Ecommerce PPC / How do you Calculate a Conversion Rate?

How do you Calculate a Conversion Rate?

Andy Thorne
How do you Calculate a Conversion Rate

One of the key terms and KPIs used by digital marketers to measure performance on an ecommerce website is by tracking the conversion rate. And in this blog we’ll answer that burning question, how do you calculate conversion rate?

In its simplest form, conversion rate is the percentage of users who take an action on your website once they land on it, either organically, directly or via a marketing channel such as social media ads or email marketing.

If you’re new to running an ecommerce website, you might be wondering ‘how do you calculate a conversion rate?’

The formula is very straightforward and the higher your conversion rate is, the better your site is performing.

Conversions can come in a variety of forms, such as:

  • Opening an email
  • Completing a registration form
  • Buying a product
  • Signing up for a giveaway
  • Downloading a resource such as a guide

Keep reading to find out how to calculate conversion rate, why it’s important to measure and what counts as a good conversion rate.

What is a conversion rate and how do you calculate it?

So, as we’ve already mentioned, conversion rate is simply calculated as conversions/users x 100. 

Now let us look in more detail at what metrics you will need to use when calculating a conversion rate.

We have listed some popular conversions above, but you will need to gather data from specific metrics in order to calculate a conversion rate of a particular goal.

For example, if you want to find out the ecommerce conversion rate on your site, the formula you would use is:

transactions/users x 100

If you want to find out the conversion rate for email newsletter sign ups, you would use:

Email sign ups/ users x 100

Why does conversion rate matter?

Conversion rate is a quick and useful way to measure how your website is performing. It shows how many users are interacting successfully with your site. 

Conversion rate also gives some context to your data. If your site received 50 sales in a month, you might see that as a reason to celebrate.

This would be a great result if you’d had 100 visitors to your site in that time period, but if those 100 sales came from more than 100,000 visitors, then your conversion rate would be around 1%. In this case, you might want to reconsider your marketing content and user experience onsite to encourage more sales.

With tools like Google Analytics, you can also segment data to find out which channels perform better and where you need to focus more attention

What counts as a good conversion rate?

The short answer is that a good conversion rate should fall somewhere between 2% and 5% as an average across all industries. 

The long answer is that what counts as a ‘good’ conversion rate depends on a variety of factors. The main one being the industry your site falls into. Industrial equipment tends to have a low conversion rate; it’s a very niche category that targets a small and specific audience.

Electrical equipment and business services tend to have higher conversion rates.

Therefore, when you measure your ecommerce website conversion rate, it is important to research what the standard for your industry is to ensure you’re comparing your site to a fair benchmark.

How to improve your conversion rate

So you have calculated the conversion rate of your ecommerce website and found that it is not as high as you would like it to be. This is where you can implement CRO (conversion rate optimisation).

CRO is the process of evaluating where and why your site is underperforming, optimising and improving those areas then testing the result of said changes.

These can be major changes such as overhauling the layout of an entire page or making minor changes such as adding an email signup form to the footer of your site.

Time to start increasing your conversion rate

You only get one chance to make a good impression, and it can often mean the difference between winning and losing a customer.

Now that you know how to calculate your website’s conversion rate, it’s time to go ahead and start improving your site to earn more loyal customers and understand the performance of your website in more detail.