Conversion Rate Means Dollars

One of the most important elements leading to the success of your website is conversion rate. Indeed, this might be the most important factor of them all.

Let’s take a look at what your conversion rate is, why it’s so important, and what it means to the bottom line of your business.

What is Conversion Rate?

Conversion rate is a simple mathematical formula:  # of Desired Actions divided by # of Site Visitors

On some websites the desired action is a sale. On other sites it’s a lead. When a visitor comes to your website, what do you want them to do? What action makes your website worthwhile for your business? That’s the desired action.

So the formula takes the number of times the desired action occurred in a set period of time divided by the total number of visitors to your site in that same time.

For example let’s say your goal is to collect email addresses of visitors to your site. If last month you had 1500 visitors and 3 opted in to your mailing list then your conversion rate is 3/1500 = 0.002 or 0.2%.

The reason this is so important is that the higher the number, the better your website is at turning visitors into customers or prospects.

Conversion rate is more important than traffic because a lack of conversion can totally kill your site. If you have all the traffic you would ever want, but your conversion rate is 0%, then you might as well shut the site down and go home.

Why Improve Your Conversion Rate?

It’s important to know the conversion rate of your website because the current rate is your starting position. Once you know it, you can work to improve it.

Improving your conversion rate is important because you get an increase in desired actions with the same amount of traffic.

For example, let’s say that 1500 visitors a month is typical for your business. If you work to improve your conversion rate, and it goes up from 0.2% to 0.6% you have tripled your results and get 9 visitors to opt in to your mailing list. Those are 9 prospects instead of 3.

By making changes to your site and testing those changes you can find ways to continue improving your conversion rate. Imagine getting your conversion rate up to 5%. With the same traffic of 1500 visitors, you now get 1500 x .05 = 75 new prospects on your mailing list each month.

Plus, improving your website’s conversion rate is often faster, easier, and less expensive than increasing the traffic to your website.

Why Conversion Rate Is So Important

Many businesses are concerned with the amount of traffic they get to their website. It’s easy to think that if only we got more visitors we would get more business.  Of course that statement is true as long as their conversion rate is above zero.

The problem is that many businesses assume they just need more traffic. They believe this because not enough people are taking action. But the real reason for the lack of action is often insufficient conversion, not insufficient traffic.

After all, the people visiting your site chose to visit. They are there because they thought your site would help them. If it fails to help them that’s not a traffic problem.

The Value of Conversion — Putting It Into Dollars

Let’s say you can buy traffic for 10 cents per click. In other words, it costs 10 cents to get each visitor to your website. In each example above 1500 paid visitors would cost $150 per month.

In the first example, with 3 prospects acquired for that $150 the cost to generate a lead was $150/3 = $50. But in the final example, when 75 prospects were acquired, the cost per lead was $150/75 = $2. Which would you prefer?

Let’s say you are able to convert 1 out of 10 leads into a paying customer. In the first example you would pay $50 x 10 = $500 to get a single new customer. In the last example your cost would be $2 x 10 = $20.

How much profit is in a new customer? If you earn thousands of dollars profit for a new customer, then a cost of $500 to get one new customer might not be so bad.

But what if you make $100 profit for a new customer? In the first case, with 0.2% conversion, you would be losing $400 to get that customer. However, when your conversion rate is 5%, you get to keep $80 per new customer.

Higher Conversion Rate Means You Win

Consider if your conversion rate is a little better than the conversion rate of your competitor. If you get to keep $80 profit and your competitor keeps $50 profit, what can you do?

You can start paying more than 10 cents per visit! You can start advertising on more platforms. You can start increasing your traffic from 1500 per month to 3000 visitors or 5000 visitors or 10000 visitors.

Because your website converts visitors profitably, you no longer have a shortage of traffic. You can buy as much as you want, outbidding your competition to get the best results. It’s no longer a matter of saving money, but rather how much you want to spend.