What is conversion rate?

What is conversion rate?

June 29, 2021 Dick Lozano

The conversion rate is a fundamental measurement metric in any ecommerce, this KPI allows us to determine if the actions we are carrying out are being successful or if, on the contrary, some adjustment should be made. Therefore, it is essential to analyze this rate constantly and introduce the changes that are necessary to improve it.

The conversion rate or Conversion Rate (CR) is the percentage that tells us how many users have completed a certain action, whether it is a purchase, a registration, a download... It is important to know how to calculate the conversion rate and in this way see how many of your users become customers. This metric will help us measure the success we are having in the objectives set within a digital marketing strategy.

To increase the conversion rate of your ecommerce you must know your customers and the users of your website, to know what their behavior really is, what they like the most... in this way you can begin to define your audience and send them a message. more personalized message.

But to start talking about strategies, you first need to know how to calculate the conversion rate and know what its formula is.

Nowadays there are more and more online stores that are coming to light. Online competition is stronger than ever and not everyone is prepared for this battle. This is also why many e-commerce businesses do not end up taking off as expected, perhaps due to lack of experience, or lack of strategy.

How to measure the conversion rate of your ecommerce?

Many e-commerce do not take into account the most important KPIs that indicate how a business is functioning , and in this post we are going to talk, perhaps, about the most important one that we have to take into account when it comes to an online store: the conversion rate or ratio. Of conversation.

Conversion is a basic concept in the world of ecommerce . This ratio specifically refers to the number of visitors to an online store who become buyers when making a purchase. That is why it is often used as an indicator of success. But do you know how your website's conversion rate is calculated? Here we are going to explain it to you.

Calculate the conversion rate of an online store

Calculating the conversion rate is the only way to know the effectiveness of a website in generating sales among those who visit it. Therefore, it is a metric that fulfills a double objective. On the one hand, it evaluates the success of the store; On the other hand, it evaluates the operation of the portal with respect to the user experience offered.

Google Analytics and many other similar tools allow you to measure the conversion rate. However, there are very simple formulas that will allow you to know it without having to resort to them. We are going to see them and understand how they are calculated so that when we see them reflected in the data measurement platforms that we use, we know how to interpret them.

Conversion Rates Formula

General approach: It is the least precise method, but it provides an approximate view of the success of ecommerce in converting visitors into customers. It is calculated like this:

Conversion rate = 100 x Number of conversions / Number of total visits

Let's give an example to see it more clearly. Imagine that your online store got 350,000 visits last month. Of all of them, there were 500 sales. Therefore:

100 x 500 / 350,000 = 0.14%

This data, a priori, would not be good and urgent actions would be necessary to improve the rate. Generally, a web store is considered successful when it reaches 1%. But, as we said before, this formula is not excessively precise. Below we see why.

Conversion rate formula

Exact approximation: The problem with the previous system is that it takes all the visits that a web page receives without making any type of discrimination. However, it is common for the same user to visit the online store several times before purchasing. That is, the same person generates several visits in the statistics.

This can be easily controlled through cookies, that is, small files sent by the website that are installed in the user's browser and monitor their activity. Of course, it is necessary that you accept them previously.

From this, we can perfect the ecommerce conversion formula by adding the concept of unique visits, which measures the number of users who visit a website during a certain period of time:

Conversion rate = 100 x Number of conversions / Number of unique visits

Continuing with the previous example, we discovered that, of those 350,000 total visits, we can only keep 100,000 unique visits. The reason? Users need, on average, 3.5 accesses to the website before deciding to make the purchase. So the sales conversion rate is like this:

100 x 500 / 100,000 = 0.5%

It may still not be excellent data since it does not reach 1%, but it is much better than the previous one and, in addition, it is much more precise. That is the reason why we recommend you always bet on this method.

Conversion Rate in Google Analytics

Google Analytics is the measurement tool most used by different ecommerce companies. It offers the most precise data since it obtains it first-hand both from its search engine and from your Ads section, email.... And Google is the most used search engine in the world by far. In Spain more than 90% of internet users use Google as their main search engine.

In addition to being a free tool, which facilitates and extends its use, it can be connected with other tools and improve its performance. They can be labeling tools to achieve better quality, more precise data collected. Or presentation tools, where once the Analytics data is collected we can use it to generate reports in a more visual way.

Once we have seen some of the features of Google Analytics, we will see that, like many other data analysis tools, it collects and represents the most important KPIs for an ecommerce in which the Conversion Rate is found .

In order to access this data, it is necessary to have the Google Analytics code or the analysis tool that we will use installed on our website.

Once we have this code installed on our domain, we will have access to all the data that our store collects. To access from Google Analytics, once traffic and user activity begin to be collected, we will be able to see the Conversion Rate metric in different reports depending on what we want to analyze. For example:

If we want to see the conversion rate of the different traffic sources through which a user accesses. We will need to go to Acquisition Report > All Traffic > Source/Medium.

conversion rate in google analytics

In the image we see that of 14,984 sessions in an online store, 418 transactions have been made, which is equivalent to a Conversion Rate of 2.79%. You can also see the conversion of each traffic source individually in more detail.

If, for example, we wanted to see the performance of our campaigns by analyzing the Conversion Rate of each of them. We would go to Acquisition Report > Campaigns > All campaigns and we would find a table similar to the previous one.

How to increase the conversion rate?

Increasing the conversion rate of an ecommerce is one of the main objectives of any online store. The set of actions intended for this is called CRO (Conversion Rate Optimization) and has a direct influence on the ROI (Return On Investment).

CRO is a methodology whose main objective is to develop a series of strategies based on changes, improvements and applications that represent an opportunity to improve the conversion rate.

"The CRO is responsible for improving the conversion rate of an online store

with available resources."

This methodology brings together features of SEO, UX, Analytics and Design, from which it extracts the necessary knowledge and resources that each website needs to design personalized strategies and improve its conversion.

Without going into detail about the CRO methodology, there are several basic actions that any e-commerce can implement to increase its sales and this rate. These are:

Segment the market. Why do you want to target an audience that is not interested in what you sell? That will only generate useless traffic. On the other hand, if you focus all your actions on your target, the possibilities of producing sales will grow dramatically. What it is about is not about attracting more users to your website, but about getting the right ones to arrive. To achieve this, it is essential to create content of interest to them.
Improve the user experience . Simplicity, usability and intuitiveness. Those are the three keys that should govern the design of any online store. The consumer must reach the product they want to buy quickly and comfortably. That is, in the fewest possible number of clicks.
The web portal must also be perfectly optimized for mobile devices since, nowadays, more sales are made through smartphones and tablets than through computers. Focus advertising campaigns on the appropriate media. Not all electronic businesses have the obligation to be on all social networks. In fact, if you analyze your target audience, you'll probably realize that only two or three of them are useful to you, at most.
Nor should we ignore the effectiveness of email marketing today. Newsletters remain a valuable resource as long as you don't cross the spam threshold.
Data Driven : the appropriate work philosophy to improve the conversion rate Subjectivity and impulsivity are not usually good allies of entrepreneurs or companies. It is always better to make decisions based on the real, objective and verifiable information available to you. Businesses that do this take a Data Driven approach. Without a doubt, it is the correct way to treat ecommerce metrics and the most effective method to increase the conversion rate.

As you can see, the conversion rate is the most important KPI that we can analyze in our online store. It is very important to take it into account from the beginning and see its evolution throughout the development of our ecommerce. In this way we can study improvements, detect opportunities and know how well the actions we are carrying out are working.