When visitors reach an online store, some of them will purchase products or services. Others will choose to go somewhere else on the Internet. If you count all of your traffic as a 100% metric, the conversion rate is the percentage of the total that decided to buy something.
The conversion rate measures a company’s performance during an advertising campaign. Although it is possible to gather this information during in-person shopping, most businesses use it for their online outreach efforts.
Cost-per-click (CPC) advertising and the click-through rate(CTR) describe the conversion rate metric's first step. When a company know show many people click on their ads, the incoming traffic levels serve as the foundation for this information.
If an e-commerce platform has four people out of 100 make a purchase, that means their conversion rate would be 4%.
Since most websites have more visitors than 100 per day, the mathematics expands to whatever traffic levels they achieve. If the company gets 10,000 visitors daily with 400 sales, they'd still earn the 4% conversion rate.
A conversion rate often tracks sales, but it can also monitor specific visitor behaviors. Companies can designate a business call, form submission, subscription signup, or site registration to get tracked by this metric.
Conversion rate metrics operate on a large scale. If a business converts four people out of 100, that information isn’t enough to understand a trend. It’s entirely possible that someone in that group had an accidental conversion.
When companies get 10,000 or 100,000 people as a sample, the data becomes more dependable.
The one metric that a conversion rate doesn’t track involves multiple sales from the same individual. Companies that get numerous repeat customers might opt to follow their “click conversion rate” instead.
Customer Lifetime Value (CLV) represents the total funds a consumer spends at a business for products and services without any specific time measurements restricting the data.
The shopping cart abandonment rate is a metric that reviews the percentage of online shoppers who add an item to a cart or bag without buying those items.
Advertising Cost of Sale (ACoS) is a common Amazon metric that reflects the actual expense of generating revenues from customer transactions due to advertising.