If you don’t care about conversion rates, you should!
In my career I have worked with countless businesses to grow revenue online and offline. Ultimately, increasing revenue for any business of any size comes down to three critical variables. Those variables are the number of leads a business generates, the close ratio on those leads (what percentage of those leads buy) and the average transaction size. For your website, these variables are the same. Most people are familiar with how to generate additional traffic. Most often, either search engine optimization (SEO), pay per click (PPC) or a combination of the two is used. If you have an e-commerce site, the average sale is easy. You need to do everything you can to increase your average cart size. However, the one area people seem to neglect is the close ratio. In the case of a website, we would more commonly call a close ratio a conversion rate. Your conversion rate is simply the percentage of site visitors that become leads or paying customers.
Let’s look at why conversion rates are as or more important than the traffic and cart size variables.
The conversion rates on most websites is a pretty small number. Many e-commerce site have conversion rates in the 1%–2% range. Very successful lead generation sites often see conversion rates of 5%–10%. Really, conversion rates can be all over the board, but they are historically very low relative to total site traffic. I think these low numbers lead to people not paying enough attention to the conversion rates. Just because the numbers are low doesn’t mean that they’re not critically important! What most people don’t understand is that even a small shift in your conversion rate can lead to massive differences in the revenue or leads generated by your site.
Let’s look at the numbers.
We will assume you have aggressive growth plans for the next 12 months and you want to double your business. Now let’s look at each of the three variables I discussed earlier and how each of them could double the business.
So if we agree that it is feasible to get that one extra buyer out of every 100 visitors, then how exactly can that be done? There are many changes that could create (or help you get closer to) a 1% increase in your conversion rate. Many times, there is low-hanging fruit for conversion rate optimization that require only simple changes. There is an abundance of information available online regarding how to increase your conversion rates. Here are a few of my favorite articles from our own blog posts for you to take a look at:
There are many things that can be done to improve conversions. Here are some of the basics.
No matter what you do though, it won’t be nearly as effective if you can’t measure what is really working and what isn’t. Simply converting 1 out of 100 visitors into buyers, resulting in your site potentially doubling your revenue, should serve as an indication of the critical importance of having analytics software installed on your site and ensuring you and your team know how to read the conversion data. One of my favorite things about digital marketing is that almost everything is measurable. We are even getting to the point where we can attribute different marketing efforts that happened months ago to transactions that happen today. As analytics continue to get better, our understanding and accuracy of conversion rates will improve as well.
The reality is that in order to achieve any substantial gain in revenue or leads on your website, it will be a combination of increased traffic, conversion rate increases and average transaction size increases that will help the most. However, don’t ever underestimate the power of small increases in your conversion rate. Remember, even a shift from 1% to 1.25% is not a quarter percent increase in revenue it’s a 20%-25% increase in revenue!