Is conversion rate the most important metric to monitor for Ecommerce?

With so many metrics to consider in your online sales and marketing funnel, it is easy to focus heavily on one metric at the expense of others. This may not be a bad thing, so long as you focus on the right one(s) and realise that it will never give you a complete picture if taken in isolation.

What is a conversion?

I like the Webster dictionary definition:

“The process of changing or causing something to change from one form to another”

In the digital world this represents a consumer simply visiting your site to carrying out a task. This can be set up to record in Google Analytics or Adwords and can show a monetary value (irrespective of money actually taken).

Your objective or key performance indicators can take many forms:

  • Sales
  • Membership registration
  • Newsletter subscriptions
  • Software or App downloads
  • Video Views

Why is it important?

Conversion rates are the biggest indicator that your marketing is being effective, along with micro conversions. These help you to see where your potential customers are on their journey to conversion. They can also help determine that you are sending the right audience to the site, your targeting is accurate, your customer journey is optimised and your site health and performance is the best it can be.

To ensure you’re marketing budget goes further it is recommended to set up a series of micro conversions and see how well these are leading to increased sales. It is bad practice to solely focus on sale conversions, you should always consider contributing factors that lead to a conversion – adding items to basket, account creating etc. By considering micro conversions you will see the true success of your marketing campaigns.

What is a good conversion rate?

This depends on your sector, at Vortex we specialise in ecommerce so keep our attention there. A recent Adwords analysis was carried out, accounts with a worth totaling over £3billion had an average/median conversion rate of 1.84% at the end of 2014. The competition will be much higher now, especially with the shift to Google ETA’s.

The top 25% of sellers are looking nearer 3.7% – 4%, that figure however can be taken out of context as it has no reference to average order value.

Improving Conversion

The first step to conversion usually takes place within the search engine result pages (SERPs), and can be maximised through appropriate tone of voice, attractiveness of the offer and correct landing page. Getting these simple things right will aid conversion as you will be reaching the correct audience and sending them where they need to go.

Regardless of customer demographic, there are checks which can be done to help increase conversions and improve UX.  Such as; site speed, use of intuitive navigation and the transition through the buying process.

Is it all I need?

It is not the be all and end all of your sites performance. You need to consider revenue separate but alongside. You could double your conversion rate by focusing on low value items with excellent price points and pay good money for the ad placement just to convert low margin items.

Say you have a conversion rate of 2% but average order value is £100, you then move towards lower value items where conversion is now 4% but AOV is £50. You have doubled conversion but revenue is the same. You may also be spending more on marketing if conversion is coming through paid channels.

Bear in mind that high value items will typically convert at a lower rate than low value items. People are more likely to consider larger purchases for longer, seek for better deals and even come in store.

Another consideration is your engagement and traffic sources. One thing we see regularly is a falling conversion rate due to an increase in non-converting traffic. If all traffic going to your site is potentially converting traffic, i.e. they have an intention of converting or are in a position to convert eventually then that traffic is good. It is a potential lead.

You may be sending new visitors who haven’t heard of your site, you can seek to engage this customer but they are potentially not going to convert for some time. Using retargeting ads will help keep you front of mind ready for their next purchase. This future customer will lower your conversion rate in the short term but are not poor traffic. They are a future lead.

If you are sending traffic to the site considering their long term value, then you may have to accept a lower conversion rate in the short term as you build a new customer base.

Conclusion

Conversion is a key metric for ecommerce, probably the most important but it should never be the only one. Conversion doesn’t show how well the customer is engaging with your site, it doesn’t really look at user experience and brand perception. It varies by channel and referrer, with social traffic having the lowest conversions, but these are probably your most engaged customers.

Consider your customer and look at your objectives. A high conversion rate usually shows that you’re doing something right, it also can hide a lot of improvements that need to be made.

There is a whole wealth of data out there and some great people to help you collect it and develop your site based on that information.


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