Conversion Rate: Measurements and Notable Factors

In Internet marketing, conversion rate refers to the ratio of the number of visitors completing a certain action at your website (such as subscribing to your e-newsletter or purchasing products you promote on the web) to visitors who visit without completing that action.

It is a very important measurement because it reflects the ROI of your marketing effort. For example, if it costs you $100 to acquire 1000 visitors to your website, and out of those visitors 30 purchase your product, the conversion rate is 3%. Suppose you know the profit of each product sold is $10, then you can calculate that for every $100 (marketing cost) spent, you have a return of $300 (revenue), making your net profit $200. This seems like a good deal, doesn’t it?

Let’s take another example: If out of those same 1000 visitors, 50 of them subscribe to your newsletter, your conversion rate is 50:1000, or 5%, and the cost of acquiring each subscriber is $2. That is a very important metric if you need to plan the budget for acquiring a certain number of subscribers.

For this reason, Internet marketers like to talk about conversion rate. And they like to show off by claiming how high the conversion rate of their websites is.

However, when we talk about conversation rate, there is one important factor we cannot neglect. It is about the source of traffic.

Let’s say you have a web site focusing on physical fitness. And currently, there are two websites referring new visitors to your website by hyperlink. One of those is about healthy foods. This website consistently refers customers to land at your website, and the conversion rate of those visitors is x%.

The other website is related to computer equipment. And the conversion rate of the visitors from that website is y%. Even if you do not tell me the exact value of x and y, I can be quite sure that x is bigger than y. Why? Because the first website has a theme more closely related to yours, so it is referring potential subscribers who have a higher tendency to feel interest in your website’s information and are more likely to subscribe to your newsletter or buy your products.

Therefore, you can easily have higher conversion rate for your website if you manage to obtain highly relevant sources of traffic. For instance, if you have a joint promotion with another marketer who has a closely related subscriber list that has similar interests to what you offer at your website, chances are you will gain a high conversion rate by the traffic generated from that newsletter owner’s list.

Therefore, without mention of the source type of the traffic, it is meaningless to talk about conversion rate. Next time, if someone tells you about the high conversion rate of his/her website, ask about the source of the traffic. This will give you the information you really need to make sound decisions.

Tags: traffic source