If you’re considering investing in a conversion rate optimisation (CRO) strategy, then one of the first questions you will likely ask yourself is “what does a good conversion rate look like?”.
It’s a logical question. After all, if you want to create an action plan to improve your conversions, you need to know a benchmark of what success should look like.
But the reality is that there is no defined parameter as to what constitutes a good conversion rate.
Many differentials need to be considered; from the size of your business, your sector, and your profit margins through to your advertising spend and your SEO budget. With so many factors involved, it’s not as straightforward as simply calculating a + b = c.
At Sherwen Studios, we believe that identifying good conversion rates should be a bespoke calculation. We work closely with our clients to understand who you are as a business. We take the time to understand what sectors you work in, and what your business priorities are. We use this information to create targeted campaigns that are based on helping you to improve your business growth.
What is a conversion rate and why is it important?
Your conversion rate is about monitoring how many of your website users are behaving in the ways that you want them to.
It’s a calculation of how many of your users are completing your desired action.
This could be purchasing products through your online store, signing up for your newsletter, making direct contact with you about one of your services, downloading a sales brochure, installing an app, or even signing up for an event that you may be hosting. In short, your conversion is whatever you want your user to do.
Having a good conversion rate is important because it’s about making the most of your existing traffic and business leads. By focusing your attention on your current website users, you can hope to grow your revenue and reduce your new customer acquisition spend.
How do you know if you have a good conversion rate?
To calculate your conversion rate, you simply divide your number of conversions (i.e., those who have completed your desired action) by your number of visitors, before multiplying by 100 to get a percentage.
Many different factors could influence whether you have a good conversion rate or not. As we mentioned earlier, your conversion rate will depend upon your sector and what the specific conversion is. But it's also about understanding your business priorities and doing what you can to ensure that the resulting conversion will have an impact upon your bottom line.
What are you trying to achieve with your conversions?
In our view, too many businesses focus solely upon the number of conversions without considering whether these are the right conversions that they should be focusing on.
We believe that before you implement any conversion rate optimisation strategies, you need to consider what you want to achieve and why. This should be the driving force behind any new strategy. And once you’re clear on this, you can start to establish an effective plan of action that will help you to increase your revenue and drive business growth.
Hubspot refers to what they call the “PIE framework”, Potential, Importance, and Ease. This framework looks at what improvements could be made, what the impact could be upon your business, and how difficult it could be to implement. In our view, this is a handy reference tool to help you to prioritise your CRO plans.
Let’s look at an eCommerce example.
We’ve worked closely with many eCommerce clients whose priority is to improve conversions so that customers can purchase an item online quickly and easily. Often, retailers focus their concerns on the volume of products sold. They may not consider whether those items provide the biggest profit margins. Your CRO team should be working closely with your sales teams and your business strategists to establish which items are the biggest revenue drivers. It stands to reason that if you can increase the conversions of the items with the biggest profit margins, your business will be better positioned for growth. This remains true, even if the volume of sales is lower than other items within your product portfolio.
Similarly, if you are a professional service, you should be focusing your CRO activity on the services that you offer that lead to more sustainable, long-term growth plans. Rather than focusing on lucrative short-term projects, your CRO should be based upon increasing business leads for long-term, retained contracts.
You could benefit from focusing on micro-conversions
To improve your overall conversion rate, you need to pay close attention to your user's journey as they reach your preferred destination.
Within each macro conversion (your desired action), your user will likely have to complete a series of micro-conversions to get to where you need them to go.
In an eCommerce environment, your macro conversion is the resulting sales transaction. But before the user gets to that stage, they need to be able to browse products and find what they need, and add them into their basket before they reach the checkout stage. At each stage of this process, there is ample opportunity for the shopper to drop out of the sales funnel. Therefore, you may find it beneficial to consider what improvements you can make to each micro-conversion and use data analytics to see what impact this has upon your overall conversion rate.
A core part of any CRO strategy is [understanding how data can be used] to test and confirm your hypothesis. As you make changes to improve your micro-conversions, you need to be clear as to what impact each change will have and monitor its effectiveness against the overall macro-conversion.
What does a good conversion rate look like?
A good conversion rate isn’t about a specific parameter.
It’s not about stating that 2% or 3% of your web traffic should be converting into paying customers.
Instead, we believe that a good conversion rate is something that provides your business with the substance to create sustainable business growth.
There are many different facets that make up a good conversion rate.
As we mentioned, your CRO plans should work carefully with your acquisition activities. If acquisition is about generating the traffic, your CRO is about getting that traffic to do what you want them to do. And this needs to be aligned with your wider business goals. You need to be clear on what your priority products/services are and focus your attentions on the income generators. A 1% increase in conversion rates on an item or service with a high profit margin will give you far greater financial stability than a 3-4% increase on a low-price point, even if the volume of sales is higher.
Similarly, it’s about linking in your conversion rate plans with your internal systems and processes, as well as external suppliers. If your conversion rate leads to a high number of orders for a specific item, but those items are out of stock or your external suppliers cannot cope with demand for the increased orders, then you could run into problems.
This is why it’s important to come back to the PIE framework. Can you make simple improvements to your micro or macro conversion goals? What will be the long-term impact of these improvements be on your business strategy? And how easy or difficult will these improvements be to implement?
If you’ve considered these questions and you’re satisfied that your increased conversions are making a tangible difference to your business growth, then you can feel that you have a good conversion rate.
As your trusted CRO partner, we’ll help your business to flourish.
At Sherwen Studios we offer a combination of CRO and consultancy services to help identify how you can make tangible changes to improve your business growth. Working alongside your internal resource and/or with external partners we’ll immerse ourselves in your business and customers ways of thinking to help to identify those pressing priorities and implement recommendations that have proven results.
With an emphasis upon continuous UX testing and data driven, human centric design, we’re the partner to bring both the experience and agility you need to turn your conversion opportunity into sustained progress.
To find out more about our methods and how we can make a positive impact on your business success, please contact us.