How to Calculate Your eCommerce Conversion Rate
Knowing how to calculate your business’s conversion is not optional. Instead, it is a vital skill every eCommerce owner that wants to upscale and grow their business needs to have.
Your customer conversion rate is an essential metric showing how often you get new customers to make purchases. Of course, you’d agree this gives you insight into how effective your marketing strategy is and can even highlight the products your customers prefer!
Remember, your customer conversion rate gauges how successful your eCommerce is at pushing customers down your sales funnel until they become paying customers.
In other words, if your conversion rate is relatively high, then it’s safe to say you’re acquiring the right leads and you have an effective marketing strategy.
But how do you find out your eCommerce conversion rate?
This article shows how to calculate your customer conversion rate using a basic formula. We’ll also share some tips on how often you should calculate this rate and why you need to do so.
Let’s get straight into it!
How To Calculate eCommerce Conversion Rate
Calculating your eCommerce conversion rate using our recommended formula is relatively straightforward. First, however, you need to know the parameters that contribute to your business’s conversion rate.
Here’s our eCommerce conversion rate formula:
Conversion rate = (conversions / total visitors) * 100%
In other words, you divide the number of conversions you get during a specific time frame by the total number of people that visited your landing page and then multiply the result by 100 to express it in percentage.
This means you need to know:
- The total number of visitors to your eCommerce website
- The number of conversions you eventually get from these visitors
Now, let’s show you an example to put things in better perspective.
Assume your website got a traffic volume of 15,000 users throughout your calculation period. Then, you successfully convert 2,300 of these visitors to paying visitors.
Going by the formula, your conversion rate would be:
(2300 / 15000) * 100%, which equals 15.3%.
In this case, the customer conversion rate is 15.3%!
eCommerce Conversion Rate: Why You Need to Know It
You probably know that experts describe eCommerce conversion rate as an essential metric every smart business owner should track.
But, why is this?
The reason is simple — your business’s conversion rate can act as a vivid reality check to show you how well your customer acquisition campaign is going.
In other words, your conversion rate helps you measure the productiveness of your marketing campaigns.
Furthermore, your eCommerce conversion rate can also help you determine which of your marketing channels offer you the best results.
This can guide your budget allocation and resource management decisions. Not to mention that your previous customer conversion rate also help you estimate your ROI on your sales efforts.
Here are some other advantages of calculating your eCommerce customer conversion rate:
- It shows you how close you are to your business goals — whether you’ve surpassed them or you need to do better.
- It gives you insight into the effectiveness of your marketing strategy and related resources — from your sales content to the landing page on your website.
- Your customer conversion rate can give you insight into whether you’re targeting the right audience or not.
- It tells you how "in-demand" your products (or services) are.
- Your eCommerce conversion rate measures how well your business is doing when you compare it with industry-wide numbers.
How Often Should You Calculate Your eCommerce Conversion Rate?
Now that you know how to calculate your eCommerce conversion rate and why it is essential, it can be tempting to want to calculate your rate as often as you can. We get that.
However, you need to fight that urge.
Calculating your conversion rate too often can misrepresent how your eCommerce is performing because so many short-term factors can affect the numbers.
For instance, calculating your conversion rate during an active ad campaign will likely give you higher numbers than you’d usually get. Also, carrying out this exact measurement directly after may also not be an accurate gauge of your marketing effectiveness.
Besides, you have to bear in mind that you have several marketing channels that eventually get potential customers to your eCommerce website. Therefore, if you have just made a significant change to one of these channels, it can also skew your conversion rate calculations if you perform them too often.
That said, the best strategy is usually to calculate your eCommerce conversion rate as infrequently as possible over a long duration, say one calendar year.
So, instead of spending all your time watching your conversion rate and stressing if the numbers go down, here’s a pro-recommended approach to calculating your conversion numbers:
- Calculate your customer conversion rate only once (or twice) a year to gain insight into your business website growth.
- You can also carry out some conversion rate calculations during major shipping seasons (like during holidays) to see how well you attract holiday buyers.
- If you have just made significant changes to your eCommerce platform, it is an excellent idea to calculate your customer conversion rate to assess how the changes affect visitors. (Pro tip? Make sure to carry out extensive A/B testing before effecting these changes).
Moreover, your conversion rates are likely doing very fine if your business revenue keeps increasing.
By now, you should have a clear picture of how to calculate your eCommerce conversion rate. Hopefully, you’ve also gained insight into why your conversion rate is an essential metric.
Remember, while you should stay up-to-date on the frequency of your business’s customer conversion, you also need to strike a balance with often you carry out the calculations.