Does Your conversion rate suck?
No panic — it always does.
It has been a long time since I have written something in English. But lately I have been talking a lot with different people about the concept of conversion rate and common mumbojumbo around it. So much that I finally became so pissed off about the whole word “conversion rate” that I thought I have to do something. Conversion talk and the community working with e-commerce, marketing or analytics needs sustainable arguments — which are often missing from the conversion conversation.
Twisted numbers — or arguments?
I love e-commerce and analytics and have been lucky enough to meet and talk with other people who also do. At some stage the discussion usually gets into a point where a person starts asking about your conversion rate or conversion trends or how you optimize the process of turning visitors into money. For me it is often the point of no return — and a point after which I often get a bit pissed off. Why? Because I think there is something twisted in having such a heavy focus around one single number. Here’s why.
I have never really thoroughly understood why conversion rate should be monitored as closely as many companies do. Yeah, sure, it is a good benchmark figure but maybe it should not be the main one or one of the main KPI’s of your website or e-commerce and marketing activities. Perhaps the goal should not be improving the mere figure of conversion rate — could it be improving your customer experience instead? How about sales? Customer lifetime value? Hopefully results & profits are a result of providing some added value on your site compared to the peer group of your competitors. One of the problems is that conversion rate as such is a bad indicator in many cases. I will not drive deeper into that but here are some other reasons why talking about conversion rate as such sucks and what one can do to improve the actual problems behind the indicator.
Lost in translation with talks and testing?
John: “Our conversion rate is 26% better than yours”. Jack: “Oh…Really? I guess we need to start doing more tests…”.
Wrong. Even though we would think that John and Jack are working on same kind of business at the same time what does this really tell us? John’s traffic is 26% valuable? Or Jack has bigger sales volumes? Maybe John only sold 200 products while Jack sold 4400 at the same time? Maybe Jack is buying lower quality AdWords traffic? Or John is doing TV advertising and it’s the great TV landing page that is converting? Or maybe there is something wrong with Jack’s checkout process. Gosh…was the tracking code implemented the right way at all on Jack’s pages? Shit the conversion rate if you don’t know the components or micro conversions of the main goal?
One could go on forever with this example. Just to make it clear: I think it is nice to talk about conversion rates, but too often the talk around it is totally out of context. When talking about conversion rate I have noticed that people quite often go too straight into talking about the numbers and forget the issues that have an impact on conversions: pricing, returning customers, regular customers, weather, market trends and so on. One cannot really do very accurate analyses or decisions based on two conversion rate figures from companies that are not in the same market or have a totally different customer base.
It is often one hears something like “Amazon has a lot better conversion rate than we do”. So what. Stop whining, try to figure out what is wrong in your business and invent something better. I would not be concerned about how much better I suppose Amazon is doing or what I have heard that their conversion rate maybe is or probably was (at least according to that brother of the consultant who once had a beer with a guy from Amazon [although that guy was working in shipping department and had the wrong figure] around two years ago). Amazon does not help you become better. You do. The focus should be in how much better we can do with our resources. Too bad it often isn't.
My conversion rate is not the same as yours — or is it?
Pete: “Yeah man, your conversion rate really sucks.”. Ray: “Oh…I thought we are doing far better than last year…”.
If you tell me what my conversion rate should be you are probably wrong. Guess why? Yours and mine thoughts about conversion rate might differ so much that we would probably be talking about very different figures.
Let’s say we would have the same goal in mind. Is your “conversion rate” the figure you get from Google Analytics or from Webtrekk? They do not record the data the same way. Or are you talking about your real conversion rate? Wait—shit…how do we even define conversion rate? The more the online businesses have evolved the more obscure the concept of conversion rate has become. There are people who think that because there are so many things involved in the formula of conversion that no one really knows how to count conversions. Wrong.
Let’s take a look at a definition of conversion rate from Wikipedia: “The conversion rate is the proportion of visits to a website who take action to go beyond a casual content view or website visit, as a result of subtle or direct requests from marketers, advertisers, and content creators.” Simple as that? Ok, let’s take an analogy from brick and mortar stores: customers come in, buy their stuff (or don't) and go out. The same happens on websites. Yes, the definition of the conversion rate is basically very simple.
Still surprisingly many of the online analytics- , conversion optimization- or online marketing tools present the conversion rate as a figure of visitors to a website who take the desired action. There’s a huge difference if we talk about converted visits or converted visitors. And if we add the fact that most of the tools cannot reliably count the individual visitors since most people are (often unmonitored) cross-device users we have three or more very different figures; visits, visitors, individual visitors, cross-device logged-in visitors, cross-device not logged-in visitors and so on.
Are you just a happy lazy pig?
So, to keep it simple why not talk about the percentage of converted visits? Since we are human. Because we are lazy and in many organisations or due to tools it is easier to report and talk about higher figures for your boss. I have seen the pain of many of the online marketers, consultants etc. when they claim they have been doing good work and still their bosses are saying that the conversion rate has not really been developing as it was supposed. Just admit it — this is when you get lazy! With an angry boss craving for more results its just easier to say that “Yeah but the conversion rate of individual visitors are getting better” and he doesn't even notice that you are not talking about the same thing anymore. Do you want to know when things start getting really bad? The moment you start believing in that talk yourself.
Unfortunately the conversion rate is only one figure. It is as important to look at the returning customers. But what really makes some difference is the figure of customers who are NOT returning and the frequency compared to the conversion rate of individual customers. When we start to get improvement to these figures, it’s when we really start making success. Not only by improving conversion rate as such. Often the quickest and most effective way to improve your conversion rate would be to adjust your pricing. But if you really can afford it is another story.
Customers have their ways of finding and getting what they want. Too often we do not measure it at all.
I know that my mobile conversion probably sucks when I don't have a responsive site. Yes — I would have known it without the knowledge about conversion rate as well but now I have a benchmark against myself; but how can the mobile conversion be 0.5% although you can not even pay with a mobile device on the site?
The answer has to be simple? One would think so but it often is not. Some of your regular customers might know your website even better than you do (yep, I know it is scary..) and sometimes one simply has to be wondering about how on earth did this gal figure out how to do the mobile checkout via third party app while it should not be working at all.
People are surprisingly good at both finding all the minor bugs on your site and inventing their own hacks to actually fix your mistakes. Sometimes they might fix something without you even knowing you had something wrong at your website. Internet is full of MacGyvers; you thought something could not be done at all. And still someone just did it.
If you have customers like this consider yourself happy — it is an indicator that you have done something right in your business. But to get back to conversion rate(s): are you measuring the conversion rate of these fanatic customers who might be considered as your most important segment? Or at least the segment of the ones that show you the path to where your business should be going? And if you measure the conversion rate how is that developing when compared to the visit frequency of that segment? Measuring and speaking about the conversion rate of different customer segments is often practically totally neglected. I wonder why.
My conversion goals: back to the future
If my website will remain online for the next five years I could assume and set a goal that my conversion rate will raise to 2.4% instead of 1.37%. Wow, isn't that a huge improvement? Yes it is. The product managers should already be ordering more of great stuff to sell or the customer service team should start writing new job postings? Not. Is the conversion rate of no real value unless the figure of both new and existing visitors are constantly growing? And how are the trends in online usage changing and what is the impact of those to your business?
How often do you hear the phrase that conversion rate now is better than same time last year? What’s the difference? Trends change. If people simply have more money to use in their hands they often use it — and vice versa. Or if you happen to have been doing good work with search engine visibility and your visitor figures went up 380% during the year it is maybe ok to have a lower conversion rate? Or should it still be better? What should it be then? It is good to remember that no matter how much you optimize, you just cannot change the amount of individual wallets in your market and niche after certain limits just with optimizing your website. Then you would have to enter new markets or product segments etc. to continue growing effectively. When you reach that point and understand it your conversion optimization just became business optimization.
Trends and people’s habits change and that also changes your conversion rates. Is defining your conversion rate goals eventually like trying to figure out what your dear neighbour Mr. Putin is going to do next Tuesday? Yes and no. You could have lots of data and assumptions, some gut feelings, some inside information, calculations of a team of engineers, psychologist’s statement and one glass of vodka and you'd still only have a good guess. But why not just try our best and start measuring the success day by day? And again and again; for different segments, time periods…combinations and new innovations. At least one would learn what doesn’t work.
Should we talk about conversion rate at all? What would happen if it would be banned to talk about conversion rate in your company for the next six months? To know and fix all the issues mentioned here is not hard. The hardest part is to change the culture so that we can talk about them and make progress. It might be easy in your organization but it might also take months or even years to accomplish. What would happen if we would forget the talk about figures only and talk & change ideas about processes, customer experience and segments, innovations and creative ideas to improve results together with the conversion rates and other indicators?
Hopefully then we would get into the talk of more business — the real conversion talk.