Conversion rate is one of the key performance indicators (KPIs) in measuring how a business performs and informing actions for improvement. It is the percentage of the people who take the desired action. Technically conversion rate measures the outcomes of the customers’ interactions with the business. Along with other KPIs, conversion rate also informs how these interactions are being done and helps businesses tackle related problems.
Based on the business goals, conversion rate can measure a variety of desired actions, from purchasing or joining a mailing list to simply hitting the Facebook ’Like’ button.
Understanding online store conversion rate will help you to devise strategies to improve both your consumer’s experience and your store’s performance
The easiest way to understand online store conversion rate is to think of the sales conversion rate in physical store. An example: on March 16, Jo’s denim shop in a CBD shopping mall was given a target of 10% sales conversion rate. It had a total visit of 2,000 people, but only 100 people made the purchases.
Based on the above numbers, we understand:
1. Jo’s sales conversion rate on March 16 was 5%;
2. It was 5% lower than target, which means Jo failed to convert 100 more visitors to customers.
If we try to understand why Jo’s sales conversion rate was much lower than target, we could be biased to make assumption that he under-performed that day. Yet everything else other than Jo’s performance (for example, events in the CBD, product availability and customer behaviours) could have an impact on the low conversion rate too. It is misleading to judge the business performance by looking at the conversion rate alone, but the nature of a traditional physical store means that the ability track and measure other factors that could affect performance is very limited.
The same theory applies to an online store, except that it is much easier to gain a better understanding of conversion rates through in-depth statistics of customer interactions with the store. For example in Jo’s case, if it was an online shop he would be able to obtain more useful figures such as the number of unique visitors, average time spent on site and the number of customers who abandoned their shopping carts. Understanding this data will help Jo come up with efficient solutions to increase his conversion rate.
We are probably making it sound much easier than it is. The reality is that today’s online consumer journey is more complicated than ever before and one can easily get lost in the sea of overwhelming data.
Therefore, before you dive into your data and analyse the conversion rate for your online store, here are five things you should do:
1. Make sure you are speaking to the right target audience
Be relevant, otherwise you will suffer from high bounce rate and low conversion rates. If you gain a lot of online attention with a blog post that doesn’t tie in with your products, you may get three times more visitors than usual but your sales conversion rate will be much lower as the number of sales will likely remain steady. If abnormality occurs, i.e. dramatic jumps or drops in your stats, analyse why and how it happened.
2. Factor in all the elements that could influence your conversion rates
The two key components of the conversion rate formula are desired outcomes and total visits. These may vary over time and can be easily influenced by many factors, such as traffic sources, frequency of customer outreach, advertising campaigns, seasons, price elasticity or unpredictable events. For example, sending out newsletter is an effective way of acquiring more traffic, which could potentially increase sales. But if your call-to-action is unclear or the contents of your store don’t meet your subscriber’s expectations, you will likely suffer from much lower conversion rates than other days when you send a more persuasive newsletter.
3. Compare your online store to the ones that you think convert well
Learn about the selling tactics and user experience of the eCommerce leaders as well as your industry competitors. Things that others are doing better than you will inspire you to fix existing problems. We are all customers in the digital space after all. Tactics that work on you have a good chance of working well for the customers of your products too.
4. Analyse conversion rates on different devices based on user behaviour rather than numbers
From Monetate’s Q4 2014 Ecommerce Quarterly, sales conversion rate on smartphone is three times lower than desktop (smartphone 0.8% vs. desktop 2.78%). But does that mean mobile users are making less purchases? Let us not forget our own mobile behaviours – we tend to pick up our phones in between different activities. We could be doing research on our phones for a short while and jump to a bigger screen to make a purchase later on. Therefore, don’t be shocked when your low mobile sales conversion rate is revealed. Focus on making your online store responsive, improving your mobile UX and implementing strategy to retain potential customers.
5. Set goals in analytical tools
‘Goals’ in Google Analytics allows you to set goals targeting different groups of users and monitor their activities on your store. If set properly, this can be a powerful tool for you to understand where the strengths and weaknesses of your business are and work out strategies targeting users based on the sales funnel.
We will be sharing ways to increase conversion rate in our next eCommerce article. In the meanwhile, we’d also love to hear about your business and provide you highly tailored solution to increase online sales. Please feel free to call us on Sydney +61 (0) 2 9519 9922 or email [email protected]