Ecommerce conversion rate: optimization and misconceptions
Regardless of the goals of your company, there are some important factors in the confusing world of online marketing which are essential for the efficient online marketing strategy: conversion, its measurement and its optimization, and conversion rate.
Before going any further, first we need to clarify the following questions:
- What is conversion?
- What does conversion rate mean?
- How to distinguish micro and macro conversion from each other?
- What not to do when optimizing conversion?
- What problems may arise in connection with the conversion rate?
- What can increase the conversion rate?
Before unnecessarily spending money on inappropriate optimization, let’s see what conversion is!
Consequently, conversion doesn’t only concern the revenue of the business, but the following as well:
- PDF downloads,
- video views,
- new users,
- predetermined time spent on the site (e.g. minimum 3 minutes),
- requests for offers,
- subscriptions to the newsletter.
You distinguish between the mentioned conversions taking into consideration the goals of your company.
The question therefore arises: according to what aspects can you weight them?
The answer is extremely simple.
Micro and Macro conversions
A great deal of data is accumulated every day in the case of an online enterprise or an ecommerce store, and for the interpretation of these – based on the importance of your goal – a distinction is made between micro and macro conversions. The question of which is which, depends on what the main reason for the creation of the website is, and also, what kind of milestones you set in the stages of becoming a customer.
Micro conversion is a sub-target, and reaching it leads the user towards the ultimate goal (macro conversion). Micro conversion may be for example:
- banner reach
- video view
- time spent on your blog page (e.g. minimum 3 minutes)
- subscription to the newsletter
Macro conversion is the main goal set for your website, your application, in other words, the purpose that you created it for. Such a purpose may be:
- click on advertisements
- request for offer
- donation, e.g. in case of non-profit organizations
It can help you a lot with the optimization of the aforementioned conversions, if you plan and continuously measure which of your goals you would like to increase on the different levels of the AARRR (Acquisition, Activation, Retention, Referral, Revenue) model.
And now, let’s review how conversions can be measured!
Measurement of conversion
Making it possible to measure conversions is recognized as the first step of conversion optimization. Without this, neither the process, nor the (indirect) increase of the revenue can be realized, because:
- the data that could be improved are missing, or
- it may also happen that the analysing software applications themselves give you a false picture of your online marketing communications activities.
How to calculate the conversion rate?
After having done the measurement, calculation of your conversion rate is extremely important, since you will be able to increase your revenues and optimize your sub-targets with its help.
Let’s see how you can calculate all this with the help of Google Analytics!
The number of all accomplished goals of the analysed period divided by all the actions performed – carried out by the users – on the given website during the analysed period.
The number of those attaining a goal divided by the number of the site visitors.
This formula is not perfect, we will get back to the arising problems in the second half of this article.
Until then, in order to get a clearer picture, we will try to demonstrate the calculation of the conversion rate in Google Analytics through the following example.
- 2856 sessions were performed by the arriving users,
- the number of goals (transactions) accomplished so far is 29.
Therefore, the ecommerce conversion rate in this case will be 0.89%.
As the above table shows, with the help of Google Analytics you can analyse your data and your conversions in breakdowns:
- of either communication channels,
- or of campaigns.
Problems arising in connection with the conversion rate
Before calculating, analysing the conversion rate, or carrying out the online marketing communication of your company based on the data, you should by no means disregard the factors that can distort the data.
Such factors may be for example:
- In case you cannot properly set your goals on the interface of Google Analytics. (For instance, viewing the Request for Offer page is also considered a goal, even though the actual request for an offer has not happened, whereas that would exactly be the real purpose of the webpage.)
- If the appropriate filters are not set for the irrelevant IP addresses (a solution for this may be if you exclude the IP addresses within the company and/or those of the developers working on the website, thus facilitating that they don’t worsen the conversion rate.)
- In case you examine the total number of previous conversions instead of the factual conversion. (For example if the newsletter subscriptions are taken into consideration as well, although, this time, you would regard only the purchases as conversions.)
- If the calculation itself is carried out based on the wrong indicator. (For example if in Google Analytics the default setting for the calculation of the conversion rate is the following: conversion rate = number of conversions / total number of sessions, even though you would get more accurate data if you used the number of conversions / total number of users (conversion/users). That’s something to think about. Because if you have a user who visited the site, say, 100 times and he has even purchased a product once, his conversion rate will only be 1% according to Google Analytics. However, the correct data in fact is 100%, since this user purchased, which means he converted!)
What can be considered a good conversion rate?
As soon as you manage to set the goals, the data will start accumulating, based on which the company’s own conversion rates will take shape.
At this point, you should ask yourself the following two questions:
- How correct these numbers are?
- How much can they be increased within reasonable limits?
A marketing manager would answer to this that it’s all being tested. In other words, different conversion rates will be appropriate depending on the company profile and the target group, and other factors (for example the price of the product) may also have an influence on the rates.
The conversion rate of three quarters of the AdWords GDN campaigns under examination was less than 1%. In case of half of the AdWords Search campaigns, this value is above 3%. In the second quarter of 2015, the average of the examined data (taking into account every industrial sector) was 2.7% in case of AdWords Search and 0.89% in case of the GDN campaigns.
The data was provided by companies with a total AdWords spending of 34.4 million dollars, thus demonstrating the importance of the research. In the survey of WordStream, data of the Google AdWords campaigns of the companies operating in various industrial sectors appear, which you can check out here.
Among the industrial sectors included in the research, the following are worth mentioning:
- car industry,
- real estate sector,
- business to business (B2B),
- ecommerce (online shops),
- healthcare, etc.
Having read the foregoing, the question may arise:
Why does the conversion rate need to be increased?
It happens many times that your website has a large number of visitors, but that doesn’t get you very far, if the visitors don’t perform actions that support the true purpose of the website, in other words, if they don’t convert.
This is where conversion optimization comes into the picture, which is considered to be one of the most useful marketing activities, as the majority of the further expenses dedicated to marketing communication can be avoided with it.
Many times it’s enough to change the marketing communication, for example:
- new, different message,
- a button of a different colour,
- different CTA buttons
- A/B testing (for the testing of all these and for the identification of the efficient solution).
What does not increase the conversion rate?
We’ve arrived to the point of our article where hopefully all kinds of myths that are about the increase of the number of conversions will be dispelled.
AdWords advertisements with higher search page positions
In case of AdWords advertisements, many people think that the reach of high advertisement positions is a conversion increasing factor, based on the assumption that if you are higher on the search lists, people will purchase from you.
However, that’s a mistake, since the higher advertisement position doesn’t have a significant effect on the increase of the conversion.
On the following graph, we demonstrate the relationship between the conversion rates of the average AdWords Search campaign and the average search result position:
AdWords advertisements with higher click-through rates
Researches carried out by Search Engine Land and WordStream show that the advertisements with higher click-through rates don’t contribute to the increase of the conversion either, which means that the click-through rate (CTR) does not directly influence, or has only minimal direct effect on, the conversion rate.
The following graph demonstrates the relationship between the average AdWords Search campaign and the click-through rate:
What influences the increase of the conversion rate then?
The data above show which tools have no effect on the increase of the conversion rate. It’s time to check out what you need to focus on in order to be successful.
The most important stage of becoming a customer (or in other words converting) is when you continuously communicate with the users who, let’s put it this way, reached a certain level on the scale of interest that you determined.
You can use the following tools for your remarketing campaigns:
- Google AdWords
Remarketing, however, doesn’t happen overnight.
Time is necessary for the planning of the segments (different interests, levels), and also for the remarketing lists to be “filled up”.
If these lists are filled up by the visitors actually showing interest, you will have a much easier job, since you will be able to reach the visitors with different intentions with much more targeted advertisements.
However, before launching a campaign like this, it’s worth making sure that its goal doesn’t clash with those of other, already running campaigns. You should make it a part of the whole campaign strategy!
Landing page and its quality
The high click-through rate of you advertisements is worth nothing if you can’t capture the visitors arriving on your landing page with the created CTA options/lead generating boxes, remarketing pixels, or if the ones arriving on the page don’t get what they expected based on the advertisement.
It’s of vital importance from the point of view of your online campaigns that you make good advertisements, which contain quality (from a technical aspect and from the point of view of content and user experience as well) and well converting messages. Since the success of these campaigns depends on a lot of factors, the thorough planning and implementation dedicated to the landing page is important, as it can contribute to the increase of the conversion rate.
Dynamic Search Ads
This tool may be one of the most returning and even more profitable form of Google advertisements for the ecommerce stores, because with its help it becomes unnecessary to find new search terms or to write new pieces of ad copy for each product. These are done by Google, specifically by assessing the text belonging to your landing page and by creating a title based on the search of the user.
This looks like the following:
A great deal of data accumulates during your online campaigns, and they all become useless without measurement and interpretation. Consequently, continuous measurement and the consequent testing become the most important conversion optimization tools.
Above we’ve already mentioned Google Analytics as one of the most appropriate measurement tools, however, in addition to this analytical software application, several other analytical tools are at your disposal: