How to calculate and improve your conversion rate?

Defining Conversion Rate

Conversion rate, also called transformation rate, is an essential marketing metric for evaluating the effectiveness of a strategy or campaign. It's defined as the ratio between the number of people who completed a specific action (purchase, newsletter signup, form completion, etc.) and the total number of visitors or contacts.

For example, in e-commerce, it represents the percentage of website visitors who make a purchase. For a B2B SaaS software, it represents the number of companies that became customers out of the number of demos conducted.

In practice, you can position it differently in your acquisition strategy analysis. At Sales Odyssey, we tend to use "conversion rate" to describe the quantity of website visitors who became "leads" and "transformation rate" to describe the proportion of leads who became customers.

If you're not comfortable with the terms leads, prospects, or customers, we have a very simple article that explains everything [here].

The Conversion Rate Calculation Formula

The conversion rate calculation can vary slightly depending on the specific objective you've defined. Generally, the formula is as follows:

Conversion Rate = (Number of completed actions / Total number of visitors) × 100

In this formula, the "number of completed actions" can represent different conversion objectives, such as the number of sales made, contact forms filled out, or newsletter signups.

It's essential to note that the figure obtained is a percentage, representing the proportion of visitors who accomplished the desired action.

For example, if you had 1,000 visitors to your website and 20 of them made a purchase, your conversion rate would be (20/1,000) × 100 = 2%.

In digital marketing, you can also calculate more specific conversion rates, such as the visitor-to-prospect conversion rate or the prospect-to-customer transformation rate. In this case, the formula would be slightly different:

Visitor to Prospect Conversion Rate = (Number of prospects / Total number of visitors) × 100

Prospect to Customer Transformation Rate = (Number of customers / Total number of prospects) × 100

The Importance of Conversion Rate in Marketing

E-commerce Site Example

To illustrate, let's take the example of an e-commerce site that sells surfboards. Suppose this site receives 10,000 visitors per month. Among these visitors, 300 finalized a purchase. Using the conversion rate calculation formula: (300 ÷ 10,000) × 100. The conversion rate for this e-commerce site is therefore 3%.

How to interpret this result—is this a good rate?

This rate can vary considerably from one site to another depending on its construction, audience, and type. A site targeting a very clear need with strong purchase intent can achieve a higher conversion rate.

Furthermore, according to studies, the average conversion rate on an e-commerce site would be 3% (across all sectors). The most performing merchant sites with perfectly refined strategies would approach 20% conversion.

It's therefore quite difficult, even naive, to judge a rate as "good" in absolute terms. However, what's very interesting is judging its progression over time and with the marketing actions implemented.

How can it be improved?

To improve this e-commerce site's conversion rate, several levers can be activated:

• User journey optimization is often an interesting avenue. This involves making the purchase journey as smooth as possible by eliminating friction that could hinder users in their purchase decision (complex purchase process, page loading times too long, etc.). But it's also ensuring all information is present at the right moment in the journey

• Work on content quality offered to visitors to encourage them to take action. Flat, poorly detailed product sheets contribute to poor conversion rates, for example. Call-to-action (CTA) buttons should be clear and present sufficiently, but not too much

• Performance analysis of your site using tools like Page Speed Insights can also help identify technical points to improve. Site loading speed has a significant impact on conversion rates

• A/B testing can be an effective method for determining which elements work best and which need adjustments

Best Practices for E-commerce Sites

To optimize your e-commerce site's conversion rate, here are some best practices to follow:

• Offer optimal user experience: Design should be pleasant and navigation intuitive. Product search should be easy and information about each product clear and complete

• Optimize loading speed: A slow site can discourage visitors from staying and buying. Use tools like Google Search Console and Page Speed Insights to identify slow pages and optimize them

• Implement a referral marketing program: Encourage customers to recommend your brand to their network by offering them advantages like discounts or gifts

• Deploy marketing automation: This is an excellent way to generate additional conversions and revenue through automated email marketing campaigns

• Use social media: They can help attract more visitors to your site and interact with customers. Regularly share interesting and engaging content. You can also leverage social ads to boost performance

• Adapt your site for mobile: This might seem obvious, but we still see horrors today. Mobile often represents 3/4 of B2C e-commerce site traffic. So design your site with mobile in mind!

• Test and adapt: Use A/B tests to try different page versions and see which converts better

• Retargeting: Re-target users who already visited your site to increase conversion chances

These best practices aren't exhaustive, but they constitute a good starting point for improving your e-commerce conversion rate.

If you want to go further and understand user behavior in depth, we've written an article on tagging plans!

The Importance of Conversion Rate in Sales

B2B SaaS Site Example

In the context of a B2B subscription software company (software-as-a-service), the conversion rate can be different and rely much more on the sales team's ability to transform a demo into a customer.

We could start with a SaaS software that tracks SEO performance, for example, costing several thousand euros per year.

This company conducts 400 demos per year and transforms 45 of these demos into paying customers. We therefore have a conversion rate of 45/400 = 11.25%.

How to explain this conversion rate?

This company's conversion rate can be explained through several aspects:

• How demo requests are generated: Depending on the levers used to generate demonstration requests, the prospects encountered won't have the same maturity level, which will influence the conversion rate

• The company's sales process: How sales representatives organize and conduct their demos has a major impact on this rate, as do all subsequent actions

• The product itself: Obviously and most logically, does the product respond well to the needs of leads generated by your marketing? If not, either the product isn't right, or the marketing strategy isn't good

How to increase prospect conversion rates?

To improve a B2B SaaS software's conversion rate, several strategies need to be implemented:

Improve the product demo: This is the company's opportunity to present its product convincingly. It's crucial to personalize the demo according to the prospect's specific needs. Don't present all features but only those that solve your prospect's problem!

Implement rigorous prospect follow-up: An effective CRM is indispensable. It allows knowing precisely where each prospect stands in the sales process. Make personalized follow-ups and don't wait weeks for a decision without doing anything.

Optimize the sales process: It's essential to analyze each sales process step to identify improvement points. Particularly qualification, which is capital for a good conversion rate! If you ignore your prospects' needs and problems before the demo, you probably won't convert many.

Remember that each company is different—test and measure the effectiveness of implemented strategies to ensure they correspond to your objectives.