The Average Conversion Rate: Is It a Myth?

  |  February 1, 2008   |  Comments

Online marketers have embraced conversion rates of 2 to 3 percent when they should be aiming higher. Here's why.

According to "American Heritage Dictionary," a "myth" is "a popular belief or story that has become associated with a person, institution, or occurrence, especially one considered to illustrate a cultural ideal." Sometimes a myth is used to inspire. So is the average conversion rate, the percentage of site visitors who make a purchase or some other transaction, reality, a myth, or a nightmare?

Dr. Pete (a.k.a. Peter Meyers) recently posted the following in response to something I wrote about conversion rates:

Whenever people talk about conversion rates, they all seem to quote an average of 2-3%. The problem is that, over time, I've noticed another phenomenon: no one ever seems to back this up with data. Ultimately, 2-3% conversion seems to be a bit like Bigfoot or, at best, a friend-of-a-friend statistic: "my cousin's sister's hairdresser said she read in Business Week that the average website gets 2-3% conversion."

Here's some of my response to Dr. Pete:

Let me address a couple of your points. First the 2-3% average conversion rate comes from a few different sources. The one I typically quote comes from Shop.org that releases their annual benchmark of all their affiliated members. This one is a bit harder to be sure they all are measuring in the exact same way. However, another publicly available source is the FireClick index (here every retailer is being measured with the same software and methodology). Last week, the average global conversion rate was 2.4%. This is also consistent with other non published benchmarks I have seen through out the years such as data from WebSideStory's StatMarket, CoreMetrics Benchmarks and my 10+ years of experience optimizing website conversion rates. I can't agree that this 2-3% is mythical.

Dr. Pete concludes the discussion by making a valid argument for other key performance indicators (KPIs) and correctly states that even a small increase in conversion rate can mean substantial top-line increases for certain businesses. He also seems to suggest that some businesses may be aiming too high even when striving for the average 2 to 3 percent conversion rate. Sadly, this is true.

Why, then, is 2 to 3 percent a mythical conversion rate for some? Have we set our sights on a nightmare?

Aiming for the Gutter?

As far as I can tell, the willingness to embrace the average 2 to 3 percent conversion rate as a good benchmark of site performance is likely rooted in average direct mail response rates, as these marketers were early online adopters. From Gaebler Ventures:

One company we've worked with is an office supplies company. They get a 1% response rate when mailing to prospects. When they target current customers, their response rate doubles to 2%.

As for industry averages, the DMA analyzed 1,122 industry-specific campaigns and determined that the average response rate for direct mail was 2.61%.

Direct mail is a long-established marketing practice and shouldn't be compared to online marketing. Almost all direct mail is implicit. It's a push-marketing method.

Online, the game's completely different. Almost all online actions are explicit, and each action reveals some degree of the intent of the person taking that action. When someone arrives at your site with a need you can fulfill, she comes with a degree of intent and is more than likely somewhere in the buying process for what you sell. Even if you factor out accidental traffic, the percentage of convertible traffic should convert at a much higher rate than 2 to 3 percent on average.

The sites that should convert 2 to 3 percent of their traffic are the exception, not the rule. I've long stated that sites that convert less than 10 percent should be concerned. Consider this along with the rising cost of online traffic, and the concern becomes a nightmare. Too many online marketers are spending too much money and time throwing too much unqualified traffic at their sites, then tweaking their traffic quality trying to reach the 2 to 3 percent mythical conversion rate.

If more online marketers focused their efforts on studying visitor intent and site optimization, instead of just driving traffic, their average conversion rates would be much, much higher. Many sites are wildly successful using this strategy:

Retailer Conversion rate (%)
Proflowers 14.1
Coldwater Creek 13.3
FTD.com 13.0
QVC 12.8
Office Depot 12.4
eBay 11.5
Lands' End 11.5
Tickets.com 11.2
1-800-Flowers.com 10.0
Amazon.com 9.6

In short, most sites shouldn't be satisfied with the industry average. Are you aiming for the gutter, or are you inspired by those that have moved well beyond the average?

Let me know how you've pushed passed the myth.

Meet Bryan at SES London February 19-21.

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ABOUT THE AUTHOR

Bryan Eisenberg

Bryan Eisenberg is co-founder and chief marketing officer (CMO) of IdealSpot. He is co-author of the Wall Street Journal, Amazon, BusinessWeek, and New York Times best-selling books Call to Action, Waiting For Your Cat to Bark?, and Always Be Testing, and Buyer Legends. Bryan is a keynote speaker and has keynoted conferences globally such as Gultaggen, Shop.org, Direct Marketing Association, MarketingSherpa, Econsultancy, Webcom, the Canadian Marketing Association, and others for the past 10 years. Bryan was named a winner of the Marketing Edge's Rising Stars Awards, recognized by eConsultancy members as one of the top 10 User Experience Gurus, selected as one of the inaugural iMedia Top 25 Marketers, and has been recognized as most influential in PPC, Social Selling, OmniChannel Retail. Bryan serves as an advisory board member of several venture capital backed companies such as Sightly, UserTesting, Monetate, ChatID, Nomi, and BazaarVoice. He works with his co-author and brother Jeffrey Eisenberg. You can find them at BryanEisenberg.com.

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