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When is a falling conversion rate OK?

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:

  1. Definitely.
  2. 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:

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Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

This Post Has 2 Comments

  1. Very true, too many retailer worship at the alter of conversion rate rather than incremental sales.

    On one of my sites, we’re getting great ROI with facebook ads. However, compared to other marketing tactics, the conversion rate is terrible. But sales are up, and that’s what matters…

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