How to calculate conversion for a webshop?

Calculating conversion rates is no rocket science, but it is essential data to be able to measure performance.

How is the conversion rate calculated? For a website, the actions we define as targets are divided by the number of visitors and multiplied by a hundred, and the resulting conversion rate is an excellent metric for our website's performance.

The goal of the conversion can be anything, whether it’s getting a registered user, downloading an e-book or file, or just making a purchase. While in the case of the former, conversion is merely an indicator of the success of a website, in the case of webshops, whose main profile is online sales, this is one of the most important indicators by which we can measure the success of our business.

What are the key parameters to consider when calculating a conversion rate for a webshop, and what tricks can you use to further increase that rate?

In addition to the conversion rate, there is no harm in paying attention to customer lifetime value, the Customer Acquisition Cost, the average order value, or the ranking of each traffic source. 

Customer lifetime value

Customer lifetime value shows the average amount of revenue a customer brings to a company from acquisition to loss. With this value, it is easier for us to decide what the maximum value is still worth spending to get a new customer.

Customer Acquisition Cost

So the main idea is: Customer Acquisition Cost should definitely be lower than the customer lifetime value since in this case, we don’t make money on a single customer.

Average order value

In order to determine profit and customer lifetime value, in addition to our profit rate, we obviously need to be aware of the average value of an order. Of course, our goal is to keep this value as high as possible, which allows us to decide which products to offer in a package, which add-on to offer, or what upsell techniques to use to sell premium products, and what is the value limit above which we can offer free home delivery for customers.

Ranking turnover sources by revenue

If we’re already spending money on online marketing, it does matter how efficiently we do it. How much revenue these channels generate and to what extent they increase our sales have a very serious impact on the profits of an e-commerce company, so keep an eye on where and in what form traffic is coming to our site. Just as we should be aware of which part of the traffic to our webshop generates the most revenue, on those content we should pay more attention in the future.

What can we do as a trader to improve these segments? 

Pay attention to page speed

Google estimates that if a page doesn’t load within two seconds, you lose 53 percent of your visitors. Do not lose almost half of your potential customers because of an unoptimized website. Also, according to Google’s calculations for webshops, every second spent with a delay decreases the conversion rate by 7 percent.

Do not forget SEO

Optimizing your SEO and conversion rate should go hand in hand, make sure your pages appear in the top spots in search engine results. To improve your Google rank, place relevant keywords on your pages, pay attention to quality content, and treat users' data appropriately.

Have a mobile-friendly page

The importance of mobile-friendly sites cannot be stressed enough. An increasing proportion of users access pages from mobile devices, and webshops that are not properly optimized for these devices are unlikely to succeed. Responsive web design is a basic requirement not only for usability but also for search engine optimization in 2021 compared to webshops.

Make the purchase process simple

When finalizing an order, we should ensure that our visitors complete the transaction as quickly as possible. Abandoned baskets and abandoned purchases greatly reduce the conversion rate, so we should try to provide customers with as little data as possible to complete their purchases as quickly as possible. Sometimes they really came simply for the five pairs of socks, don’t let them get lost with the overly complicated payment process and checkout!