How to Evaluate Conversion Rate

Chuck Forbes - June 19, 2018

If you are running paid advertising campaigns to boost leads or generate sales, then Conversion Rate is probably a metric you look into frequently. Conversion Rate is telling you how many people saw and clicked your ad against how many people converted. If 10 users clicked my ad, but 5 bought something from my website – my Conversion Rate is 50%. This is a great way to measure campaign efficiency, especially if you are trying to stay within a tight budget and keep your Cost per Conversion low.

However, if you are more concerned with getting as many conversions as possible and you have flexibility within your budget and your Cost Per Conversion, Conversion Rate may not be metric you want to hold in the highest regard, here’s why:

By definition, Conversion Rate is just giving you a percentage of how many conversions you achieved from the amount of people you interacted with. As an advertiser trying to increase my Conversion Rate, I could just cut back on trying to expand my audience and stick to a very small group of users who I know have a high percentage of converting. If you read that last sentence and said to yourself “What is the issue with that?” you’re not necessarily focusing on how much more revenue or conversions you could generate, but instead focusing on getting one metric to a number you’re satisfied with.

Pretend I run an E-Commerce business and every new customer I acquire is worth $75 dollars. Below is a comparison between two campaigns I am currently running, with my Conversions being new customers:

Campaign 2 outperformed Campaign 1 in every category except Conversion Rate. Yet, if I were to hide all other performance statistics besides Budget and Conversion Rate, some marketers would choose to run Campaign 1. It is also important to consider how your paid campaigns are affecting other avenues of conversion:

  • Did someone see your ad and conduct their own research further?
  • Do you track phone calls as conversions?
  • Did your ads lead to people requesting more information that eventually lead to a conversion?

The greatest insight Conversion Rate provides is efficiency – but being more efficient does not mean you gained more conversions or achieved a higher ROI. I am not saying Conversion Rate is irrelevant – again, if I know month over month I need to stay within a strict budget, then efficiency makes sense. However if you have the liberty to test new channels, launch new ad units and target new prospects, making optimizations based on Conversion Rate could be a short-sighted move.

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