion rate is the end product of so many moving parts that in reality that rarely happens.

      For example, your traffic might increase on day 3 to 5000 visits but if increase is mostly from fickle prospects shopping around for cheapest price you might see your conversion rate plummet.

  • http://www.webstrategy360.com/ Kamal

    Excellent post Dan. One thing to note though is that not all conversion rates are measured by visits but some actually measure by visitor. This is because, as you’ve stated, not every visit might be an opportunity to make a purchase. Of course, BOTH types of conversion rates should be monitored. Another more useful pair of metrics would be:
    1) Revenue per visit.
    2) Revenue per visitor.
    Overall AND by segments ;)

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  • http://www.twitter.com/danbarker dan barker

    @elaine thanks very much! i agree & have had experience of the effects of discounts/catalogues. it’s very interesting from an affiliate’s point of view, as it makes those topline ‘conversion’ numbers the affiliate networks publicise far less useful. most of the networks track voucher code use, so it would be fairly easy for them to display a ‘conversion rate (without vouchers)’ number too. would that be useful for you?

    @roman your english is just fine! we are both right. the thing we don’t know is: what caused that change in conversion rate? was it genuinely something that is going to make it more likely that future visitors will buy? (in which case you would be right). or was it just a change in the traffic patterns, or (for example) an email offer? If you have a look at the examples later on (point 5), you can see a site where conversion rate was vastly improved, but it wouldn’t follow that increasing the traffic would keep the same conversion rate.

    @kamal – thank you! revenue per visit (& margin per visit) also gives you a break even ‘cost per click’ point for each channel. How are you using them?

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  • http://www.skiusainc.com/ Cady Haren

    I would also add that check for high bounce and exit pages on your website. More often than not, these are pages that cause reduction in your conversion rate.

    I would also like to add is that while conversion rate is not the right metric, at least from the client’s point of view, it is everything.

    Thanks for the enlighting post though :)

    • http://www.smartinsights.com/ Dave Chaffey

      Thanks for your thoughts Cady – can’t disagree with that – hopefully this will help educate some clients to think about conversion of different visitor segments.

      You’re right that reviewing + improving inefficient pages can help boost overall conversion: the Page Value metric in GA is useful for this too.

      Dave

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  • http://www.showcasemarketing.com/ideablog/ Bill Freedman

    Excellent examples showing how a great metric like conversion rate can easily be corrupted. Thanks, Dan.

    Conversion rate is still the king of metrics. Your lesson is extremely powerful: choose you numerator, and more importantly, your (segmented) denominator wisely.

  • Andrew Strickland

    Hi Dan,

    Well summarised post, which I totally agree with, site wide conversion rate in complete isolation is a terrible performance metric :) having said that (as you say) if employed properly it is still very powerful.

    The biggest ‘corruption’ I’ve seen is when brands used to run pop unders (!) and when a sale is coming to an end where everyone converts on the final day of it (having researched during it).

    Also brands need to also focus their analysis on merchandise activity (where applicable) and existing customers. With visitor segmentation it should be much easier to prove that an engaged loyal customer coming to the site weekly but not converting is spending more than they would have if they were not consuming the blog/clicking through so often.

  • Andy Morris

    Great article…. This is EXACTLY how a digital marketer should be thinking. Smart & Analytical, everything is measurable and therefore can be explained.

  • Alice H

    Really interested post. Can I ask a quick question? If you have a site with pretty constant traffic, but massively varying conversion rates (ie; between 2-12% with no site changes) where would you start looking for the problem? (if there is one!)

    • http://www.mardiros.net/ Carmen Mardiros

      Alice, such wild swings in conversion rate would suggest significant variances in the shape of traffic your site is getting. What you want to do is create a few segments:

      – existing customers vs prospects (this isn’t information available by default in GA, you’d need to use custom variables to “tag” people when they make a purchase)

      – new visitors vs returning visitors

      – top traffic sources, campaigns, etc.

      Try and cross-reference the highs and lows with these interesting segments. it’s not uncommon to see a spike in conversion rate when you get an influx of visits from existing customers, possibly as a result of promotions. Do you do any email marketing?

      You say your traffic is more or less constant but the “shape” of it may change. You might, for example, get a higher proportion of ppc traffic at different times of the week depending on how you’ve got your Adwords account set up.

      I’d calculate what proportion of traffic each channel/campaign/customer segment accounts for in the overall traffic and see whether that fluctuates in line with conversion rate.

      You might also see conversion rate fluctuate upwards or downwards during different times of the week. if that’s true, then you might want to calculate what your “normal” conversion rate might be for:

      – existing customers on weekdays
      – existing customers on weekends
      – prospects on weekdays
      – prospects on weekends

      You could refine your segments further if needed:

      – ppc prospects on weekdays

      – ppc prospects on weekends
      – organic prospects on weekdays
      – organic prospects on weekends

      And last but not least, if you have a website with low traffic than the small sample sizes mean that these wild swings in conversion are simply part of random fluctuations and things will settle down once your website traffic increases.

      • Alice H

        Thanks Carmen, that’s really helpful and interesting. It’s an long established site, that has seen a fall in traffic over the last few years. At the moment there’s no PPC and also no promotions, so everything is organic with some returning customers. There has been SEO work done in the past and we are about to hire some help with SEO which will hopefully improve the traffic levels again. But the variation in conversion is the most frustrating thing at the moment.

  • Julia

    Very Interesting post!

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  • Hassan

    Thanks Carmen, that’s really helpful and interesting,

    Which is right Director of Sales or Director sales and Marketing ? and why

    Thanks for u kind support

  • David Scott

    Awesome article Dan! Thx for writing it! Curious, in your HPOV, what is a good growth goal for conversion rates? Example, can a company go from 2% to 10% in one year, doing most of the same things, i.e. PPC, content creation, etc?

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  • http://activeadventures.com/ Mia Gordon

    Awesome article I agree. I’m reading this over and over again to assimilate it all. Thanks heaps for writing it

  • Ranjanraji

    Awsome Info, and pretty great learning stuff. Learned a lot today from this article except once clarification; “your site has most definitely improved, but it’s very likely your headline conversion rate will go down”. I didn’t get this line.

  • RheemaC

    Great article on how to manage and measure your return online. Very nice way to break it down and begin to understand different ways to think about interpreting conversion rates.

    It’s also important to take into account various tools and technologies which will improve your conversion rates offline so for example identifying visitors (companies in the B2B sense) and who have left but how can you re-engage with these companies and find out who they are or contact them, or alternatively tracking the inbound telephone calls and tagging these to your acquirable sales/conversion rates. There’s loads of telephone based systems that will plug into GA but can’t remember for the life of me what they are. There’s also a great tool called http://www.whoisvisiting.com which we make use of and reports the companies that have visited and left.

    If I can remember the telephone number tracker I’ll jump back on here and be sure to let everyone know!

    Thanks

    Jake

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