How to calculate conversion in a webshop?
Calculating conversion rate is really not difficult, although a very useful data to have when checking the performance.
How is the conversion rate calculated? For a website, we divide the actions we define as targets by the number of visitors and multiply it 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 we need to look at when calculating a conversion rate for a webshop, and what tricks can we use to further increase that rate?
In addition to conversion rate, we should also pay attention to customer lifetime value, customer acquisition cost, average order value, or the ranking of individual traffic sources. Let’s check what do they cover.
Customer lifetime value
Customer lifetime value shows, on average, how much revenue a customer brings to a company from acquisition to loss. With this value, it is easier to decide what the maximum value is still worth spending to acquire a new customer.
Customer Acquisition Cost
The point is that the amount spent on acquiring a new customer must be lower than the value of the customer's lifetime because in this case, we do not make money on a 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 have 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
Once spending money on online marketing, it matters much, how efficiently we do that. 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 it doesn’t hurt to keep an eye on where and in what form traffic comes to our site. We should also be aware of which part of the traffic to our webshop generates the most revenue so that we can focus more on these contents in the future.
What can we do as a trader to improve the above values?
Pay attention to the loading speed!
Google estimates that if a page doesn’t load within two seconds, it loses 53% of its visitors. We should pay attention to this and not lose more than half of our visitors because of a page that is not optimized. Another data from google: every second that the visitor spends with loading, brings down conversion rates by 7%.
In addition to conversion optimization, pay attention to SEO as well!
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 website!
The importance of mobile-friendly sites cannot be stressed enough. An increasing proportion of users visit 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 for webshops.
Simplify the checkout process
During the checkout process, the main goal should be to have the quickest way for the customer to finish it. Abandoned baskets and not finished purchases are decreasing the conversion rate a lot. Because of that, we should try to ask for the really necessary details from the customer so that they can click on ‘Confirm’ as soon as possible. Sometimes they really just got there to buy 5 socks, do not let them go because of a complicated payment and checkout process.