I was speaking with a client the other day about his site. He said he was fairly pleased with its performance as the conversion rate was 3%.
I paused and took a breath.
Did I really want to get into why that is a meaningless statistic? No: “I really don’t want to go into why that is a meaningless statistic, but yes your site has been performing better lately.” Luckily I have built up some level of trust to where it was okay to leave it at that.
What I mean to emphasize is that aggregate conversion rate tells you nothing about your website or business. However, it is a statistic that is commonly referred to as meaningful (especially the higher up the corporate ladder you go). Adding to the confusion, in the web world, I am not certain the definition of “conversion rate” has been uniformly established. Does it mean:
1) Total number of conversions/ Total number of visitors
2) Total number of conversions/ Total number of people who added items to the cart*
In my mind when we in the web world talk about conversion rate, most mean #1.
Why is Aggregate Conversion Rate not important?
Aggregate Conversion Rate is not important because you will always be willing to sacrifice your conversion rate for increased revenue.
Say you are paying $1/ visitor and converting at 5%. You get 100 visitors a day.
I tell you that there is a potential stream of traffic that you have not taken advantage of. This stream costs $.10/visitor and converts at 1%. (Both customers spend the same amount).
Would you want the traffic?
Would you be happy with increased revenue and decreased conversion rate?
Yes, of course. This would be great.
Could this ever happen? Yes, it happens all the time. Each revenue source (or channel) converts at a different rate and will change your aggregate conversion rate if you decide to incorporate that channel. The content network might convert at a different rate than the search network. As long as they are both profitable, they are worthwhile investments.
Never focus on the conversion rate, focus on profitability and maximizing conversions.
*Number #2 has something to do with abandonment rate. That is, conversion rate + abandonment rate will always add up to 1 (or 100%). We do not have a good term for conversion rate #2 (that I can think of) so we refer to its opposite term, the abandonment rate.