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What Is Conversion and How To Calculate It

Not every person who views marketing material like an online ad will become a customer through a process called conversion. Given this reality, it’s important for marketers and business owners to understand the percentage of viewers or audience members who become paying customers — that way, they can determine the effectiveness of their marketing strategy.

What exactly is conversion, and how do you calculate it? Read on to discover those answers and much more.

Definition of Conversion Rate

Conversion rate is the percentage of site visitors or store visitors who “convert” into paying customers. It’s essentially the percentage of the visitor population that contributes monetarily to your store or business.

In any business, your potential customers can be broken down into different groups or buckets:

  • The general public or audience
  • Your target audience — these are the people who you are trying to market and sell to. For instance, if you run an athletic clothing company, your target audience includes people who are into athleisure clothing, exercisers, health fanatics, etc.
  • People who visit your website or store. This is a percentage of your target audience.
  • People who make a purchase. These are “converts,” or people who contribute to your conversion rate.

Your conversion rate will always be lower than the number of unique visitors to your store, as you can’t expect a 100% sale rate from everyone who interacts with your brand. Still, knowing how to calculate conversion rate can be important when determining the best business practices for your brand going forward so that you can best figure out how to get visitors to complete the desired action.

Conversion tracking is crucial so you can improve digital marketing results with Google Analytics or other platforms. Track the number of conversions for social media, ads, and purchases at the end of the sales funnel to get a good idea of your ad and web page effectiveness.

What Is a Conversion?

Note that a conversion is not always a sale, although this is the most common way to define a conversion. A conversion can be any positive action that turns a prospective customer or site visitor into a real customer. 

Examples of conversions aside from sales include:

  • Someone becoming a subscriber to your newsletter
  • Someone becoming a subscriber to your brand for an ongoing service, like a software subscription
  • Someone joining your loyalty program
  • Someone donating to your charitable foundation

A conversion occurs whenever a target audience member does what you hope for them to do, whatever that might be.

Calculating Conversion Rate

You can calculate the conversion rate for any product, service, or advertising campaign with a straightforward formula:

  • Conversion rate = conversions / visits

Let’s take a look at an example.

Say that you have a website for your brand. In a given week, you launch a new marketing campaign and get 2500 website visitors. In the same week, you receive 200 new customers. Therefore, plug those numbers into the formula to get your conversion rate for that week:

  • 200 / 2500 = 0.08 or 0.8%

In other words, 0.8% of your total number of visitors became paying customers in some way.

Using this formula, you can determine the conversion rate for:

  • A specific length of time
  • A specific marketing campaign or advertisement
  • A specific group of customers
  • Or something else

Measuring Conversion — Each Action vs. Complete Customer Journey

When you measure conversion for a population demographic or a group of store visitors, remember that you can measure conversion for different actions or as a representation of a completed customer journey.

For instance, say that you want to know whether a given advertisement is effective at its primary job: bringing people to your brand. To do that, you calculate the conversion rate by counting a conversion as each time a customer clicks on the ad and visits your website (note that this is the same thing as click-through rate or CTR).

While this is possible, most marketers use conversion to mark the moment a prospect becomes an actual customer. That way, you can use other metrics, like CTR, to denote or understand other metrics in your marketing efforts.

Why Is Conversion Important?

Conversion is important for a few big reasons.

For starters, it tells you (in a general sense) how many people you can expect to get for each marketing campaign or ad. If you measure the success of your ads over a long span of time, like several months or years, and find that you have an average conversion rate of 10%, you can expect about 10% of the people you attract to your brand to make a purchase on average.

You can also use conversion to determine whether there's something wrong with your site or store. For instance, say you have a very effective marketing campaign with a high click-through rate, but your conversion rate is very low. This tells you that something is wrong with your store that’s causing site visitors to click away rather than make a purchase, even after their interest has been piqued. There may be an issue with usability or user experience. 

Such information can be invaluable when building up your brand and ensuring that it is as profitable as possible. You can and should use conversion to continually iterate and improve your online shop as much as possible.

Ways To Achieve Conversion Rate Optimization

There are a few ways in which you can improve conversion, especially if you get most or all of your customers from online advertising.

First and foremost, try to revamp your landing page. Your landing page is the initial page that prospects will "land on" when they click on your site from an advertisement or Google SERP. If your landing page is attractive, loads quickly, and leads customers to excellent products, it will be more successful, and your conversion rate will increase.

Try to practice A/B testing. This involves creating two different types of landing pages or product pages that are similar to each other but which nonetheless have some important differences. Measure the conversion rate from both types of pages over a week or so, then adopt the type of page that has better results.

Note that you can use that tip to improve your ads and apps. For example, include a call-to-action from one ad, then a different CTA for another. See how each contributes to conversion goals, then use the one that drives the most downloads or clicks. CRO tactics like this can be utilized for SEO, pricing, and all other types of conversion marketing.

Lastly, revamp and improve your actual product pages. If visitors continually click on your website, it means your advertising materials are doing a great job. So you need to make sure that your product pages are attractive, compelling, and persuasive to people who see them. 

Make sure your products have good pictures and that the checkout process is quick and easy; people are more likely to abandon checkout if it requires a lot of steps or takes too much time.

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Ultimately, conversion gives you a good idea of how many target audience members you capture with each marketing push or ad. You can use conversion as a proxy for marketing effectiveness for both digital and OOH or out-of-home ads, such as billboard ads.

Of course, AdQuick can also help, particularly with OOH media buying and marketing analysis. We’ve already helped businesses like Wrapify with our intuitive and navigable platform, which can help you master billboard marketing. Check it out today.


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