When you talk to digital marketers, a term you’ll hear constantly is “conversion rates”.  For those not familiar with what this means, this post will break the concept down and delve into its importance for online marketing.

First, let’s define a couple of terms.

Conversion:  the act you want a visitor to take when they visit your website.  For example, filling out a contact form, clicking a call button, or buying a product.

Conversion rate:  the ratio of people who convert compared to the total number of visitors.  For example, if 7 out of every 100 visitors take action, you have a conversion rate of 7%.

Conversion rate optimization (CRO):  tactical efforts marketers make to improve your conversion rates.  For example, you might test different offers (like a price discount vs free shipping offer) then track data to see which has the best conversion rates.

A conversion is to an eCommerce or lead generation website what a touchdown is to football.  It’s the goal your strategy, tactics, and execution all funnel towards.  Conversions either directly or indirectly relate to the revenue of a business website.

What’s a Good Conversion Rate?

Most people get conversions as a goal even when they haven’t heard the term.  However, confusion arises when we start talking about conversion rates because that number varies widely depending on the type of business and conversion goal of the site.

As a baseline, it’s long been held that 2-3% conversion rates are the starting point.  That is, if you’re below 2% then your marketing is failing – you’re below the minimum threshold for success.  However, there are some cases where a 10% conversion rate is actually low performing.

For example, on Black Friday 2017, here are conversion rates reported for these major eCommerce websites:

• Amazon:  7.7%
• Old Navy:  9.1%
• LL Bean:  8.3%

Now, because of the immense traffic that Amazon gets, this translated into 7.14 million transactions just on Black Friday.  Their success is undeniable.

Then again, take this moving company where Marketing 360® was able to generate an overall conversion rate of 32.54%.  They have a conversion goal which is a phone call, which generates a much higher percentage of conversions.  If their conversion rate was under 10%, it would be disappointing.  The benchmark of 2-3% would be a failure.

Commitment and Urgency

A good conversion rate depends on who you’re targeting, what your offer is, and how urgent the need of the prospect is.

In general, 5-10% is considered strong for eCommerce.  The level of commitment here is high.  You’re asking someone to give over their credit card number, to spend their hard-earned.  They have to feel confident in your product and trust your business.  Hesitation-levels are high with online shoppers.

However, if you’re advertising for 24×7 emergency plumber services and analyzing calls you get between midnight and 6 a.m., then you’d like to see conversion rates in excess of 50%.  In this case, urgency is very high and the chances that the lead will convert – either with you or your competition – is basically 100%.

In another example, you may have traffic going to an informational blog post that has almost no conversion rate, because it’s not really a page designed with a direct-response call to action.  The searcher’s goal is to get useful info, not engage a business.  However, the page has value because it exposes people to your brand and puts them on your retargeting list.

On the other hand, a paid search campaign with a landing page that has one, highly targeted conversion goal should be converting at a strong clip.  In this case, if your conversion rates are low, you have to analyze your target audience, ad copy, offer and call to action to discover what’s keeping people from converting.

But even with a conversion-based landing page conversion rates will vary depending on the level of commitment you’re asking for.  Whenever you’re asking for money, you’re asking for the highest level of commitment.  Risk aversion becomes a real obstacle to converting.  However, if the call to action is just to download an e-book, then all you’re asking for is an email address – a low-risk conversion.

Conversion rates are also affected by traffic volume.  Generally, the higher traffic volume you have, the lower your conversion rates would be.  This happens because there is a point at which really high traffic volume means that your targeting is not as precise – which is not necessarily a problem, but it will lower your conversion rates.   A 30% conversion rate for Amazon on Black Friday would be astronomical; the 7.7% rate they have now is making Jeff Bezos one of the wealthiest men on Earth.

ROI and Market Share

Hopefully you now have a better feel for what a conversion rate is.

If you do, you see from our examples that there is no set number for a successful conversion rate.

Conversion rates vary depending on the campaign they’re associated with.  10% on one campaign may be stellar, but on another sub-optimal.

In the final analysis, it’s about return on investment.  If you’re making money hand-over-fist, a 3% conversion rate might feel pretty good.  If you’re losing money on your marketing, 50% won’t matter.

Also consider:

1. Are you maximizing reach and impression share with your advertising?  Are you fully reaching your target audience?
2. Have you been diligent about your CRO efforts?  Are you leaving money on the table because you could be converting higher?

And most importantly, how are you doing in terms of market share?  If you’re in a city with only four plumbers but you’re only getting 5% of the market share, your marketing isn’t getting it done.  If you are approaching 100% of market share with high ROI, then your conversion numbers are largely irrelevant.

Conversion rate is a data metric, and like all data metrics, it has limitations.  For the most part, conversion numbers are useful in telling you if a specific campaign is reaching your target audience and persuading them to act.  In the bigger picture, look at your ROI and market share.  They have a stronger correlation to the overall health of your business.