Conversion rate

Conversion rate measures the proportion of an eligible audience that completes a defined action. The action may be a purchase, but it can also be a quote request, registration, download or another meaningful step. After a business attracts people to a store, website or sales process, this indicator shows how effectively that attention becomes progress or revenue.

When to use it

• Answer the key performance question: “To what extent are we able to convert potential customers into actual customers?”
• Assess this KPI within the Marketing and sales perspective.
• Plan data collection, formula use, reporting frequency, and data-source requirements for this KPI.
• Compare results against the targets, benchmarks, examples, or trend guidance available for this KPI.

Origins

Conversion measurement predates the web in direct-response advertising, mail order and sales-funnel management, where marketers divided desired responses by the audience exposed or contacted. Digital commerce made the measure immediate and granular during the 1990s. Its apparent simplicity hides a design choice: both the qualifying population and the conversion event must be defined, and attribution across multiple contacts must be handled consistently.

What it is

Perspective: Marketing and sales perspective.

Key performance question: To what extent are we able to convert potential customers into actual customers?

A conversion must be defined in relation to the objective. In a physical setting it might be a store visitor who buys an item or asks for a quotation. Online, it could be an order, telephone call, membership registration, newsletter subscription, software download or another response to marketing or content.

The measure exposes whether marketing, selling and operations work together. If 500 people arrive at a site or shop and none buys, the problem may be mismatched expectations, poor navigation, unavailable products, weak service or an unacceptable price. Conversion identifies the break; diagnosis still requires evidence about its cause.

The term covers several related measures, including:

• Visitor sales conversion rates
• Lead generation conversion rates
• Click-through rates
• Tender or quote conversion rates

How to use it

Measurement

Data collection method

Match collection to the environment and define the unit before calculating. Web analytics can follow eligible users through the funnel from an initial prompt to a target action such as a purchase. Physical retailers may compare entrance-counter data with transaction counts. More advanced camera and software systems can automate visitor-flow and conversion reporting, subject to privacy and data-protection requirements.