Internet Marketing Business Strategies

When it comes to focusing on your websites metrics, most people will point to the website conversion rate as being the most important. But, is this really the case?

Of course, every online business owner wants to increase conversion rate optimisation in the hope of making more sales. But a higher website conversion rate doesn’t always generate an increase in income.

The reason for this is that sometimes the conversion rate can actually lead you to draw the incorrect conclusion as to why something is working or why it isn’t. Here is a closer look at what a website conversion rate actually is and how to understand what it is really telling you.

What Is A Website Conversion Rate?

There are a number of different factors that you can use to determine your conversion rate, but it is basically a number of actions divided by the number of visitors.

For example, if you are talking about sales, then the conversion rate is the number of sales divided by the number of people who landed on the sales page, however it can be used to track any action you can measure.

How To Draw the Wrong Conclusion From Your Conversion Rate

The fundamental reason why people misinterpret the stats is because they don’t understand the relationship between different analytics. Here is a closer look at a few examples of how a conversion rate will lead you down the wrong path.

1. Price
Let’s say you are testing out different price points. You could have a much higher conversion rate at a much lower price, but still end up with less income. This is because you are comparing price points that are so far apart that you will make more by selling less at a higher price.

2. Coupons/Promotions
Another way that your conversion rate can lead you astray is when you are running a special promotion or giving away a limited time coupon. The reason that this happens is that a large number of people may have purchased the product without the coupon. The increase in the conversion rate doesn’t automatically mean that you generated more income.

3. Merchandising
It is common practice to try and limit friction from within the checkout process because the higher level of friction, the more people that will abandon it without making a purchase. One thing that causes friction are up sells, down sells, and related items pages. At the same time, all of these things are proven to help you generate more total income, even though your conversion rate will be lower.

4. Banner Ads/PPC Ads
Whenever you are sending cold traffic to your website your conversion rate will always decrease, but it doesn’t necessarily mean that you are selling less.

As you can see, there are times where your website conversion rate should not be your most important metric because it can provide you with information that will lead you in the wrong direction. So what other metrics should you look at?

Here are a few that tend to stand out as always impacting your bottom line.

Lifetime Customer Value – This will let you know how much money you will make per person, on average. This metric is important because it tells you how much you can on advertising per person who enters your funnel.

Rate Of Return (ROI) – Another thing to consider is your return rate. You could have an incredibly high conversion rate, but if most people ask for a refund then high conversions are pretty meaningless. Normally, this is an indicator that you are not meeting the expectations that you set on your sales page.

Clearly your website conversion rate is a very important metric, but it is not the only one you should evaluate, and it should always be analysed together with other important metrics in order to effect genuine conversion rate optimisation.

David Hurley