How to Calculate Conversion Rate

When creating and managing an advertising campaign for your digital property, one of the most critical metrics publishers must understand is the conversion rate. 

The conversion rate is a percentage value corresponding to the number of users that completed a desired action (conversions) divided by the total number of users.

If the success of your business operations primarily depends on sales and revenue, then calculating and monitoring your conversion rate helps you:

• Determine how many new customers you’re gaining over a set period
• Scale your ad spend rates
• Accurately estimate your business profitability
• Allocate your advertising resources more efficiently

A good conversion rate means your ad campaign is successful, reflecting a robust marketing strategy. It serves as a crucial data point to avoid overspending on your marketing efforts, which can endanger your revenue and even put your entire business at risk.

Understanding the definition of a conversion rate, how to calculate your own conversion rate, and what is considered a good rate for your sector are essential marketing skills. The information provided by your conversion rates will help you improve sales and ensure your business’s growth and long-term sustainability. 

Definition of What Conversion Rate Is

In simple terms, your conversion rate is the percentage of users or visitors that completed a desired action, referred to as a conversion. Conversion occurs when a website, app, landing page, or digital property has successfully achieved a specifically defined objective with a visitor or typical user. The most common definition of a conversion is when a visitor completes a purchase. However, this is only one example of a conversion. The exact definition of conversion for your business depends on your business objectives. 

To understand what conversion rates do for your business, it is crucial to understand the different meanings of “conversion” in the marketing world and the few ways to use them. It is also necessary to know the important marketing metrics for conversions. Check them below.

Common Types of Conversions

Other examples of conversions include:

• Creating a new account on your website;
• Signing up for a newsletter by submitting an email address or email conversion rate;
• Completing a download;
• Installing an application and completing specific in-app tasks;
• Engaging with a visitor on live chat;
• Visiting a set number of webpages;
• Submitting a form or survey answers;
• Upgrading from a free service to a paid one;
• A click on a call button;

A conversion occurs when a visitor or an otherwise anonymous user performs a measurable action that transforms them into a paying or potential customer.

How to Calculate Your Overall Conversion Rate in 3 Steps

To calculate your conversion rate, you must first determine three data points: a defined period (e.g., one week, one month, one year, etc.), the total number of conversions completed during this period, and the total number of non-converting interactions recorded during this period.

1. Total Conversions

After determining what constitutes a conversion according to your business objectives, setting up the conversion tracking events, and choosing a specific period to calculate the conversion tracking data, count the number of successful conversions over the defined period.

For example, an eCommerce business typically defines a conversion as a website user or app visitor finalizing a purchase and spending money on its digital storefront. Count these actions over a defined period (e.g., monthly purchases) to obtain the total conversions.

2. Total Interactions

An interaction refers to any action a user can make that isn’t a conversion but can be compared to one. Like conversions, the exact definition of a non-converting interaction also depends on your business objectives. Examples of interactions include the number of clicks on one of your ads, the number of unique visitors on your website, the number of sessions opened in an application, and more.

For example, an eCommerce business may consider simply using the application or visiting the digital storefront as an interaction; in which case, the number of website visits is counted over a defined period (e.g., monthly visits) to obtain the total number of interactions.

3. Divide Conversions by Interactions

Once you have the total conversions and total interactions for the defined time period, divide the former by the latter, and multiply the result by 100 to obtain a percentage.

More Specific Conversion Rates

The basic conversion rate formula can be applied to calculate simple conversion rates for your business. However, depending on your sector and specific objectives of the online business, you may need to know how to calculate more specific types of conversion rates.

1. Lifetime Conversion Rate

Also known as the overall conversion rate, the lifetime conversion rate may appear similar to a standard conversion rate at first glance. However, instead of calculating it over a set period, it is calculated over the entire lifespan of your business. Consequently, the lifetime conversion rate compares your total traffic with the total number of conversions ever achieved. Thus, you gain predictability of the total conversions and potential profit your business can generate from this customer.

2. Channel-Specific Conversion Rate

A channel-specific conversion rate is a conversion rate calculated using traffic or total users coming from a single advertising or marketing channel. Knowing channel-specific conversion rates helps you determine how efficient your marketing strategy is in this channel. It is also crucial to compare the performance of different channels and identify which work best.

For instance, if you use both Google Ads and Facebook Ads to advertise your digital property, you may want to know both your Google Ads and Facebook Ads conversion rates, helping you determine how much traffic you draw from these advertising channels and what percentage of that traffic converts.

3. Keyword Conversion Rate

If you are familiar with SEO optimization, you may already know that not all keywords are created equal, and some may draw more traffic than others. A similar concept exists in Conversion Rate Optimization (CRO): some keywords may draw a higher conversion rate than others.

The keyword conversion rate helps you identify which keywords result in the highest rate of conversions and how to re-allocate your resources (e.g., making changes to web page body content or product descriptions) accordingly.

4. Landing Page Conversion Rate

The landing page conversion rate helps you calculate the number of users that convert after navigating to a designated landing page.

This specific type of conversion rate is primarily useful for campaigns intended to draw traffic to your website (e.g., email advertising) and incite visitors to complete a particular task with a call-to-action (CTA), such as subscribing or making a purchase.

5. Ad Campaign Conversion Rate

If your business relies on paid advertising campaigns to draw traffic and incite them to convert directly after viewing the ad (e.g., advertising campaigns for a mobile app), you’ll want to know the conversion rate for each ad campaign.

Knowing your ad campaign conversion rates will help you measure the effectiveness of the ad creative and determine whether to allocate more resources to a particular campaign.

Conversion Rate Formulas

The basic conversion rate formula is:

For example, if an eCommerce business has recorded 45,385 visits (interactions) and 7,823 purchases (conversions) in one month, the conversion rate calculation is:

This business’s monthly conversion rate is 17.24%.

Website visits and purchases aren’t the only ways to define interactions and measure conversion rates. There are multiple ways to define a conversion rate and equally as many conversion rate formulas.

Examples include:

What is Click-Through Rate?

The click-through rate (CTR), also known as the click conversion rate, is a variant of the original conversion rate but designed to measure a specific metric: the number of conversions generated divided by the total number of clicks.

Click-through rates are primarily used to measure the performance of click ads but can be used to determine the performance of any ad or mechanism where a click sends the user to a landing page or a similar environment where they gain an opportunity to convert.

Conversion Rate Difference Vs. Click-Through Rate [+Formula Examples]

The primary difference between the conversion rate and the click-through rate is what it measures. The conversion rate compares the number of conversions to the total number of users or visitors, whereas the click-through rate divides the number of conversions by the number of clicks on an ad or element.

When expressed as a formula, the conversion rate is written as follows:

In contrast, the formula for click-through rates is:

Profitability Based on Conversion Rates

To understand the profitability of an ad from your conversion rates, it is critical first to understand where your traffic comes from and how much you spend to acquire a customer compared to how much you earn.

While increasing conversion rates is generally beneficial for profitability and long-term business sustainability, you may want to have more precise numbers to better measure your current performance.

For example, if your website gets most of its traffic from a Cost-per-Click (CPC) ad campaign, you pay a given amount of money each time a user clicks on one of your ads. Each click is an opportunity for a user to convert. A CPC ad campaign is profitable and successful if the conversions bring in more revenue than you spent on the ads.

To determine profitability, you’ll need to know the following data points:

• Number of clicks (visitors)
• Number of orders placed (conversions)
• Cost per click
• Revenue from orders placed
• Average revenue per order
• Total ad spend costs

Suppose you spend $20,000 to acquire 80,000 clicks. Your cost per click would be $0.25. If these clicks result in 800 orders placed worth $40 each, your conversion rate would be 1%, and your revenue from orders placed would be $32,000. These values correspond to a net profit of $12,000 and a return on investment (ROI) of 60%: you’ve earned 60% more sales from customers than you spent attracting them with ads.

If no other factors change, increasing the conversion rate significantly increases profitability because you obtain more conversions from the same ad spend.

Additional Metrics and Data Points for CRO

While knowing your conversion rate is crucial, you should also keep an eye on additional metrics and Key Performance Indicators (KPIs) to help ensure the profitability and efficiency of your marketing campaign and know more about the process called CRO. The five most important metrics to remember are:

• ROI, 
• CAC,
• AOV, 
• LTV, and
• CRO

ROI (Return On Investment)

ROI stands for Return On Investment. It is a way to measure the cost-effectiveness of your marketing campaign, particularly when conversions result in revenue.

The ROI formula is:

In this context, the investment costs refer to the amount spent on a marketing campaign, whereas the investment gains refer to the campaign’s revenues. Generally, the higher the conversion rate, the higher the ROI of the marketing campaigns. The higher number of conversions brings the average cost of acquiring a new customer down.

CAC (Customer Acquisition Cost)

CAC stands for Customer Acquisition Cost. It measures the average money you spend to acquire a new customer or ensure a new conversion. The lower the CAC, the better, as it indicates your marketing strategy is cost-effective.

The CAC formula is calculated this way:

A higher conversion rate brings the CAC down and increases the ROI due to getting more customers for the same ad or marketing spend.

AOV (Average Order Value) and RPV (Revenue Per Visitor)

The Average Order Value (AOV) is the average amount of money a single customer spends on your app or digital storefront during a particular period.

The AOV formula is simple:

For example, if your app has generated $62,500 in revenue and 2,000 customers for March, your AOV for the month is $31.25.

The AOV helps you evaluate the efficiency of your marketing strategy by determining how much money a given customer is likely to spend. The AOV also allows you to calculate your average Revenue Per Visitor (RPV).

Multiply your conversion rate by your AOV to obtain the RPV. The higher the RPV, the more profitable your digital property is, as this key metric helps you track the average amount of money earned per visitor, regardless of whether they convert.

Example:

LTV (Lifetime Value)

A customer’s Lifetime Value (LTV) refers to the total amount of money a given customer spends on your storefront during their lifetime. A customer’s lifetime is the amount of time they spend forming a relationship with your brand, app, or company. For example, the lifetime of a mobile app user can be calculated from the amount of time they spent actively using it.

LTV can be calculated using different methods and formulas, depending on your business type and objectives. Regardless of the method used, a high LTV across all your customers indicates a high degree of loyalty to your brand, app, or storefront. Knowing your customers’ LTV also helps you measure the efficiency of your marketing strategy and determine how steadily your business is growing.

An example formula to calculate LTV in eCommerce apps is:

• Average order value ✕ Number of purchases per year ✕ Customer lifetime in years

Tracking Conversion Rates for Your Business

Whether you operate a website, an app, or another type of digital property, using tools to track your conversion rates is essential. Google Analytics is one of the most commonly used tools for conversion rate tracking and optimization due to its powerful array of settings and options for web analytics.

1. Testing and tracking software, such as Google Optimize, offer website personalization and A/B testing tools to help you compare the performance and conversion rates of your digital properties by modifying its text and visual elements.

1. Behavioral analytics software such as Heatmaps can help you track how conversions happen by recreating a user’s path and click history. They can also help you identify the usability of your app or website with a direct demonstration of what users do when browsing.

For instance, Heatmaps can reveal whether users show interest in written copy and body content and how often they click on buttons, links, and other clickable elements. It can also show you meaningful data on whether users attempt clicking on non-clickable objects and how often they click on competing CTAs and ads.

Conversion Rate Optimization Tools

Digital property owners looking to optimize their conversion rates, do A/B tests, and utilize a wide range of CRO tools. These tools can perform various tasks: testing, analytics, CRO testing tools, analytics tools, survey designers, journey mappers, and opt-in form designers.

Examples of commonly utilized CRO tools include the following:

• Google Optimize: Google is a multifunction CRO tool that can help digital property owners conduct multiple forms of web page testing, including A/B testing, split testing, and multi-variate testing (MVT). It is an ideal tool to experiment, compare performance, and find the highest-converting configurations.
• Heatmaps: The purpose of this tool is to analyze user behavior and create visual “maps” showing which parts of your website they are most likely to click or tap onto. It can help you reveal whether your site design is easy to navigate and encouraging visitors to convert.
• ConvertBox: If you rely on opt-in forms and personalized offers to convert customers, ConvertBox allows you to design high-performance forms and call-to-action pop-ups. This tool also includes built-in split testing and segment funneling functionality.
• SurveyMonkey: Taking advantage of customer surveys can be challenging without the right tools. SurveyMonkey was designed to help digital property owners build fully customizable, high-converting surveys with ease.
• Optimizely: Managing your content and running large-scale tests can be challenging if your site or blog has a large number of pages. Optimizely is designed to help you experiment, test, and refine conversion-oriented modifications from a single, easy-to-use platform, regardless of your site’s size.

Conversion Rate Examples

Suppose two commercial mobile applications in the same segment are competing on a given app store. The owners of both applications view in-app purchases as one of their most important KPIs, defining it as their conversion. They want to compare the number of in-app purchases (conversions) with the number of times users opened the app (interactions) during a one-month period.

In this example, despite bringing in equal revenue, App A has a conversion rate 20 times higher than App B.

So, How to Calculate Website Conversion Rate?

If you operate a website and wish to calculate your conversion rate, you’ll first need to set a specific period. Most CRO tools track conversion rates by week or by month.

After choosing the period to calculate, use your analytics software to determine the total number of visitors, your website has received during this period. Then, count the number of successful conversions during this same period, and divide that number by the total number of visitors. Multiply the result by 100 to obtain a percentage value.

For example, if your website has received 28,000 visitors and recorded 980 conversions in February, your conversion rate is (980 ÷ 28,000) ✕ 100 = 3.5%.

How To Track Conversions Month Over Month By Day

Most analytics software and CRO tools can help you track your conversion rates over the periods of your choice. Tracking conversions and comparing your rates month-over-month can provide you with critical information regarding your business’s long-term performance.

What is a Good Conversion Rate?

On average, across all sectors, the top 25% of businesses achieve conversion rates of 5.31% or higher, and the top 10% of most companies get 11.45% or more. Although you generally want to optimize and improve your conversion rate as much as possible, what constitutes a good conversion rate depends on your business type, industry, advertising channels, and products or services sold.

For instance, eCommerce businesses have conversion rates ranging between 2% and 5%. If your app, website, or digital property is in the eCommerce sector, your conversion rate is considered good if it achieves at least 2%. Average US-based eCommerce businesses have an average conversion rate of 2.63%, whereas the global average is 2.86%.

Median conversion rates for websites vary significantly depending on the industry. For instance, websites in the real estate, family support, software-as-a-service, and business industries typically have median conversion rates of 2.5% to 3.5%. Legal, fitness, and finance websites have conversion rates ranging from 5.6% to 6.2%, and the highest-performing sectors, media, and restaurants, tend to exceed 8%.

To determine whether you have a good conversion rate, research which sectors and industries your business belongs to and how well your competitors are doing. A given percentage may be considered high in one sector but low in another.

Below is a table of average conversion rates by eCommerce sector:

Tips on How to Improve & Boost Your Conversion Rate

Improving your conversion rate through specialized methods and strategies is known as Conversion Rate Optimization (CRO). Making modifications to your site, app, blog, or digital property for the exclusive purpose of improving your conversion rates counts as CRO.

Implementing the right CRO strategies is among the best ways to optimize your website, application, blog, or digital property and improve your chances of converting users and visitors.

The primary benefit of Conversion Rate Optimization is increased revenue with little to no increase in expenses. CRO is all about extracting more revenue from the traffic you already pull in. In other words, optimizing your conversion rates decreases the cost of acquiring a conversion.

The best way to optimize your landing pages and improve your conversion rates is to create a dedicated landing page, research your audience, and build the content on the landing page to maintain the interest of potential customers and incite them to convert.

The optimization process affects all aspects of your digital property, from aesthetically pleasing design elements and visual identity to high-quality, informative website copy. Following the best practices of CRO is essential to improve your conversion rates, boost conversions, and increase sales.

• Define clear, precise goals for your optimization process. The best way to do so is to analyze your business’s current performance, then use the data and insights to set a target conversion rate and time frame.
• Use your analytics suites to study your users or website visitors. Behavioral analytics provide invaluable information regarding user habits, preferences, and pain points. Identifying and addressing usability issues and user experience (UX) problems can significantly impact your conversion rate.
• Pay attention to your bounce rate; it provides crucial information on how often your users leave your site or close your app and why. You’ll want to ensure your bounce rate doesn’t exceed 50-55%. If your bounce rate is too high, use your analytics tools to try and determine whether a particular element of your digital property is causing visitors to leave.
• Consider implementing enter and exit surveys on your website’s landing pages. A powerful way to understand how your users think and behave is to ask them directly. Keep the surveys brief and easy to understand to ensure visitors are more likely to fill them out.
• While aesthetics and brand identity are important, ensure your digital property is usable and functional first. Users are more likely to spend more time on websites, blogs, and apps that are easy to use and informative, increasing the chances of a sale.
• If you are experimenting with a new layout, design element, or other changes to improve your conversion rates, avoid continuously tweaking and modifying it until you’ve gathered enough data to measure the impact of the changes. Constant modifications can make it challenging to determine what worked and what didn’t.
• Prioritize dynamic language in your calls-to-action. Short, concise words with active verbs (e.g., “Buy now” or “Join today”) are direct and more likely to incite a visitor to convert. You can also use first-person language (e.g., “Yes, I’d like to sign up today”) to reframe the CTA from the visitor’s point of view and create a connection with them.
• Directly address the user’s pain points with concise solutions. Your products should be presented as a solution to the visitor’s problems. Highlight the reasons why a visitor will benefit from purchasing it, or reframe the description to suggest why the visitor can’t afford not to try it.
• Take advantage of customer reviews and testimonials. Visitors trust the opinions displayed in product reviews at least as often as personal recommendations. Consider prominently displaying positive customer reviews on your product pages to incite further sales.
• Respect the visitor’s time. Avoid making them fill out long forms or submit excessive quantities of information before they can purchase the product or finalize a conversion. The faster visitors can convert, the more they will.
• Limit distractions. While design elements and brand identity remain important, it is crucial to avoid implementing CTAs, links, and other page elements that could confuse or distract a visitor from finalizing a conversion.
• Consider implementing incentives. Whether in the form of free downloads, bonus material, coupons, free webinars, or any other incentive you can think of, offering potential customers additional freebies can help you boost conversion rates. Remember that each type of incentive may have varying effectiveness on different visitor demographics. Don’t hesitate to use testing and comparison methods to see what works best for you.

A/B Testing Method

It is critical to test any planned changes before implementing them into your site, app, or digital property. One of the best testing methods in the industry is A/B testing because it lets you directly compare the performance of your current arrangement with those your changes would bring.

A/B testing involves two versions of your own digital asset or digital property: version A, which is the current version as it currently stands, and version B, which is the version after implementing the desired changes.

For example, suppose you intend to increase conversion rates with a more efficient landing page and more attention-grabbing site copy. In that case, you can use A/B testing to measure the performance difference before and after implementation.

A/B testing is easy to scale and applicable to virtually any aspect that might affect conversion rate, from product page copy and advertisements to email text, newsletters, and even web page components. Even simple elements, such as button colors, font choice, or navigation layout, can have measurable impacts on your website’s conversion rate.

Headline Optimization

Although it may not fit as much copy as the body of a product page or the content of a blog post, the headline is critical to your conversion rates because it is the first thing a visitor will see.

Headline optimization methods are among the simplest and most effective ways to boost your conversion rates. While optimizing a headline doesn’t require you to implement extensive changes, it can significantly increase the likelihood of a conversion if done correctly.

Follow these guidelines and best practices to optimize your headlines efficiently and bring in more converts:

• Include relevant keywords into the headline. Visitors and readers want to ensure they’re finding what they’re looking for, and proper keyword usage helps make your web pages and blog posts rank higher in search results. Ensure the keywords flow naturally with the rest of the headline, as it helps prevent visitors from thinking your content is spam.
• Keep it short. Whether your headline is an email subject line, a title tag, or a social media post, you have a limited number of characters to get the point across. Use short but descriptive headlines, and take advantage of numbers to shorten the headline’s length whenever possible.
• Turn it into a question. Asking a question in the headline may align it with your audience’s own questions, increasing the likelihood they will read on to find the answers they’re looking for.
• Use headline testing software. Test each headline before posting or implementing them with testing tools, plugins, and other software to see which ones are the most likely to perform better.
• Double-check for grammar and spelling. While mistakes happen, finding a spelling error or bad grammar in the headline can deter visitors and decrease your conversion rates. Always ensure your headlines are easy to read, concise, and free of spelling and grammatical issues whenever possible.

Refined Audience Targeting

Understanding your audience and who you are marketing your product, service, or brand to is critical to increasing your conversion rates. While having a high amount of website traffic is never a negative sign, having many visitors matters little if very few of them are interested in converting. For these reasons, it is critical to understand who your audience is to attract more people with similar profiles more efficiently.

Use analytics tools to learn about your converts’ profiles. They can provide you with a wealth of information that you can use to refine your audience targeting methods, including:

• Demographic information, such as age, gender, country of origin, education level, income, etc. It also includes more subjective data points like lifestyle, personality, interests, and behavior.
• How they find you. Knowing where your traffic comes from (e.g., ads, Google search results, links on other websites, etc.) is essential to determine which advertising channels work best.
• What they want and don’t want. Optimizing and refining your audience targeting may involve catering to their demands by adding more of what they are looking for and removing what they don’t want to see.

Additional avenues to learn more about your target audience include customer surveys, direct interviews, and live chat discussions. These environments can complete the information provided by your analytics software and help you build more comprehensive visitor profiles.

You can use the information to implement the following changes:

• Adjust your offerings according to the wants and needs of your visitors.
• Improve keywords and content descriptions to ensure your audience finds what they need more efficiently.
• Understand how users describe the products and services they want, allowing you to change or adapt your content accordingly.
• Prioritize the content the users want the most so they find what they’re looking for more quickly.

Keyword Optimization

Optimizing the keywords in your content is another efficient way of increasing your conversion rates. Keyword optimization is not only about choosing the right keywords for each page or product but also building a robust keyword strategy that can help attract visitors into your funnel and increase the likelihood of a conversion.

Keyword optimization intended to improve conversion rates is part of a Conversion Rate Optimization (CRO) strategy. In the context of CRO, keyword relevance is not evaluated based on search intent like with Search Engine Optimization (SEO), but based on conversion intent instead, also known as purchase intent. In other words, if your digital platform is optimized for SEO but not for CRO, you will increase the number of visitors but not the number of converts.

CRO strategies aim to find and implement high-converting keywords throughout your digital property to ensure visitors with high intent find your pages. Keyword research tools such as Google Keyword Planner or the keywords tool in Google Ads Reports are designed to help you find the most relevant high-converting keywords for your industry and sector.

After determining these keywords, implement them into your digital property content and use A/B testing and other tools to measure the performance difference.

Improve Your Conversion Rates with CodeFuel

Boosting your conversion rates and improving your sales can be arduous, especially without assistance. At CodeFuel, our digital marketing experts can help you analyze your site or app’s performance and implement an efficient conversion rate and conversion optimization strategy to meet your business objectives. Contact us today to get started.