Conversion Rate Formula 101: How to Calculate Your Sales Output

Conversion Rate Formula 101: How to Calculate Your Sales Output

When measuring the success of your ecommerce website, there are plenty of metrics and KPIs you can track to stay on top of your progress. Choosing a few to monitor can provide insights into how your departments are working and the direction your online business is headed. Some help ensure your CRM is on point, while others highlight your most effective online marketing efforts. 

However, one thing’s for sure: all businesses and departments need to be thinking about conversion rate tracking.

From informing your digital marketing strategies and identifying your most popular products to providing feedback on your ecommerce website UX and checkout process, conversion rates reflect every stage of the customer journey.

Conversion rates can be used to inform business decisions, shape your projects, and ensure that what your business does is in line with the wants and needs of your target customer base. 

Ready to learn more about calculating and optimizing your conversion rate? Let’s dive in!

What is a conversion rate?

At its core, a conversion rate calculation shows how many of your customers/ecommerce website visitors go on to make a conversion. 

Depending on how you’re defining “conversion rate,” you could be measuring a number of different data points. 

It’s important for your online business to define which actions are counted as a conversion.

Typically, a conversion means making a purchase or submitting an order, although there are other equally valuable conversions your business might track.

Those other types of conversions could include things like initiating contact with your business (through your toll-free number, a form, a chatbot, etc) or subscribing (to your social media channels or email newsletters). 

The results of paid advertising may also be considered conversions. 

Likewise, downloading content from your blog or using your free features could be counted as conversions in some cases.

Conversion rates can further be divided into new customer conversions and existing customer conversions. Separating these shows how your business is doing at different stages of the marketing funnel, either by acquiring new customers or retaining existing ones.

What does the conversion rate tell me?

Conversion rates are useful for sales and marketing teams, helping them monitor their strategies and find ways to better engage with customers along the entire customer journey.

Any change or improvement you make to your marketing strategy, website navigation, or brand image can affect your conversion rate. 

Unlike other metrics, conversion rates are an accurate representation of the holistic profit of your business in relation to the visitors your website receives.

How to calculate conversion rate using a conversion rate formula

Once you’ve decided what you’re counting as a conversion, it’s time to calculate your conversion rate. To do this, divide the number of conversions by the total number of website visitors. 

To get this as a percentage, multiply the answer by 100. 

The conversion rate formula looks like this: 

(conversions/total visitors) x 100 = conversion rate

If, for example, my business website received 1,500 visitors over a day and 20 of those made a purchase, my conversion rate would be (20/1500) x 100 = 1.3%

This formula can be adapted, so you can tweak it to include the total number of conversions per new visitor or the total number of conversions on a specific page, for example.

You’ll notice that if the total number of visitors is low but conversions are high in comparison, your conversion rate will be higher. Similarly, many visitors with few conversions will lead to low conversion rates

Once you’ve calculated your conversion rate, you can compare it with other conversion rates in your industry. As of 2020, average conversion rates for an ecommerce website were around 2.86%.

Conversion rate by industry

How to optimize your conversion rate

After calculating your conversion rate, you need to do something with that information. Simply knowing it isn’t going to boost your profits or grow your customer base!

Instead, use the data to:

  • inform future business decisions, 
  • help you attract more customers, 
  • make purchasing (or other forms of conversion) easier and more user friendly, and
  • boost the effectiveness of your marketing strategies. 

By making these data-driven improvements, you’ll optimize your conversion rates and lay the foundation for long-term business growth.

Next, let’s see a few more tips you can use to boost your conversion rates.

1. Run ad campaigns

There’s a reason marketing teams run ad campaigns on different platforms—because they work! 

By drawing attention to your brand, highlighting offers, and directing customers to your ecommerce website, ad campaigns increase interest in your products or services and can lead directly to purchases or other conversions.

The more campaigns you run, the better your brand awareness will be when customers are looking for products. So, make sure you keep an eye on your marketing channel conversion rate. It can help you identify which campaigns (and which platforms) are converting visitors into paying customers.

RingCentral runs Facebook ad campaigns to improve the conversion rate

Image source

2. Set up a landing page

If customers are arriving at your ecommerce website from search engines or other web pages, they need to know they’re in the right place. You want to echo the core messaging from the ad they clicked on, the search result they chose, etc. 

A dedicated landing page that reflects your brand image and speaks to a specific segment of customers will make them less likely to bounce. Once you have their attention, send them into your sales funnel or move them directly to your product pages with high-converting popups.

3. Send follow-up emails

Many customers are unlikely to convert on their first visit. They need time to get to know you, and this is where you nurture those leads with follow-up emails.

Sending follow-up emails reminds customers about your brand and the products you offer. This can help them re-engage with your business by reminding them of the products they viewed during their last visit and encouraging them to make a purchase. 

This email from Birchbox is a great example. It displays attractive products and incentivizes potential customers to make a purchase with discount codes and free shipping.

Birchbox follow-up email to improve the conversion rate

Image source

4. A/B test your pages

Some elements of your ecommerce web pages will boost conversions, while others will fall flat. There’s only one surefire way to identify them: test each element and experiment with alternatives!

Improvements could be as simple as including calls to action throughout your content or moving purchase buttons to be more centralized on your pages. 

A/B testing compares two options and determines which is more effective and gets you closer to your conversion goal.

A/B test your pages to improve the conversion rate

Ready to boost your sales with conversion rate optimization?

As we’ve discussed, if you want to improve your conversion rate, you first need to know how to calculate it, decide what you’re counting as a “conversion,” and study what’s driving your customers to purchase or convert. 

Remember that you may want to track several different types of conversions (like purchases, downloads, follows, subscriptions, etc.) as you’re tracking your website’s conversion rates: the more conversions you secure, the more your business will grow.

Hopefully, you’ve found the formula, tips, and examples in this article helpful. When you begin tracking your conversion rate, you’ll notice trends and patterns emerging over time which you can use to make better business and marketing decisions. Good luck!

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Written by

Samantha Clayton

Samantha Clayton

Samantha is a Content Specialist at RingCentral, the leader in cloud communications, international phone number, and collaboration provider worldwide. Samantha is passionate about creating compelling angles for content and finding out about people’s interests and passions, ensuring a better experience for customers and partners. She has extensive experience in content writing and strategy and has been an Account and Senior Manager in Tech & Communications industries.