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Quick guide to measuring online conversion |
By Debbie Weil (Article updated January 30, 2004)
Success in online marketing boils down to two factors: more traffic and higher conversion. Bottom-line, conversion means turning a visitor to your site into a customer. Conversion can also mean more sign-ups for your newsletter or downloads of your white paper.
Traffic vs. conversion
Let's stick with sales for a moment. It may require a sizeable ad budget to drive massive amounts of traffic to your site. But a small stream of targeted traffic may be just as good.
Here's why: no matter how small your budget or number of visitors, you can improve your conversion to sales with clearer and more persuasive copy, a credible site, a gotta-have product or service, an easy-to-use shopping cart, etc.
Higher conversion of a lower number of visitors translates to more revenue.
Why conversion is the key metric
As online conversion expert Jeffrey Eisenberg, CEO of Future Now, puts it: ìTraffic doesn't show up on your balance sheet. If you don't convert, it doesn't matter if you have 20 million visitors. Your conversion rate is the number you plug into an equation as the predictor of your success.î
In other words, conversion is where marketing meets sales. Explains emetrics expert and consultant Jim Sterne, "Everything you do online has to result in a sale or you're spinning your wheels.
Understanding the steps from awareness to purchase enables you to increase your number of sales."
"The purpose of measuring these discrete steps from awareness to purchase is to identify where changes to your site, your copy, your promotions are helping or hindering," Sterne said.
Keeping score
E-book author and Microsoft Office training expert Richard Kraneis explains it this way: ìI'm a numbers guy. You can't win unless you keep score. Once I got over the excitement of selling the first copy of my e-book, The World's Shortest Excel Book, and then my first 5 books in one day, I had to figure out if it was profitable.î
He set up a spreadsheet and discovered ñ to his horror ñ that his conversion rate (number of sales divided by number of visitors to his Web page) was .3% or three tenths of one percent. His Google Ad campaign was costing him more than what he was making in e-book sales.
Improving his conversion
Richard lay awake for nights fretting over this spreadsheet (remember, he's a numbers guy). Then he took action.
He re-wrote the copy on his sales page to make it more positive and more benefits-oriented. The headline ìAre you afraid of Excel?î turned into ìMake Excel your friend.î He commissioned a professional-looking cover for his e-book. He added some bonus downloads (sample spreadsheets).
Weeks passed and he kept measuring his Google Ad click-throughs and the number of sales. Finally, sales began to tick up. He threw more numbers into his spreadsheet and discovered that his fledgling e-book was now a profitable venture.
Measuring profitability
Actually, there's a bit more to it than that. His carefully constructed spreadsheet is a model of clarity and logic. It takes into account the price of his e-book, the number of copies sold, transaction costs, the cost of his Google campaign, his estimated profit (or loss) per day and more. In other words, all the moving parts that lead up to conversion to sale.
The secret...
Online conversion is a bigger concept than "visitors who turn into customers." It's what underlies the success of every profitable Web site, whether it's Amazon, Ebay or a single page selling one e-book.
To truly grasp what ROI (return on investment) means, you don't need to be a math genius. You do need to understand the key metrics and calculations behind online conversion.
Once you do, you'll experience a *bingo* moment. Hey, you may discover you're a closet numbers person!
Useful Links
Drilling Down
Handbook: Turning Customer Data Into Profits
Download a free chapter of this hands-on guide. Complete version includes analysis
software.
Future Now's conversion calculators
Jim Sterne's Emetrics.org site
Conversion Chronicles
Site & newsletter about online conversion.
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Sterne's handbook for marketers: 
