April 27, 2017

Understanding Conversion Rates Can Increase Your Sales

I’m a big “conversion” person as many of you already know.

I like conversion increases and I am always seeking higher conversion levels, even tenths of a point at a time (it all builds up.)

Having said that, I thought it was important to point out one thing I tell store owners. I bring this up because many store owners I meet think that increasing conversion automatically means increasing sales and that’s not always the case. You can increase conversion without increasing sales.

You see, conversion rate is a metric that helps you measure the effectiveness of your efforts. It tells you how well your site performs to turn visitors into sales (or into other actions if you consider conversion rate in that respect.) Although it helps you measure effectiveness, and is a critical metric toward moving your business in the right direction, you can actually gain higher conversion without increasing sales.

I have store owners ask me to help them increase conversion—and I am happy to do so (in fact I love that.) But when I explain to them that we can increase conversion without increasing sales they look at me like I have two heads.

Here’s an example of how this is done:

Let’s say you have 100 unique visitors to your website and you make 2 sales from that. Your conversion rate is 2%.

After looking at analytics it is determined that one marketing channel—we’ll say paid search for this example—is delivering unqualified traffic to your site. For sake of this example again, let’s say that 50%, or 50 visitors, are deemed non-qualified. You decide to turn off that channel so as to not waste any more money on it (it’s good to stop the bleeding before you burn a hole in your pocketbook. Take that saved money and put it toward resources that can help you better your business.)

In taking this approach (i.e. stopping traffic from the portion of the channel that is non-qualified) you now have 50 (not 100) unique visitors arrive at your site and you still have 2 buy (because the first sales came from that qualified group of 50 anyhow—so those sales shouldn’t change at all.) If you had 2 before you should have 2 now. All you did was eliminate the bad traffic.

Guess what just happened? Your conversion rate just doubled to 4%! But notice what did not happen. Your sales remained the same and did not increase. Although conversion increased, sales remained consistent.

So what good does it do to increase conversion and not sales? A lot when you know what you are looking at and understand that conversion is a measure of effectiveness. Under the example presented here, the double in conversion rate tells us that our site is doing a decent job at converting the traffic from the channel which is driving the 50 qualified visitors. Knowing that, we could increase sales in several ways, one of which is to attract more of the same traffic from that qualified channel (there are other ways to increase sales as well but I won’t go into them in this article.)

Our conversion rate told us our site was effective at generating sales from a specific segment of traffic. Let’s now say that we attract 50 new visitors from within that same channel (on top of the 50 already arriving at our site.) Ideally, we should gain at least 2 more sales (we win 2 sales per every 50 visitors from that channel.) Now you have increased sales!

Your increase in sales would not have been possible though without the knowledge you gained from understanding what your conversion rate was telling you. So the conversion rate is related to sales and typically an increase in conversion rate can translate to an increase in sales, but not always as directly as some might think.

Conversion rate is a metric that measures performance—understanding what it is telling you about your business is the key toward increasing sales.