Achieving a high conversion rate is the golden ticket for online businesses and appears to be the one metric that means money in the bank. In terms of defining what the average conversion rate for online business is, the answer varies depending on the niche your business is in. We need to go back to a 2012 Marketing Sherpa survey to find the last available list of reliable data across different industries.
It is apparent that retail/ecommerce industries struggle the most with a 3% conversion rate; only non-profits have a worse hit rate. Professional & financial services and media & publishing have the highest rate of all with 10% on average.
Defining the Conversion Rate
The difference in conversion rates outlined can be explained through a variety of factors, not least the budgets used by the industries mentioned and the numerous marketing channels used. However, it is also worth noting that the very meaning of the term ‘conversion rate’ will vary depending on the industry. For example, it can mean anything from actual sales to newsletter subscription or the downloading of an eBook.
One of the reasons why professional & financial services might have a seemingly high conversion rate is because conversion rate often refers to the capturing of an email address in exchange for a free download. Likewise, media outlets consider a free newsletter subscription as a successful conversion of a customer.
In contrast, non-profits appear to perform so poorly because they are looking for people to donate cash to their cause which is of course much more difficult than merely giving up an email address. When it comes to retail and ecommerce sites, conversion will depend on their product lines. For example, a store specialising in designer dresses costing $100+ will probably not sell as much as a sports store with various items on sale for less than $10.
What Is a ‘Good’ Conversion Rate?
Again, there are multiple factors involved. For example, if you are using Pay-Per-Click (PPC) advertising and paying $1 per click with a 15% conversion rate, it would seem as if you are faring extremely well. However, this is certainly not the case if you are only making $1.75 profit per sale. In contrast, you could have an apparently dismal conversion rate of 0.3% but if your company website manages to drive leads for equipment worth $50,000+, your seemingly ‘low’ conversion rate could lead to fantastic revenue.
Consider the examples below and decide which one you would rather have:
200 visitors per day with a 10% conversion rate. 1,000 visitors per day with a 2% conversion rate. 10,000 visitors per day with a 0.4% conversion rate.
While you should always look to increase your conversion rate, the bottom line is that total sales should be your first priority and using the (admittedly extreme) examples above, option 3 leads to 40 sales a day against 20 sales a day in options 1&2. Of course, you also have to consider the cost of advertising in all of the examples.
The other great thing about option 3 is that you are already getting great traffic so the ultimate goal is to increase conversion rate. Increasing your existing 0.4% conversion rate to 2% is actually easier than improving your traffic tenfold.
What is Possible?
In the aforementioned Marketing Sherpa report:
17% of respondents enjoyed a conversion rate of over 10% on organic traffic 41% of companies had a conversion rate of 2% or less 1% of companies managed an incredible 60%! In terms of PPC traffic, 22% of companies had conversion rates of over 10% 2% of businesses achieved a 60% conversion rate.
While it is certainly not easy to achieve conversion rate greatness, it’s likely that you can fare much better than your current results.
In future posts, I will look at the different methods of advertising and discover the typical conversion rate you can expect to achieve. I will also provide you with essential conversion rate tips that will add thousands of dollars to your end of year profits.