What is ecommerce conversion rate?

14/02/2020 283
E-COMMERCE

Increased conversion is one of the strongest ROI arguments for better user experience and more user research. Track over time, because it’s a relative metric.

 If you want to run your business online efficiently, you need to know what is ecommerce conversion rate. The definition is really simple, you can understand conversion rate as the percentage of users who take a desired action.

 The typical example of conversion rate is the percentage of online visitors actually buying something on your website. For instance, 200,000 people visited an ecommerce website during June of 2020. In that month, 4,000 users purchased something from the site. Thus, the site’s conversion rate is 4,000/200,000 = 2%.

 

So, now you know what is ecommerce conversion rate. However, counting the baseline number of users or numbers of actual buyers is still a problem.

  • Count the baseline number of “users”: Count a person only as unique visitors, or count as many times as he visit during the measurement period is appropriate. You can choose the best way that works for your type of website as long as you’re persistent and use the same way during all measurement periods.
  • Count the number of actual buyers is count the conversion events: count a specific person only once, even if they buy once or several times during the period. Or count each person as many times as they buy.  Once again, either rule will work as long as you apply it consistently.

Conversion Event

After knowing what is ecommerce conversion rate, you will wonder why conversion event is important, here’s why: Conversions don’t have to be sales but can be any Key Performance Indicator (KPI) that matters for your business. 

Example: 

  • Buying something on an ecommerce site
  • Becoming a registered user
  • Allowing the site to store the user’s credit-card information for easier checkout in the future
  • Signing up for a subscription (whether paid or free)
  • Downloading trial software, a whitepaper, or some other goodie that presumably will predispose people to progress in the sales funnel
  • Requesting more information about a consulting service or B2B product
  • Using a certain feature of an application — especially new or advanced features
  • Upgrading from one level of a service to a higher level — in this case, the baseline user count would only include those users who are already at the lower service level
  • People who didn’t just download a mobile app to their phone but also used it; or people who keep using the app a week later
  • Spending a certain amount of time on the site or reading a certain number of articles
  • Returning to the site more than a certain number of times during the measurement period — in this case, it would make the most sense to define the user count as unique visitors
  • Anything else that can be unambiguously counted by a computer and that you want users to do

 Also micro conversions is count when simply clicking a link, watching a video, scrolling down past the page fold, or other secondary actions that may not be valuable in themselves but do indicate some level of engagement with the site.

What Measurement Period Should Be Used?

Many different periods will work for different purposes, for instance, a month, a year,… The key criteria for deciding on the period length are:

  • The measurement period should be short enough that you have time to track the conversion rate across multiple periods and still make an impact on the business. You would get very solid numbers if you use a year as measurement period. Then your company might not be working before you could add anything to increase profitability.
  • The measurement period should be long enough that it’s not susceptible to random fluctuations and also accommodates as many structural fluctuations as possible. For example, many B2B sites have substantial less traffic during weekends when their core users aren’t in the office. If such sites tracked conversion rates on a daily basis, they would see big swings that had nothing to do with the site’s real performance but were simply caused by the difference between weekdays and weekends. Using a full week as the measurement period would smooth over these irrelevant fluctuations.
  • The measurement period should align with your product-development cycles. If you launch major design updates once a month, it would be problematic to use a full quarter. During each measurement period you would be measuring 3 different designs. And you may not know which design changes truly appropriate with your conversion rate.

However, no matter what measurement period you pick, you also have to consider seasonal variations that affect the period. Normally, most consumer sites experience increased sales during the December holiday season. In contrast during those last hectic shopping days, activity on a site like our own falls to almost nothing.

For low-volume sites your measurement period needs to be long enough to achieve a decent level of statistical significance. If only handful conversion events exist, then the estimated conversion rates will bounce all over the map for no real reason other than random fluctuations. Use standard statistical estimates of the confidence interval to make sure that you’re actually measuring something real.

What’s a Good Conversion Rate?

What is ecommerce conversion rate is important but what’s a good conversion rate is important too. There is no single answer, other than to say that a good conversion rate for your site is one that’s higher than what you had before. In other words, it’s depend.

Some factors that influence on conversion rate beyond the control of user-experience professionals:

  • Pre existing brand reputation of the company
  • Price: cheap stuff is easier to sell than expensive stuff
  • Sales complexity: products that are impulse buys will tend to have higher conversion rates than complex services that require months of research and the approval of a committee before the contract is signed.
  • The required level of commitment: it’s easier to get users to read 5 free articles than to get them to sign up for an email newsletter, because people don’t feel that they need to commit to something simply to browse a website. So, micro conversions (users making incremental progress through the user interface) obviously have much higher conversion rates than the macro conversions (complete actions).