Understanding Conversion Rates Can Increase Your Sales

Understanding Conversion Rates Can Increase Your Sales

Date: 29-Sep-2010
Understanding Conversion Rates Can Increase Your Sales
I’m a big “conversion” person as many of you by now know.
I like conversion increases and I am at all times looking for higher conversion levels, even tenths of a point at a time (it all builds up.)
Having said that, I thought it was vital to point out one thing I tell store owners. I bring this up for the reason that many store owners I meet feel that increasing conversion automatically means increasing sales and that’s not always the case. You can raise conversion without increasing sales.
You see, conversion rate is a metric that helps you measure the efficiency 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.) Even though it helps you measure efficiency, and is a significant metric toward moving your business in the right direction, you can in fact gain superior conversion without increasing sales.
Ecommerce store optimization tips

Ecommerce store optimization tips

Many of our e-commerce store owners ask us to help them rise conversion— and we are happy to do so (in fact we love that.)
Let’s say you have 100 exceptional 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 untrained traffic to your site. For sake of this example again, let’s say that 50%, or 50 visitors, are deemed non-qualified. You come to a decision to turn off that channel so as to not misuse 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 assist you better your business.)
In taking this move toward (i.e. stopping traffic from the portion of the channel that is non-qualified) you now have 50 (not 100) exclusive visitors appear 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 get rid of the bad traffic.
Guess what just happened? Your conversion rate just doubled to 4%! But become aware of what did not happen. Your sales remained the same and did not increase. Even though conversion increased, sales remained constant
So what decent does it do to increase conversion and not sales? A lot when you know what you are looking at and recognize that conversion is a measure of efficiency. Under the instance presented here, the double in conversion rate tells us that our site is doing a right job at converting the traffic from the channel which is driving the 50 qualified visitors. Knowing that, we could increase sales in numerous ways, one of which is to draw 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 efficient at generating sales from a particular segment of traffic. Let’s now say that we draw 50 new visitors from within that same channel (on top of the 50 already arriving at our site.) Perfectly, 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 probable though without the information you gained from understanding what your conversion rate was telling you. So the conversion rate is associated to sales and normally an increase in conversion rate can convert to an increase in sales, but not always as directly as some might believe.
Conversion rate is a metric that measures performance—understanding what it is telling you about your business is the solution toward increasing sales.


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