Conversion rate (CVR) is a key metric in digital marketing and e-commerce that represents the percentage of users who take a desired action. The specific action can vary depending on the context; it could be making a purchase, signing up for a newsletter, filling out a contact form, downloading a software, or any other goal set by a website or campaign.
Conversion Rate = (Number of Conversions/Total Number of Visitors*) × 100%
For example, if an online store receives 1,000 visitors* in a month and 50 of them make a purchase, the conversion rate would be:
In this scenario, the store has a 5% conversion rate.
*You’ll notice we have included an asterisk with ‘visitors’, as some definitions might not be as straightforward. You could also be using ‘sessions’ or ‘clicks’ as your formula’s denominator. Make sure your CVR definition is clear to you and your key personnel.
Efficiency Measurement: It helps gauge the effectiveness of marketing campaigns, website design, user experience, and other factors in prompting users to take the desired action.
ROI: A higher conversion rate generally means a better return on investment (ROI) for marketing efforts.
Optimization: By knowing your conversion rate, you can test changes to your website or marketing strategies to see if they lead to improvements. This is often done through A/B testing.
Cost Management: Boosting your conversion rate can be more cost-effective than trying to increase traffic. For example, improving the conversion rate from 2% to 4% effectively doubles the number of conversions without having to double the traffic.
While the conversion rate is a valuable metric, it’s essential to interpret it in context and consider other related metrics, like average order value, customer lifetime value, and acquisition costs, to get a comprehensive view of a business’s performance.
