Knowing how to calculate conversion rate is essential for any business that wants to improve its online performance. This metric provides valuable insights into the effectiveness of your marketing strategies, user experience, and customer engagement.
To calculate your conversion rate, simply divide the number of conversions by the total number of visitors to your website and multiply by 100 to express the result as a percentage.
In this article, we’ll walk you through the step-by-step process to accurately calculate this key performance indicator (KPI).
How to Calculate Conversion Rate (Step-by-Step Guide)
A conversion rate can measure the percentage of visitors who take a desired action, from purchasing to signing up for a newsletter. By calculating this rate, businesses can identify their strong points and weaknesses. Thus, they can make data-driven decisions to optimize for higher conversions.
These are 3 steps to calculate the conversion rate:
Step 1: Define Your Conversion Goal
The first step in calculating the conversion rate involves defining what a ‘conversion’ means for your business. A conversion can mean different things in different contexts. Here is an excellent example of the various definitions of conversion rate according to Cambridge Dictionary:
For an online retailer, it could mean the purchase of a product, whereas for a newsletter service, it may signify a subscription. Clear identification of a conversion is necessary to measure the conversion rate precisely.
Step 2: Track Your Conversion
Once you have defined what constitutes a conversion, gathering data is the next step. This involves tracking the number of unique visitors to your site and the number of conversions within a given time frame.
Tools like Google Analytics can be instrumental in collecting this metric accurately. Once you have defined your goals, you can create conversion funnels to track how visitors are moving through your website and completing your goals. A conversion funnel is a series of pages that visitors typically go through before completing a goal.
For example, a conversion funnel for a purchase goal might look like this:
- Home page
- Product page
- Shopping cart
- Checkout page
After having created your conversion funnels, you can view your conversion rate in the Google Analytics Reports section. To view your conversion rate for a specific goal, visit Conversions > Goals > Overview. Below is the report of the conversion rate in Google Analytics.
Step 3: Calculate Your Conversion Rate
With data in hand, the actual calculation of the conversion rate is relatively straightforward. The formula for the conversion rate is:
In this formula:
- Number of Conversions refers to the number of times visitors have completed the desired action (e.g., making a purchase, signing up for a newsletter, etc.).
- Number of Unique Visitors is the total number of people who have visited the website or page where the conversion action can occur.
- The multiplication by 100 converts the ratio into a percentage, making it easier to interpret and compare.
For example, if an e-commerce website received 5,000 unique visitors in a week and made 250 sales, the conversion rate would be calculated as follows:
- Conversion rate = (25 / 1000) * 100% =5%
Note: A 5% conversion rate indicates that out of every 100 visitors, five completed the desired action: making a purchase.
Understanding the conversion rate using this formula allows companies to assess the result of their marketing strategies, web design, and customer engagement initiatives.
It serves as a benchmark for measuring improvements and optimizing the conversion rate over time.
What Do You Need To Calculate Conversion Rate?
To understand how to calculate conversion rate, you’ll need essential information and the tools to collect that data.
Here is a breakdown of what you will require:
- Number of Conversions: This is the total count of the specific actions (as defined by your conversion definition) completed during your selected time frame.
- Number of Unique Visitors: This is the total number of individual visitors who have come to your website or specific landing page during the same time frame as the conversions are counted.
- Analytics Software: Tools like Google Analytics, Adobe Analytics, or any other analytics platform can help you collect the number of unique visitors and the number of conversions. For instance, Google Analytics measures the conversion rate by dividing the number of conversions by the total number of sessions. Here is an example of Google Analytics goals and conversion tracking.
- Conversion Tracking Setup: To accurately count conversions, you may need to set up conversion tracking tags on your website. This usually involves placing a small piece of code on the ‘Thank You,’ or confirmation page a visitor sees after completing the desired action (conversion).
- Data Spreadsheet or Dashboard: A spreadsheet or dashboard can help you organize and visualize the data. It can be as simple as an Excel sheet or as advanced as a custom dashboard that pulls real-time data from your analytics tools.
How to Interpret Conversion Rate (Industry Benchmarks)
Interpreting the conversion rate requires more than just understanding the percentage of visitors who take a desired action. While the rate can provide some insights, its true value comes when you compare it to industry benchmarks, historical data, and other key performance indicators (KPIs).
Contextualize with Industry Benchmarks
Industry benchmarks provide average conversion rates for various industries and can serve as a valuable reference point.
For instance, according to Shopify, The conversion rate for the ecommerce sector is between 2.5% and 3%. If you want to see more about other industry benchmarks in ecommerce, here are some great examples.
However, these metrics can vary significantly based on the type of product, the target audience, and other factors. Knowing where your business stands compared to industry averages allows you to gauge whether your conversion rate is competitive or has room for improvement.
Relativity to Other Metrics
Conversion rate should always be analyzed in collaboration.
Other metrics like Customer Lifetime Value (CLV) and customer Acquisition Cost (CAC) offer complementary perspectives. By analyzing the conversion rate with CLV, CAC, and AOV, you can gain a deeper understanding of your business and make more informed marketing decisions. Below is the relationship between CLV and CAC.
For example, if you have a high conversion rate but a low CLV, you should focus on marketing campaigns that are more likely to attract high-value customers. Or, if you have a high CAC but a low conversion rate, you may want to focus on improving your website’s user experience to make it easier for visitors to convert into customers.
Seasonal Fluctuations and Trends
It’s also essential to know seasonal factors influencing conversion rate. This is how ecommerce conversion fluctuated during the year 2018.
Seasonal fluctuations and trends can have a significant impact on the conversion rate. For example, many businesses see a spike in conversion rate during the holiday season, when people are more likely to shop online. Similarly, businesses that sell seasonal products, such as swimsuits or snow gear, may see higher conversion rates during the summer and winter, respectively.
Therefore, it’s crucial to compare your conversion rate year-over-year for the same time or adjust for seasonality to get a more accurate picture.
Mobile vs Desktop Conversion Rates
As mobile web traffic becomes more important, breaking down conversion rate by device type can provide additional insights. According to the Thesis, on average, the desktop conversion rate for all traffic was 1.9x that of the mobile as follows:
This means that desktop devices still have a slight edge over mobile devices regarding conversions. However, it’s important to note that the gap between mobile and desktop conversion rate is narrowing. In fact, the mobile conversion rate has been growing steadily in recent years.
If you need help optimizing your website for mobile or desktop devices, consider hiring a professional website development company. A good website development company can help you create a website that is both user-friendly for both devices and conversion-focused
Segment-Specific Conversion Rate
Segment-specific conversion rate is the conversion rate for different groups of visitors to your website. These groups can be segmented based on various factors, such as demographics, psychographics, behavior, or location.
For example, you could segment your visitors based on:
- Age
- Gender
- Location
- Interests
- Purchase history
- Browsing behavior
- Traffic source.
For example, you might find that female visitors are more likely to convert than male visitors or that visitors from a particular country are more likely to convert than visitors from other countries. This information can help you to create more targeted marketing campaigns and website experiences.
2 Conversion Rate Calculation Examples
To help you better understand how to calculate conversion rate, here are two examples with step-by-step instructions.
Example 1: E-commerce Website
Scenario:
- An online clothing store receives 8,000 unique monthly visitors.
- During the same month, the store recorded 160 sales.
Calculation:
- Number of Conversions = 160
- Number of Unique Visitors = 8,000
→ Conversion rate = (160 / 8000) * 100 =2%
Interpretation:
- For every 100 unique visitors, the site averages 2 sales.
- If the industry benchmark is around 1-2%, this store performs at an average level.
Example 2: Newsletter Subscription
Scenario:
- A blog focusing on personal finance has 15,000 unique weekly visitors.
- It managed to get 450 newsletter sign-ups within that week.
Calculation:
- Number of Conversions = 450
- Number of Unique Visitors = 15,000
→ Conversion rate = (450 / 15000) * 100 =3%
Interpretation:
- The blog converts 3 out of every 100 visitors into newsletter subscribers.
- There may be room for improvement if the industry newsletter benchmark is around 4-5%.
Understanding how to calculate conversion rate is more than just a numbers game. It’s a gateway to actionable business insights.
As we’ve shown, the process is simple but highly informative. Knowing this information empowers you to make data-driven decisions that significantly improve your marketing strategies and customer engagement. Ultimately, companies may attract more qualified leads and increase business revenue.
In other words, pay attention to this essential metric. Leverage it to optimize and continuously steer your business toward success.
Co-Founder & General Manager @ ROI Digitally
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