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FutureNow Article
Thursday, Nov. 1, 2007

Unlocking Key Performance Indicators: Conversion Rate

By Ronald Patiro
November 1st, 2007

After hitting on Take Rate, Bounce Rate, and Order Acquisition Ratio, it’s time to turn our attention to a metric near and dear to our hearts here at Future Now: Conversion Rate.

The Conversion Rate (CR) tracks how well your website is achieving its main objective. This goal will vary depending on the type of site. An e-commerce site’s main objective, of course, is to get people to buy product. Here’s how a commerce site would calculate conversion:

CR = Number of Sales / Visitors (A metric often related to CR, especially with content-driven sites, is Take Rate.)

The higher the CR, the better the ROI (Return on Investment). Improving conversion increases the amount of money you can make with the same amount of traffic. To determine exactly how conversion affects ROI, calculate your Order Acquisition Ratio.

Understanding what affects conversion requires an in-depth look at the entire online marketing strategy. To begin, break down the steps involved in the site’s sales process. For instance, a retail site would look like: Homepage -> Category Page -> Subcategory Page -> Product Page -> Cart -> Checkout.

Along with these steps, the Exit Rate for each must be calculated. Exit Rate shows how many people are not converting by leaving the site at various stages in the sales process — often thought of as a funnel, although it’s slightly more complicated in reality. Still, the funnel gives us a visual representation of where to find the biggest leaks, so we can fix them and optimize the experience to recapture money that would otherwise be left on the table (if you don’t mind me further mixing metaphors).

Each stage in the process is a micro-action that will lead the visitor closer to the macro-action of converting (e.g., purchasing). The best way to diagnose why various steps, or micro-conversions, aren’t performing as well as they should is to ask three simple questions:

1. Who is the audience at this step?

2. What action would we like them to take?

3. What information do they need to feel confident enough to be compelled to take that action?

When asking these questions, it’s important to recognize that a website is not one size fits all; it should be many sizes fit all. Multiple scenarios, or pathways through a site, need to be planned ahead of time in order to suit different personality types and how they prefer to behave online. It’s also important to take into account how close a person is to making a decision. Are they early on in their buying process and just researching, or do they know exactly what product they want? (Bryan’s recent screencast shows how to appeal to different buying modes and temperments.)
Heirarchy of Optimization Image

To help understand why visitors may not be taking the necessary micro-actions to move closer to converting, the Hierarchy of Optimization provides a useful guide in addressing potential problems. This hierarchy forms a pyramid and starts with basic requirements, then moving higher up toward the top, where persuading visitors to take the action is the highest aspiration.

Let’s look at them in reverse order…

  • Functional. Does the site offer something that the visitor needs?
  • Accessible. Is the visitor able to access whatever it is that the site offers?
  • Usable. Are there unnecessary difficulties or roadblocks that cause friction for the visitor?
  • Intuitive. How well is the site’s sales process structured? Is it compatible with how the visitor likes to buy?
  • Persuasive. Does the visitor truly want and understand the problem by clearly knowing that it will solve their needs? Do scent trails carry through to the more funnel-like, conversion point on the site (e.g., the checkout process)?

If your CR is less than 10%, you should focus on optimization — but there’s always room for improvement. Along with taking steps to remove obstacles that impair the visitor’s buying process, causing them to waste their time thinking instead of doing, the most potent tool is empathy. Anticipating your visitors’ motivations will help you to answer their questions at each step — and that requires a good deal of planning.

Remember, a website exists to help its visitors achieve their goals. Give people visiting your site all of that, and the ROI will be well worth the effort you put into it.

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Comments (2)

  1. A true wealth of information. Thank you! I made a couple of changes to my site’s flow chart based on this one article alone…let the conversion olympics begin.

  2. [...] Conversion Rate = (Number of Sales) / (Visitors) [...]

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