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How To: Estimate Your Internet Conversion Rate

By Ayo Ijidakinro

How to calculate web metrics. Teacher at blackboard.
Computing your conversion rate is easy as long as you know how to measure each conversion with your web analytics.

Summary: This article teaches you how to compute your conversion rate. Calculating your website's conversion rate is a first step to accomplishing your online objectives. Typically, retail websites exclusively consider a purchase to be a conversion. However, what you consider a conversion may differ, depending on your goals.

The Equation

Web Site Conversion Rate = Number of Visitors who Take a Desired Action / Total Number of Visitors on Your Website

The above equation is simple. The trick is identifying what your desired actions are and knowing when to measure that the goal has been met.

What is a Conversion?

Now for some nomenclature. A visitor is considered converted whenever he takes a desired action on your website. Google calls desired actions your website's goals.

The following are examples of goals:


  • User registers for your newsletter.

  • Customer buys a book from your website.

  • Reader emails your article to a friend.

Tracking your Conversions

How do you know that one of the above goals has been hit? Google's approach is to track when a user views one of your confirmation pages after a desired action is completed.

For example, if a visitor has registered for your online newsletter, you might have a Thank you page that thanks the user for registering. Google would suggest you then measure your goal as being successfully reached whenever a visitor sees your Thank you page.

Similarly, if a user is buying a product from your website, you would measure success, not when the user adds an item to his shopping cart, but when you display the purchase receipt to the customer.

Read more about Google Goal Conversion and how to set it up for your website.

Putting It All Together

So in the above examples, the number of times visitors view your Thank you page or the number of times visitors hit your purchase receipt page would make up the top part of the conversion equation (e.g. the number of visitors who take a desired action).

The bottom part of the conversion equation is simply the total number of unique visitors to your website.

Do you have any follow-up questions about how to calculate your website's conversion rate?

Related Articles

Vertster.com. 2008. "How to Calculate your Conversion Rate."
Clickz.com. July 25, 2005."Calculate Your Conversion Rates."

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Benchmark your Conversion Rate Using Fireclick.com's Industry Data

By Ayo Ijidakinro

Example conversion rate data from Fireclick.com.
Use Fireclick data to establish reasonable conversion rate goals for your website.

Summary: The Fireclick Index is a great resource for site conversion rate data. I was very happy to find it! Use it to benchmark your site's conversion rate.

In a previous post I discussed the importance of benchmarking your site's conversion rate against your industry's average. In the post I mentioned that finding good benchmark data is difficult. Today I stumbled upon Fireclick, a great website for industry average website conversion rate data.

I suggest you take some time to review Fireclick's data, because a good understanding of your competitive environment is necessary to set realistic goals for your website.

Examples of What Fireclick's Data Reveals

Fireclick reveals that the average website conversion rate is 2.2%. However, conversion rates vary greatly by industry.

For example, catalog companies have a site conversion rate of 6.8%. Which lends further evidence that direct mail can do a lot to improve your conversion rate. (Of course you must balance this against the added cost sending out direct mail.)

The worst industry, by conversion rate, is electronics with an average of 0.8%.

Conclusion: Benchmark Your Site Against this Data

So far, this is the best resource I have found for freely available, real-time, accurate conversion rate data. I hope you are able to use this to successfully benchmark your website!

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How can I analyze the reasons for a low conversion rate?

By Ayo Ijidakinro

Picture of an example chart analyzing your company's website conversion rate versus the competitor's.
Sometimes in-depth research is required to generate an accurate comparison between your website and your competitors'.

Summary: The past two articles have emphasized the importance of product mix in determining website success. How can you figure out if a low conversion rate is due to a poor product mix versus a bad website? This question will be discussed in this article.

How can you identify the reason for a low conversion rate? As I mentioned in a previous article stressing the importance of analytics, you can't measure yourself against yourself. The best way to measure your success and identify methods of improvement is to benchmark your website against your competitors.

What type of benchmarking do you need to do?

Since this article is discussing website conversion rate, the answer is to compare your conversion rate to the conversion rate of your competitors. For example, do you sell Caterpillar tractors? What is your conversion rate on those tractors? What is your average competitor's conversion rate? Even better, what is your best competitor's conversion rate?

If your conversion rate on a product is 8%, is that good or bad? Well, it always depends on the average for your industry. If the average conversion rate for that product, in your industry, is 3%, then you're doing great. If the average conversion rate for that product, in your industry, is 15%, then you have some serious catching up to do.

What conclusion should the data help you reach? Here are two conclusions:
  1. If your conversion rate is below the competitor average, then you probably need to improve your website.
  2. If your conversion rate is low, but at or above the competitor average, then improving your website is unlikely to help generate a higher conversion rate. Perhaps you need to sell a different product. You're already at or above the industry average. Unfortunately, this product doesn't look like it sells well in general.
Unfortunately, figuring out the conversion rate for your competitors can be difficult. It may require some in-depth research. Each company will likely have to find industry specific resources in order to do their own analysis.

(Now that we are on the subject, I am interested, myself, in finding this data. I will do my best to dig around and see if there is a conversion rate research database out there. However, I doubt there is one. Nevertheless, if you are aware of one, I would appreciate your notifying me about it.)

UPDATE: I've found a wonderful database of conversion data at http://index.fireclick.com/. Read more about Fireclick's web site conversion rate database.

In conclusion, make sure that you are benchmarking your conversion rate against your competitors and not against yourself. Benchmarking how you rank in your industry is the only objective way to identify whether a conversion rate is low because the product you're selling just doesn't sell well or if you have a problem with your website and marketing approach. By doing this benchmarking you allow your business to make much more intelligent decisions in product selection and web strategy.

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Great Product Selection Trumps Elegant Website Design. Re-emphasized lessons from The Popcorn Factory

Screenshot of the homepage of The Popcorn Factory's website.
There is nothing outstanding about The Popcorn Factory's website. The key is their product selection.

Summary: The other day I wrote an article that analyzed the key reasons for The Popcorn Factory's astounding 29.5% conversion rate in December of 2007. To translate, this conversion rate means that nearly one out of every three visitors to The Popcorn Factory's website actually bought something! Today, I want to re-emphasize those lessons in a more concise manner so that you can improve your own site conversion rate.

After looking at the success of The Popcorn Factory, and the relatively simple website they use to generate this success, the natural question is, "does website design really matter?" The answer is No...to an extent. How can we show this?

First, from the standpoint of aesthetic beauty, The Popcorn Factory website is not one of the more attractive websites out there. It's design is very plain, and really not very attractive compared to the really good sites. There are no pictures of beautiful people eating popcorn; there are no animated videos; the color scheme is a rather bland pastel purple, dull pink, and red.

Secondly, there are few calls to action and no empty marketing slogans like, 'Putting quality first.' or, 'Perfectly popped popcorn every time.' They do have an Easter sale currently on the website, but it doesn't scream at you with flashing lights or multiple exclamation points!!!!

Put simply, the website does exactly what its supposed to. It sells popcorn. No more. No less. And sell popcorn it does, very well in fact.

As mentioned, the key lesson from The Popcorn Factory is the importance of choosing products that are already primed for success. Don't choose a product that will require you fight an uphill battle just to get customers interested in it.

Warren Buffet has been known to say, 'Give me a great [profitable] industry and poor management any day, over great management and a poor [unprofitable] industry.' What did he mean? He meant that a profitable industry allows even the worst managers to have a measure of success. Whereas, an unprofitable industry will make even the best managers look like perennial failures.

The same applies to websites. As an owner, it is better to have a poor website selling a great product everybody wants, than to have a great website selling a product nobody wants. The website selling the in-demand product will win every time.

Does this mean that anything we can say about website design then is invalid? Absolutely not. If the Popcorn Factory improved their website, no doubt they would also improve sales. Warren Buffet would not turn down great managers in a great industry. That's a one, two punch. Similarly, no company would be wise to turn down having a great website, just because they're already selling a great product.

What's the conclusion? Absolutely, review your product selection, and make sure you're selling products that the customer already needs or strongly desires. Once you've reviewed your product selection once, review it again. Keep doing it until you know your product selection is excellent. Then, once you've done this, start investing in improving your website to further improve your conversion rate. Don't do this process in reverse.

Review your products, then improve your website. If you do these two things, in this order, you put yourself in position to maximize sales growth and profits.

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What gave The Popcorn Factory the highest conversion rate on the internet?

By Ayo Ijidakinro

Picture from the homepage of the Popcorn Factory, the website with the highest conversion rate in 2007.
The Popcorn Factory's basic homepage doesn't explain their high conversion rate.

Summary: In December of 2007 the Popcorn Factory had the highest conversion rate, 29.50%, of any major website (MarketingCharts.com, 2007). For most retail websites, a conversion rate of 10% is considered excellent. Anything below that is considered average (Eisenberg, February 3rd, 2008). What can we learn from The Popcorn Factory to help us improve our own conversion rates? In this article we will answer that question by looking at one very important reason behind their success.

No doubt there are many reasons that The Popcorn Factory has one of the highest conversion rates online. However, as I researched this article, one reason kept coming up, product selection. Not all products sell well online (Warren, 2000). The Popcorn Factory has done a good job of identifying what sells well online and investing their resources in those products. They have done this in the following ways:
  1. The Popcorn Factory sells a product the customer already wants to buy.
  2. Their online product mix is specific to online tastes and is different than their offline product mix.
  3. Their products are well suited to being delivered by mail.
Let’s discuss each of these points one by one.

The Popcorn Factory sells a product the customer already wants to buy. If you manufacture a product, improving on this point may be difficult for you. However, if you are an online retailer retailing other vendor’s wares, then this is entirely within your control. The simplest way to increase your conversion rate online is to start with great products. This quote bears that out:

“People's motivations trump any great or poor [website] design. If people have made up their mind (persuaded themselves), that they want to buy flowers or popcorn from the particular retailer then they'll work through almost any poor shopping process…” (Eisenberg, January 29th, 2008)

How can you improve your product mix? Put extra effort into the product selection process. Read product reviews, see what people are talking about. Are there any trends you can take advantage of? Product strategy is not my area of expertise. Nevertheless, the key point I want you to take from this article is that bad product selection will trump good website design. So don’t invest more money in improving your website or increasing your online marketing if you don’t already have products that the customer desires. After all, we can put lipstick on a pig, but it’s still a pig. A better website might just end up being a better color of lipstick for a litter of ugly piglet products.

That brings us to the next point.

The Popcorn Factory’s online product mix is specific to online tastes. The Popcorn Factory has a print catalog as well as their website. Cheryl Zatz (the Vice President of Marketing for The Popcorn Factory as of at least October 2006) made clear in a ComputerWorld.com case study that, “the Web site doesn't simply replicate the paper catalogue: the number of products is limited, to avoid creating navigation problems for users, but the site does include a number of exclusive lines.” (Warren, 2000)

If you already sell products offline, moving online may not be as simple as putting pictures of your products on your website. Here the Popcorn Factory specifically faced a navigation issue. They didn’t want to overwhelm users. Nevertheless, not all products are tailored to the online world. For example, a clothing store that sells suits and dress shoes will probably find dress shoes are far easier to sell online than suits. Clothing that needs to be tried on first may be harder to sell than shoes that have fairly universal sizes. Such differences may affect policies such as return policies. Return policies online may have to be different than the return policy you’ve used successfully in the past.

These are just some of the things to think about. There are probably dozens of factors I could list. However, hopefully you see the point. When you decide to go online make sure you think through how the customer’s preferences are different online than when he is buying from you in your store or even over the phone. Your online policies, prices, product descriptions, may need to be different.

This brings us to our last point.

The Popcorn Factory's products are well suited to being delivered by mail. The Popcorn Factory started as a mail-order business, so their products are already nicely suited to being delivered through mail. What does this mean for those of us who don’t have mail-order businesses to learn from? We can take a look at the products we’re trying to sell online and make sure they really fit the online purchasing model. For example, the majority of cars will probably always be purchased locally. The internet is a powerful marketing tool for cars, but most customers want to test drive the car they ultimately buy. On the other hand, tin cans of popcorn are very easy to sell online. The cost is low; if you don’t like the popcorn, you’re not out a lot of money. Popcorn is a pretty standard product that is hard to mess up, so there isn’t much fear of completely botched service.

Thus, it is wise to ask yourself the following questions: Do customers understand your product well enough that they would feel comfortable buying it online? Is your product’s value proposition only convincing when seen in person? All of these factors will affect your conversion rate. Again, these factors are far more important than the overall look and feel of your website.

In conclusion, product selection on your website is going to have a larger impact on your conversion rate, than even the best website design can have. The Popcorn Factory achieves a high conversion rate, not because of outstanding website design, but because of outstanding products. Focus intensely at improving the product selection on your website and you will naturally see an improved conversion rate.

References:
MarketingCharts.com. 2007. “Top 10 Online Retailers by Conversion Rate - December 2007”
Eisenberg, Bryan. January 29th, 2008. “Top 10 Online Retailers by Conversion Rate: 12/2007”
Esenberg, Bryan. February 3rd, 2008. “Top 10 Online Retailers by Conversion Rate: An Analysis”
Warren, Liz. May 18, 2000. “Positive approach to e-business will pay dividends for SMEs”

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What is a Good Website Conversion Rate?

By Ayo Ijidakinro

Top ten websites by conversion rate in December 2007.
Chart based on marketing research data from MarketingCharts.com.

Summary: The best retail websites have a double digit conversion rate. If you are a retail website you do well to set a conversion rate target of greater than 5%. However, some websites, especially those that also mail customers a print catalog, can obtain a site conversion rate greater than 10%.

Just what is a good website conversion rate? For reference, Amazon.com had a 17.6% conversion rate in December 2007. This number can help us set a baseline goal for our websites.

Your website conversion rate should be one of your most tracked website statistics. Why? Because it doesn't matter how many visitors you have; if your conversion rate is zero that means your website has generated zero business. Thus, improving your conversion rate is often the most reliable and cost-efficient way to increase your sales.

Your conversion rate is calculated by dividing the number of website visitors who spent money with your company by the total number of visitors to your website. For example, if your website had 10 purchases last month and you had 100 total visitors, then your conversion rate would be 10% (e.g. 10% of customers spent money on your website).

A well designed website is generally going to have a higher conversion rate. You do well to ask yourself:
  1. What is my conversion rate today?
  2. Am I happy with my current conversion rate?
  3. Is my current conversion rate good for my industry?
  4. What can I do to improve my conversion rate?
Unfortunately, conversion rate statistics for each industry are difficult to find. I did, however, come across data from MarketingCharts.com that lists the top 10 websites on the internet by their conversion rate!

What can we learn from this list? I can identify at least two lessons:
  1. That conversion rates in excess of 10% are possible for a retail site. Compare this to your site.
  2. That sites that send out a physical catalog to customers dominate the conversion rate list. Perhaps you can include direct mail marketing in your budget.
This list leaves us with some questions. For example, what makes The Popcorn Factory such a successful website?

If we can learn lessons from successful websites that have proven their ability to convert website visitors into paying customers, then we can generate more income from our websites.

To accomplish this, I will soon be analyzing some of the companies from this list and sharing that analysis on my website. Please check back for the analysis.

In the meantime, why don't you examine these top ten websites and see if you can determine why they are so successful at converting website visitors into paying customers. Then apply these lessons to your website. If you'd like help improving your site's conversion rate, give me a call and tell me that you're looking for help improving your website's sales.

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Increase Site Conversion By Making Text on Your Site Scannable

By Ayo Ijidakinro

Studies of how users read on the Web found that they do not actually read: instead, they scan the text. A study of five different writing styles found that a sample Web site scored 58% higher in measured usability when it was written concisely, 47% higher when the text was scannable, and 27% higher when it was written in an objective style instead of the promotional style used in the control condition and many current Web pages. Combining these three changes into a single site that was concise, scannable, and objective at the same time resulted in 124% higher measured usability. Such improved usability will increase your site's conversion rate.

Read the full Alertbox at: Jakob Nielson Alertbox - Writing for the Web

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