One of the starkest differences between eCommerce and earlier forms of retailing is the enormous quantity of data available to its practitioners. From reach to click-throughs, impressions to engagement, we are all now awash in information, so much so that it can be difficult to keep your head above water. That’s why the savviest eCommerce operators have learned to focus only on those metrics which best match their commercial objectives. For the majority, that means getting very familiar with conversion rates, the closest thing we have to a gold standard in eCommerce.
Conversion rates may sound like a quintessentially modern concept, but have in fact been an obsession for traders since long before the Internet was invented. If you owned a stall selling spices in a Turkish bazaar in the twelfth century, you would be measuring your success by just how many of the thousands of people passing by you could persuade to stay, sample, and ultimately buy. The same is true now, although the bazaar is the Internet, and the thousands wandering by have become millions.
So, in this much bigger and more bewildering new world, what is a good conversion rate? Here we’ll try to guide you through the maze of factors you need to consider. Stay close.
Before we can even begin to name a good conversion rate, we must first establish a definition that all can agree on. The Nielsen Norman Group define the conversion rate as “the percentage of users who take a desired action”. While the “desired action” can vary wildly according to your objectives – and can include subscribing to a newsletter, downloading an app, even signing a petition – the most simple way of understanding it would be the number of visitors to a website, app or advert who go on to actually buy your product or service.
Unfortunately, even with such a simple definition, there are still complexities to consider. Some experts believe you should measure how many unique users become buyers, while others recommend you measure each individual sale, even if several of them come from one user. What matters most is choosing your standard and sticking to it to allow for accurate comparisons over time.
So, armed with this yardstick, what is a good conversion rate? Unfortunately, this is where it again gets complex. For one thing, conversion rates vary significantly across different channels. Organic leads are by far the likeliest to convert into sales, but there is great variation when it comes to external channels. Some experts believe that an Amazon listing can achieve as high as a 15% conversion rate, compared to less than 4% for a Google Ad and less than 1% for a social media promotion.
What can be considered a good conversion rate also depends on the sector you operate in and the products you offer. If you sell mass-market goods you can expect a much lower conversion rate than if you are offering something highly specialist, such as beekeeping equipment. That’s for the simple reason that once you have attracted someone looking for such a niche product as a beekeeping mask, the customer is much readier to buy and you have far fewer competitors distracting them from your product.
But even among consumer goods, there are considerable variations in conversion rates. As reputable research from Adobe found just a few months before the COVID pandemic began, expensive consumer goods such as electronics have markedly lower conversion rates of 1.4%, compared to generally cheaper items such as health and pharmacy goods. However, Adobe did find that the average conversion rate for consumer goods was 3% so – for the purpose of our argument today – let’s make that our benchmark.
You might think that this benchmark would mean that anyone scoring higher than 3% would be happy, but you’d be wrong. In fact, almost everyone working in eCommerce is unhappy with their conversion rate, even if they are hitting the average or above. According to Small Business Bonfire, just 1 in 5 eCommerce managers are satisfied with their conversion rates – and if you are reading this, you probably aren’t one of them.
The reason behind this chronic dissatisfaction is that we are all aware of businesses that are not just beating the average, but beating it by a massive margin. For example, Wordstream investigated Google Ads conversion rates, assessing over $3 billion worth of online adverts, and discovered that the top 10% of advertisers are converting at a rate of 10% or higher, smashing the 3% average. 10% of advertisers are not a tiny elite and therefore 10% is not an unattainable anomaly, it is achievable and the best eCommerce businesses are determined to reach it. 4% isn’t good enough.
The next step is therefore how to go about improving conversion rates. This being the Internet, there are thousands of articles offering different solutions, some of which blatantly contradict others. However, the most reputable sources share a few simple ideas. Forbes, for example, concentrates on one of the basics – the importance of testing. Simply trying out different approaches to adverts or landing pages can have an enormous impact, so do experiment with different headlines, formats, and layouts. When you find a formula that works, stick with it right up until it stops working and you know it’s time to start getting creative again.
If different formats don’t increase your conversion rate, perhaps your problem is more fundamental – your offer simply doesn’t stand out enough. Anyone who spends any time on the Internet will know how repetitive the sales offers can be, from free consultations with financial services agents to endless free trials for apps or software. If you find a new way to differentiate your product or service, one that isn’t used by all your competitors, you may have found your springboard for sending your conversion rate sky high.
Another reason many people’s conversion rates consistently underperform is that they haven’t paid proper attention to that ever-valuable blueprint, the digital marketing funnel. As Forbes points out, “most marketing specialists agree that a prospective buyer must go through seven steps or touchpoints before they’re ready to buy.” If you’ve laid out an eCommerce strategy that expects customers to leap immediately from seeing an ad into buying a product, this could be why you are so disappointed with your results. Many marketers neglect “middle of the funnel” marketing tactics, such as offering free “extras” like ebooks or videos to increase the potential customer’s desire for their product. Carefully leading potential customers down the marketing funnel will prevent many of them from exiting the process earlier than you would prefer.
In fact, there are countless ways you can look to improve your overall marketing strategy and bump up that conversion rate, and we would encourage you to explore them all. But the most important first step is to understand what you are hoping to achieve. We hope this introductory guide proves a useful base camp to you all, as you get ready to try and scale the conversion rate peaks all good eCommerce businesses should be aiming for.