Posts tagged as:

continuous improvement

When is a falling conversion rate OK?

by Tim on June 28, 2011

A couple of days ago, I mentioned that your conversion rate should always move in the right direction, but that that direction isn’t always up. A couple of you wrote and asked, essentially, “What you talking about, Willis? Don’t you always want to increase your conversion rate?”

Well, there are two answers to this question:

Definitely.
Maybe not.

I know, I know. Way to take a stand, right? But, here’s the thing. Conversion rate is a compound statistic, built by dividing the number of conversions on your site by the number of visitors (or visits) your site receives. And, most of the time, you’re looking for conversion rate to grow.

But there are exceptions.

Anytime your traffic is growing at a faster rate than your conversions, your conversion rate will drop, even if your sales are increasing. I once ran a promotion that drove a 40% increase in traffic and a 25% increase in sales. The bad news? Overall conversion rate dropped more than 10%. The good news? Perhaps you missed it a moment ago: Sales were up 25%.

Most of the traffic for this promotion came from referrals, so we didn’t pay excessively to gain that additional traffic—or, more importantly, those additional sales. In fact, I’d argue that our “bad news” wasn’t bad at all, but a necessary, short-term consequence of a promotion with great results from a broad (i.e., not-so-targeted) audience. A promotion with a 10% increase in sales from an 8% increase in visits would have shown a better conversion rate, but wouldn’t have grown the business equally. Sometimes we can focus too much on numbers like conversion rate and miss the bigger picture.

Of course, over the longer term, you want your conversion rate to increase. You’re almost always paying for traffic, either with financial or human capital. Even hosting costs increase to support additional traffic volumes. So you want to spend your capital effectively and efficiently. Traffic that doesn’t convert is of questionable value. And, if your conversion rate is falling because your sales are falling, well, that’s a very bad thing, indeed. But, if you see short term drops in your conversion rate while your sales catch up to traffic growth, don’t get too worried. Just make sure both sales and traffic are moving in the right direction (that’s “up”). Then you can focus on bringing conversion rate in line.

And, if you’re not sure how to improve conversion rate, check out these past posts:

Want to improve conversion? Start at the end.
Six questions you must get right to improve bounce rate.
6 awesome tips to grow conversion right now.
Where to begin? How to pick things to fix on your site.

Are you getting enough value out of your small business website? Want to make sure your business makes the most of the local, mobile, social web? thinks helps you understand how to grow your business via the web, every day. Get more than just news. Get understanding. Add thinks to your feed reader today.

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Tim Peter & Associates helps companies from startups to the Fortune 500 use the web to reach more customers, more effectively every day. Take a look and see how we can help you.

Technorati Tags:
analytics, Avinash Kaushik, Brian Clifton, continuous improvement, conversion, conversion rate, conversion rate optimization, E-commerce, e-commerce, e-marketing, ecommerce, Google Analytics, internet business, internet marketing, marketing, marketing best practices, measurement, metrics, Rimm-Kaufmann, competitive research, competition

Tagged as: continuous improvement, conversion, conversion rate, e-commerce sales, e-commerce strategy, ecommerce, ecommerce merchandising, ecommerce metrics, ecommerce strategy, measurement, metrics

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Should you care about your competition’s conversion rate?

by Tim on June 21, 2011

in E-commerce, Marketing, Strategy, analytics

Competing over conversion rate Just a quick follow up to my post last week about “industry average” conversion rates. Another question people ask me all the time is how their conversion rate compares with their competition. It’s sort of the same question as “what’s my industry’s average conversion rate”, but asked in a different way. And, I’d argue that the answer to this question just isn’t that important.

Here’s why.

Let’s say you found out that your competition converts half as well as you do (ignoring, for the moment, why it’s almost impossible to compare conversion rates). What would you do different if you knew your competition’s conversion rate? Are you going to change your strategy? Slow down? Take the rest of the summer off?

Probably not.

What if their conversion rate is twice as high as yours? Are you going to give up? Fold your tents and go home? Beg them to take the rest of the summer off? Again, probably not.

Data is valuable when it helps you make decisions or causes you to change your behavior. When it doesn’t, it might be interesting, but, not much else. Better to spend your time focused on whether your conversion rate is moving in the right direction (which, believe it or not, isn’t always up).

Does any of this mean that I’m not in favor of competitive data? Not at all. For instance, understanding market share is incredibly valuable. So is regularly conducting competitive analyses. But data like your competitor’s conversion rate in isolation, in most cases, simply isn’t useful to your business.

What do you think? Am I missing something? If so, I’d love to hear from you in the comments.

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Tagged as: competition, competitive analysis, continuous improvement, conversion, conversion rate, e-commerce sales, e-commerce strategy, ecommerce, ecommerce metrics, ecommerce strategy, online business, online marketing, online marketing strategy, online sales, online strategy

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What exactly is an “industry average” conversion rate?

by Tim on May 31, 2011

in E-commerce, Strategy, analytics

Clients and friends ask me all the time, “What should my conversion rate be?” Or, “What’s a ‘good’ conversion rate?” Or, my personal favorite, “What’s the ‘industry average’ conversion rate?” As if being “average” is where you should aim. Still, I get where people are coming from with this question. What they really want to know is, “Am I doing well enough?” And, “Am I leaving money on the table?” We’ll come to those. But first, I wanted to take you through why it’s almost impossible to answer the original question.

What is conversion rate? Simple. Conversion rate is:

The number of people who show up on your site divided into…
Sales. Or leads. Or email enrollments. Or… waitaminnit.

This isn’t looking so simple, is it?

The variety of conversion goals brings us to the first challenge with benchmarking conversion rates. Every business has different goals, usually more than one per site. You may want your customers to buy something and/or join your loyalty program. Those are two separate conversion actions and would each generate two separate conversion rates. Lead generation produces vastly different rates from e-commerce. And so on.

Of course, in most industries, you’re usually all conducting similar activities, which should make benchmarking conversion rate simpler, right?

Um… not exactly.

Because the second challenge is determining how you’re going to count “the number of people who show up on your site.” Last fall, I took a somewhat exhaustive look at how to count “people” on your site and addressed some of these issues. But, to recap, some businesses count “people” by “visits” and some by “unique visitors.” Visits are fairly straightforward. Unique visitors, less so. Let’s look at them one at a time.

Visits

When a web browser requests a page, your tracking tool counts that as the start of one visit. Each subsequent page requested counts as part of the same visit until the consumer closes their browser—ideally after completing a conversion action—or after their session times out. While 30 minutes of inactivity is somewhat, ahem, “standard” for causing session time outs, different settings among analytics tools and their users within a single industry can result in wildly different visit counts. Still visits are simple compared with our next culprit: unique visitors.

Unique Visitors

At their core, unique visitors seem simple. Most tracking tools count unique visitors via cookies placed in a visitors web browser and treat all visits from that same machine as belonging to a single “unique” visitor. And that’s all well and good. Except that the the lifespan of a given cookie can vary widely among analytics vendors and implementations. Some businesses expect set the cookie lifespan to 30 days. Others may choose 90 days. Or 14. Or 120. And that’s before considering topics such as cookie deletion, customers who use more than one computer or browser, different people in the same household using the same computer and on and on and on. In fact, these reasons are why Google Analytics guru Brian Clifton argues that counting unique visitors is useless. (Incidentally, I disagree with Brian and think that uniques are often better than nothing, but that still doesn’t make them great from a competitive data standpoint(*).

Analytics Tools

Now, I’ve alluded to this in each of the above sections, but, different analytics tools also compound this competitive data problem. Why? Because no two tools ever count traffic the same way. Google Analytics will report one metric, Omniture SiteCatalyst another and WebTrends a third. I have, on more than one occasion, run websites that contained tracking tags for two (or more) analytics tools simultaneously and found that each tool counted visits and visitors differently. While their movements were highly correlated, their reports were never, and I mean never, the same.

So, putting this all together, the only way to get a true competitive measure of conversion rate is for you and your competition to agree:

To count the same conversion actions, whether those are sales, leads, enrollments, what-have-you’s;
To use the same metric for traffic (visits or unique visitors);
To agree to a common standard for session time outs and cookie lifespan; and,
To use the same analytics tool configured precisely the same way.

Alternately, you can look at it this way. Take a look at what George Michie over at Rimm-Kaufman Group says about the value—or lack thereof—among competitive data. It’s well worth your time to give it a read. I have long believed that the best way to get the right results is to worry less about your competition and more about your customer.

Yes, a certain amount of competitive data is handy. And it’s frequently interesting. But will knowing your “industry average conversion rate” help your customers any? Probably not. Focus on their needs, their pain points, their cares. Address their concerns. And, then, instead of meeting your “industry average,” you may just lead the pack.

Footnote: Incidentally, I have recently been analyzing data across multiple sites in multiple industries that suggests visits may (and, boy, do I put heavy emphasis on that “may”) be a better leading indicator of conversion activity than unique visitors. Of course, I have to say that this comes with two huge caveats. Caveat #1: I want to run these models with larger and more diverse data sets. The amount of data I’m analyzing, while not trivial, is hardly going to represent every type of website out there. Caveat #2: None of the models I’ve put together accounts for more than 50% of conversion activity. A good number of on-site factors I’ve yet to analyze (price offered, message quality, etc.) also heavily impact conversion, so counting on visits alone as a leading indicator is only going to take you so far. Still, the early results look promising. I’ll keep you posted…

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Tim Peter & Associates helps companies from startups to the Fortune 500 use the web to reach more customers, more effectively every day. Take a look and see how we can help you.