Calculate Your Conversion Rates

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Measuring site performance is vital. Yet many of us have trouble understanding exactly what should be measured. Obviously, an essential key performance indicator (KPI) for all sites is conversion rate. In addition to overall conversion rate, there are two others. Let's explore all three:

• Overall conversion rate: Total number of actions considered conversion divided by total number of visits. This is a site's overall effectiveness rating for getting visitors to fulfill your goals within a single visit.
  
  
• Scenario conversion rate: Total number of visitors starting a specific scenario divided by total number who complete it. Scenario conversion rates enable you to quickly identify specific conversion processes that require improvement or ones whose successes should be modeled.
  
  
• Conversion over time: Several measures that reveal a site's effectiveness in generating conversions over time. Use this for situations where conversion is likely to occur over time or multiple visits.

Overall Conversion Rate

Overall conversion rate accounts for people having numerous goals when visiting a Web site. Probably you do, too. It provides a more accurate picture of how effectively a Web site serves people and accomplishes your goals on a per-visit basis.

Generally, it should be used only to evaluate broad, sweeping changes. Use it to evaluate the results of a site redesign, a specific marketing campaign, or new site-search technology.

Scenario Conversion Rate

Most efforts require more finite measures for evaluation and improvement. Everything you do ultimately affects scenario conversion rates. Actions are tied to goals, the success of which are measured using scenario conversion rates.

If this metric increases or decreases, you need further analysis to determine why. With this metric, you'll see which marketing campaigns, affiliate relationships, or PPC (define) search engine keywords positively affected your scenario conversion rates. Everything on your site: new content, navigation, promotions, calls to action, and merchandising, can be measured to determine if it contributes or detracts from the scenario conversion rate.

Conversion Over Time

Conversion is a process, not an isolated event. A purchase decision is the culmination of that process. It may take place almost instantaneously or stretch out over a long time. For this reason, it's important to consider not all visitors are prepared or even inclined to convert on their first site visit. Sometimes, conversion is the result of multiple visits. This is why measuring conversion rates as buying sessions over total sessions isn't the best way to calculate conversion rates.

A new marketing campaign, for example, attracts a lot of visitors to the first few steps of your scenario. Perhaps it takes an average of five visits before conversion. Evaluate initial conversion rates from this scenario accordingly. Until you achieve a five-visit frequency, don't gauge a low conversion rate too harshly or assume it's not working.

In the early phase, focus on getting visitors to the scenario and keeping them engaged. This may entail marketing tactics designed to encourage repeat visits and shortening the average number of visits required for conversion.

To understand conversion over time for your site, these visitor history measures are useful:

• Days between first visit and first purchase. "Purchase" can be any form of conversion you define, such as collecting lead-generation information. How quickly does your site generate conversions?
  
  
• Number of visits between purchases. How many visits occur before more purchases are made? Use this to understand repeat buying behavior of audience segments.
  
  
• Days since most recent purchase. How recently have visitor segments made purchases? Have most visitors made purchases in the past 30 days? Has a significant portion of your audience not made a purchase in the last 90 days?
  
  
• Number of total purchases (purchase count) and lifetime value. How many purchases have visitors made, and what is their lifetime value?

You can also examine visitor frequency, recency, and latency by purchase count and lifetime value to understand the effect more recent or frequent visits or shorter time between visits have on conversion. Also consider whether visitors who convert once return to convert again.

Calculating overall conversion rate is admirable and necessary, but it's not the only indicator of a site's ability to persuade. Dig a little deeper, and calculate all three conversion rates. You'll likely uncover a wealth of information you can use to continually optimize and keep your site a lean, mean persuasion machine.

Today's column ran earlier on ClickZ.