What is Conversion Rate Optimization? Turn More Visitors Into Customers With Experimentation

Nov 14, 2023

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Many marketers work tirelessly to amplify their website’s traffic, optimizing existing avenues and exploring new ones. Yet, they often overlook the one thing that all of these channels converge upon: the website itself.

Consider this: to double the sales from a website, the common instinct is to double the traffic, a path both lengthy and costly. But by merely boosting the website's conversion rate from 2% to 4%, the same sales outcome can be achieved using the existing traffic and marketing budget.

This is Conversion Rate Optimization.

In this guide, we’ll cover the basics of conversion rate optimization, the important role it plays in your funnel, and how you can achieve dramatic revenue gains by focusing on this essential metric.

What is Conversion Rate Optimization (CRO)

At its essence, Conversion Rate Optimization (CRO) is the art and science of refining the user experience on a website or online platform to boost the percentage of visitors who take a desired action. This action could range from making a purchase to starting a free trial, or even signing up for a newsletter.

But CRO is more than just tweaking a few buttons or changing the color of a call-to-action. It's a holistic approach that involves understanding your audience, their behavior, and their pain points. By using a combination of analytics and user feedback, CRO identifies hurdles or barriers in the conversion process and seeks strategies to overcome them.

In the digital age, where competition is just a click away, CRO emerges as a critical strategy. It ensures that every visitor, whom you've invested resources to attract, has the best chance of becoming a customer, subscriber, or loyal advocate.

Why is CRO Essential

Imagine your website as a physical storefront. Just as you wouldn't randomly scatter products or set up barriers preventing smooth navigation, it's crucial to ensure your online visitors can effortlessly explore and engage with your content.

But unfortunately, all to many marketers unknowingly make this mistake and the resulting low conversion rates, while sometimes subtle, create big problems for businesses as they struggle with low margins and return on ad spend, high customer acquisition costs, poor customer loyalty and CLTV, and more.

The answer to this problem lies in Conversion Rate Optimization (CRO). CRO fine-tunes your online space to guide visitors towards conversion. It's about creating an intuitive, frictionless, and engaging environment that resonates with your target audience, compelling them to act.

Oftentimes, small improvements to the user experience that relieve those frustrations, shorten processes, and gently guide users to a confident conversion result in truly transformative results in a relatively short period of time.

How to Calculate Conversion Rate (and Predict Revenue Gains)

Understanding the Math:

Conversion Rate is a fundamental metric that provides insight into the effectiveness of your website in turning visitors into customers. It's calculated using a simple formula:

Conversion Rate = (Number of Conversions / Total Number of Visitors) x 100

For example, if your online store had 10,000 visitors last month and 300 of them made a purchase, then:

Conversion Rate = (300 / 10,000) x 100 = 3%

Predicting Revenue Gains:

Knowing your conversion rate alone is valuable, but combining it with other metrics can provide powerful insights into potential revenue gains. Here's how:

Average Order Value (AOV) or Average Sale Price (ASP): Calculate the average amount a customer spends per transaction. If, for instance, the 300 customers spent a total of $30,000 last month, the AOV would be $100.

Projected Conversion Increase: If you aim to increase your conversion rate from 3% to 5% while maintaining the same traffic, the number of conversions would rise to 500 (5% of 10,000).

Predicted Revenue: With the increased conversion and keeping the AOV constant, the predicted revenue would be 500 (conversions) x $100 (AOV) = $50,000.

In this case, a mere 2% increase in conversion rate could result in a potential revenue gain of $20,000 per month - all without increasing the marketing or advertising spend.

Optimizing your conversion rate is not just about improving a single metric. It's a ripple effect. A boost in conversion rate can lead to increased sales, which, when coupled with other metrics like Average Order Value, can significantly enhance revenue, drive down customer acquisition costs, and improve profitability.

What is a Good (or Average) Conversion Rate

Context Matters:

When it comes to determining what constitutes a "good" conversion rate, there's no one-size-fits-all answer. A myriad of factors influence what might be considered average or above average in different industries, platforms, and circumstances.

Industry Benchmarks:

While e-commerce platforms might boast an average conversion rate hovering between 2% to 3%, SaaS (Software as a Service) platforms, given their different sales cycle and customer journey, might see a higher average, perhaps around 5% to 7%. Similarly, niche markets with specialized products could experience even higher rates, while industries with longer decision-making processes, like luxury goods or B2B services, might see lower averages.

Platform Variations:

The device and platform on which users access your site can also impact conversion rates. Mobile conversion rates, for example, tend to be lower than desktop due to the differences in user experience and intent. Similarly, organic traffic from search engines might convert differently than traffic from social media channels or paid ads.

Improvement Over Time:

While industry benchmarks are helpful, it's also essential to track your own site's progression. If you started at a 1% conversion rate and have worked your way up to 3%, that's a significant achievement. Your historical data can provide insights into what's working and where there's room for growth.

The Bigger Picture:

Aiming for an industry average is a reasonable starting point, but always strive for better. Remember, even a fraction of a percentage increase in conversion rate can lead to substantial revenue growth. Instead of getting too fixated on the numbers, focus on continuous improvement and offering a seamless user experience.

How do I Improve My Conversion Rate

The short answer: Learn, Experiment, Repeat!

Consistent conversion rate growth comes from a continuous and iterative process of understanding your audience and how they interact with your website, experimenting with new variations to solve problems and streamline the buyer's journey, and taking what you’ve learned from winning and losing variations forward as you repeat the process.

1. Learn: Deep Dive into Data and Insights

Audience Understanding: Begin by immersing yourself in user behavior, preferences, and feedback. Tools like Google Analytics, user surveys, and heatmaps can offer a basic understanding of your audience's journey on your site.

Pinpoint Barriers: Identify areas where users drop off or seem hesitant. Is it the checkout process? Or perhaps a confusing navigation flow? Maybe the messaging on your product pages don’t align with your audience's wants and needs. Or maybe there’s a technical issue holding users back from making a purchase - this presents a “quick win” opportunity for your business.

Competitor Analysis: Sometimes, insights can come from observing industry peers. What are they doing differently? What seems to be working for them? Take it a layer deeper and seek to understand what this means for your industry or niche as a whole, is there a commonality that everyone has except for you?

2. Experiment: Hypothesize and Test with a Purpose 

A/B Testing: One of the most powerful tools in the CRO toolkit. By presenting two variations of a webpage, you can isolate certain elements of your website and find out what resonates the best with your audience.

Process Optimization: Refine every user interaction on your site, ensuring steps from navigation to checkout and everything in between are easy and intuitive, enhancing the overall user experience and reducing drop-offs.

Mobile Responsiveness: In an increasingly mobile-first world, ensure your site offers a smooth experience across devices.

Engaging CTAs: Your Call-to-Action buttons should be impossible to ignore. Test different colors, placements, and texts to see which combinations drive more conversions.

Feedback Loops: Always provide avenues for users to give feedback. This can be a goldmine of insights for future experiments.

3. Repeat: Continuous Iteration is Key

Regular Reviews: CRO isn't a one-time project. Regularly revisit your strategies, assess their effectiveness, and determine areas of improvement.

Stay Updated: The digital landscape is ever-evolving. Keep an eye on industry trends, emerging tools, and best practices.

Understand Wins, Learn from Losses: Every experiment, successful or not, offers a lesson. Take time to really understand why certain variations and strategies worked, and dive deeper into those that didn’t to understand why it didn’t align with your website visitors.

Final Thoughts

Improving conversion rates using the 'Learn, Experiment, Repeat' approach ensures that your strategies are not just data-driven but also flexible and adaptive to changing user behaviors and industry trends. This iterative method fosters a culture of continuous learning and optimization, placing businesses on a path of sustained growth.