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How Do You Determine A Good Conversion Rate?


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#1 cre8pc

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Posted 01 December 2016 - 09:39 AM

How do you determine a good conversion rate?

 

Example: 1400 visitors/month with a $2100 media budget. High ticket products ($2,000+) for purchase and longer purchase cycle.  

 

 



#2 glyn

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Posted 01 December 2016 - 10:29 AM

Very difficult to arrive at a number here, it depends on what you start with as a baseline and what you change and what you improve.

 

A conversion rate of .5% is good where you spend a $1 and the product costs 100,000000!



#3 EGOL

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Posted 01 December 2016 - 11:04 AM

My sites have conversion rates that range between 0.01% and 4%.  

 

Content sites with a small store have really low conversion rates.  Most of their revenue is from ads.  However, some visitors arrive to read articles but some of them are seduced into a purchase with house ads.  

 

The one with 4% is a small retail site.  During most of the year the conversion rate is about 2%, but that jumps up to 4% during the Christmas season.  This is a site that sells consumables with a lot of repeat buyers.



#4 earlpearl

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Posted 01 December 2016 - 11:54 AM

Conversion rates are a function of the type of item/service one sells and many many other factors.  As referenced endlessly we operate small business sites.  How well do they convert?

 

So many different ways to calculate all that.  Parenthetically I was at a local seo meetup a while back and had the local rep of being Mr. Local.  (ha ha).  One particular presentation made a strong impression.  A person with a certain type of local business/service was presenting their site, discussing it and it was up for comments and conversation.

 

The single point that most impressed me was that he described that his team converted 75% of all the calls that came in.   75 freaking percent!!!!!   (I'd die for those figures--or alternatively I'd go to Switzerland and take over (rent at an obscene profit margin for George Cloony) his uber luxurious villa and contact Glyn to come on up and play dominoes and drink absurdly expensive wines with me and the girls).   But seriously!!!!!!

 

Conversion rates depend on the product/service and Many many other factors.  Hard to give a number that is appropriate for the website and product unless one has more data.

 

Last month we had this amazing response for our largest local smb.   No reason to bs around it, it occurred because of both heavy discounting and very good selling.

 

It appears we converted over 50% of the month's volume of leads to sales.  This is a business that ranges from about 20-less than 40% most of the time and probably is in the 25-29% range virtually all the time.      Actually it looks like abt 40% of the leads that month purchased PLUS we picked up a very healthy number of OLD leads.  For us a lot.

 

That last part had me thinking.  We worked on old leads virtually entirely via promotional emails. 

 

Last month spread throughout the month we sent out a TON of PROMOTION emails.   It appears to be over 55,000 of them.  Our monthly email bill is a function of several things but one factor is total volume.   Those 55K promotions were combined with our normal usage....and we ended up paying an overage. 

 

To me those 55K emails are just like remarketing.   Our overage costs weren't much--about $50-60 (our normal usage was low).  We really converted a very high total number of old leads.  

 

My gut, without looking at every sale is that we converted at least 30 of them into sales.  (haven't looked at it in depth on a one by one basis.).  30 out of 55,000 emails.  That is about 1/2 of 1 one thousandths.   Not much of a conversion rate.  OTOH, Revenues would be a couple of hundred times the cost of the email overage. 

 

so our percentage is crazy low   30/55,000 = about .0005 conversion rate.  Now that is absurdly low.  But the payback on that extra email expense is something over 200 times the cost (estimate).      So that is great!   Great great!!!!   Its so strong I'm not going to try and get granular as to figure out the specifics.

 

On that basis I agree with what Glyn said above. 

 

Very difficult to arrive at a number here, it depends on what you start with as a baseline and what you change and what you improve.

 

A conversion rate of .5% is good where you spend a $1 and the product costs 100,000000!

 

 

We didn't do nearly as well, but we did darn good.  A conversion rate depends on a lot of factors.



#5 Grumpus

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Posted 01 December 2016 - 02:09 PM

We're playing around with this right now.

 

The answer to your question is difficult - because there is no answer - as earlpearl points out. There are too many variables. There is an easy way to determine if your efforts are worth it or not and that's to ask a different question.

 

 

1400 visitors/month with a $2100 media budget. High ticket products ($2,000+) for purchase and longer purchase cycle. 

 

All the numbers there are irrelevant except for the $2100 one. If you are spending $2100 a month, you need to shoot for generating $21,000 in sales based upon the general principle that in business, marketing should be 10% of your revenue.

 

If you are at that number, then the conversion rate you need to consider as a good conversion rate is the conversion rate you have. If you are generating half that, you need to double your conversion rate.

 

One reason you can't just give a number as to "what's a good conversion rate?" is because there are different types of marketing. To examples I'll use are Shotgun Style and Sniper Style.

 

I have a client that makes commercial screen printers that do everything from t-shirts to beer kegs - and everything in between. We're currently looking at how to leverage the boom in Craft Breweries. They have machines that will print their logo onto their beer kegs (and bottles for that matter, but we're just dealing with the keg printers for now). Rather than these breweries just using an inexpensive sticker, you can put a nice multi-color printed logo on there and up the perceived value of your beer by MUCH more than the cost difference from a sticker option.

 

So now, how do we market that machine?

 

We can go Sniper Style and just focus on Craft Breweries looking for Keg Printers. Or we can go shotgun style and get Craft Breweries period - any one. Send 'em to us and we'll convince them they need a keg printer.

 

With the shotgun style, I may pay twice as much for 5-6 times the amount of traffic that I get for the sniper style. That's just the way it works. There simply are a lot more people out there who own a craft beer company than there are people out there who own a craft beer company who are looking for a keg printer.

 

With my sniper style, though - I would expect and I NEED a pretty good conversion rate. I'd certainly be shooting for Earl's 75% example in that case, but I'd probably get around 25% - so let's say we get that. So if I want 1 sale per day from there, and I'm getting a 25% conversion rate with my Sniper Style marketing, I need 4 visitors per day.

 

With my shotgun style, though - a lot of the traffic isn't really interested so I have to sell them. I can't expect the same conversion rate. Let's shoot for 5% (which is typical, though not great, for this type of approach). This means, to sell 1 per day, I need 20 visitors (which is also 5 times the 4 I got above, so 20 visitors cost me the same using my fictional formula above). But remember, these 20 visitors cost me twice as much to obtain as the 4 visitors. So for my profit margins to remain intact, I actually need to double my sales - selling 2 per day on those 20 visitors. So, I need 10% conversion rate.

 

So, in these two examples - what's a good conversion rate? Well, in example one it's 25%. In example 2 it's 10%. Big difference. But both produce the same value in the bottom line.

 

Now we need to decide which is going to be easier to improve? I suppose that depends upon the levels of silver in the tongue of your marketing copy writer.

 

G.


Edited by Grumpus, 01 December 2016 - 02:12 PM.


#6 EGOL

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Posted 01 December 2016 - 06:50 PM

Just do like Amazon and lose $5 per sale for your first 15 years, make no money at all for the next 15.

Half of the people in the freekin' country will be your customer. The other half will be working in your pack and ship operations for minimum wage. Conversion rate will be kickass.

Edited by EGOL, 01 December 2016 - 06:56 PM.


#7 iamlost

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Posted 02 December 2016 - 09:03 AM

Uber has been following the Amazon methodology and runner by as fast as they can hoping to stick - they subsidies each ride approximately 40%. How successful would they be if their fares were twice current? How long can they keep shovelling VC before either success or implosion?

#8 EGOL

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Posted 02 December 2016 - 11:26 AM

Uber has been following the Amazon methodology and runner by as fast as they can hoping to stick - they subsidies each ride approximately 40%. How successful would they be if their fares were twice current? How long can they keep shovelling VC before either success or implosion?

 

Wow.  I didn't know that.  No wonder taxi drivers are madderThanHell.



#9 earlpearl

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Posted 02 December 2016 - 03:52 PM

Uber has been following the Amazon methodology and runner by as fast as they can hoping to stick - they subsidies each ride approximately 40%. How successful would they be if their fares were twice current? How long can they keep shovelling VC before either success or implosion?

 

I didn't know that either, but just looked it up...and yesseree.  Uber is funded by VC's and is burning through cash.  Amazon and Uber have very little to do with website conversion rates and few live businesses have the cash or ability to raise money like they have done.  In the world of real estate the term used to be "patient money".  Wait a decade or two and then start seeing returns.  Not applicable to most of us....but it works for family dynasties.

 

When it comes to "conversion rates"   I like how Grumpus described the process above.  What is a good conversion rate is dependent on a variety of factors.



#10 iamlost

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Posted 12 December 2016 - 03:42 PM

earlpearl and especially grumpus have given extremely good advice.
That said, given your comment:

High ticket products ($2,000+) for purchase and longer purchase cycle

there are a few complementary considerations:

1. product inter/intra-relationships are critical
* can one buy more basic and upgrade over time?
* are there opportunities to
---up sell?
---cross sell?
---accessorise?

2. longer purchase cycle means there is time to draw them in
* create free value surrounding products
---comparisons
---manuals: free in HTML and pdf
---high quality custom imagery
---'how to' videos
Note: make sharing simple and easy.
Note: marketing MUST favour SM over search as SM needs to be worked and search comes (relatively) free.

* create best of the best content heavy on value light on sell.
Note: look at the density and value of Wikipedia articles on niche; now go 10 times broader and 10 times deeper than that in general and even more so with regard to specific products/services.
Note: if someone is looking at your niche you want to be 'the' source 'the' goto in their mind when it comes to information and especially to product.

3. customer service
Absolutely critical.
Not only having best possible support for products given available resources but identifying how best to (1) provide it, (2) market it's awesomeness, and (3) handle problems and criticism.
Note: often customer service marketing is best done WoM with exceptional light guidance; let the quality speak for itself.

Marketing is much much more than mere advertising. It is the entire customer acquisition and support system, it is the strategy driving pretty much everything from conception on. Granted, it is often an afterthought bolt on... but it shouldn't be. Marketing is integral to the business model. They might not like to think so but it even encompasses production and sales. :)

 

Yet another mindset issue. Without a strategic model covering A to Z ROI is just a number blowing in the wind because the initial invetment has no grounding. Yes, if one is spending 2100$ to make 21000$ that is certainly a good thing... but why 2100$? Grumpus is correct given the input provided, however, if the input is insufficiently grounded in reality a company could still fail. Many do.



#11 tam

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Posted 12 December 2016 - 06:10 PM

Was reading a news article on Uber yesterday: http://www.bbc.co.uk...nology-38252405about govt. basing schemes on Uber and subsidised transport - even as replacements for ambulances!

 

I confess to not tracking conversion for as much as I should - Amazon affiliate control panel is nice as they tell you 10-20% depending on month/country :)





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