Definition: Conversion Rate [CR]

 in Affiliate Marketing / Conversion Rate Optimisation / Digital Marketing Analytics / Display Advertising / Email Marketing / Paid Search / Social Media Advertising / Web Design by (updated on )

The Conversion Rate (CR) of a campaign is the number of conversions achieved per click. It is mainly used to optimise CPA campaigns but is actually rarely used as it is such an inconsistent measure, even within a single website (see the example under Top Tips below).

The Conversion Rate of a campaign is the percentage of people who clicked on an ad and then completed an action/purchase/conversion. For example, if one person made a purchase after an ad had been clicked on 100 times, that will give a CR of 1%.

 

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What does Conversion Rate mean?

The Conversion Rate, as with CTR vs clicks, is theoretically a better metric to use than just conversions. This is because it helps you work out the speed at which inventory is causing conversions. In this way, it is easier to compare campaigns/publishers which are running different amounts of impressions.

A conversion is a catch-all term for an acquisition (sale) or action which results from a CPA campaign. It comes from the idea of converting a non-customer into a customer.

Conversion Rate is an inconsistent measure, unfortunately. This is because generally CPA campaigns are used to mop up remnant inventory. Remnant inventory quality can change significantly depending on what other campaigns are running.

 

Conversion Rate Formula

The Conversion Rate formula is:

 

Conversion Rate EquationClick to enlarge

Conversion Rate = (Conversions ÷ Clicks) x 100

 

Top Tip

As clicks are part of the CR equation, it may seem reasonable to optimise towards CTR to improve conversions. However, the below example demonstrates why this isn’t nearly foolproof.

For example…

If in January a nutrition website with 1,000,000 impressions per month only has 200,000 Run Of Site ads appearing, then a CPA campaign for fruit on the site would have access to 800,000 ad impressions. This would likely include some on the homepage and the sections about fruit.

The CPA campaign would likely get a lot of clicks. This is because the subject of the ads (fruit) lines up with the subject of the site (nutrition). However it would also likely get a lot of conversions as it would have good access to the site’s users, and at the point at which the users were most interested in the subject of the ad (on the fruit sections and homepage).

However, in February the same site only has two campaigns running. The first is a homepage takeover for the whole month. The second is a sponsorship deal across the fruit section of the site, which in total makes up 200,000 impressions.

The fruit CPA campaign would still have 800,000 impressions available, however, the best pages (and users) would be gone, so it would likely convert a lot less. It may not get a relatively different amount of clicks, as the ads and the website line up quite well, however, it will likely get many fewer conversions.

This means…

The above example is why advertisers can’t care too much about conversion rates. They want to keep ad impressions down to reduce ad serving costs, but they have to accept that sites have other deals going on and so the inventory they get will be of variable quality. Advertisers, therefore, focus on the number of conversions they get in total usually.

For publishers/ad networks, however, the conversion rate can be much more useful in that they can calculate it for placements, and try and push more CPA ads there. Moving inventory around like this is the key to maximising revenue for a site (this process is often called yield management).

 

7 Things To Know About Conversion Rate

  1. A conversion is a broad term for any online action that is a goal (such as a sale).
  2. According to Adobe, 40% of marketers say their conversion rate is less than 0.5%. Consider this a low benchmark to beat.
  3. What percentage of clicks on your ads lead to a sale? Work it out, then try and improve it.
  4. You can (and should) calculate the conversion rate of anything online – an ad, post, email, website, or webpage.
  5. If 5% of clicks on an ad led to a conversion in the past, you can assume that anyone who clicks on it has a 5% chance of converting as well.
  6. CRO stands for Conversion Rate Optimisation & means testing things in order to improve your Conversion Rate. It can result in huge gains.
  7. According to EyeView, adding videos to landing pages can increase conversions by 86%.

 

Other names for Conversion Rate (synonyms)

CR, CVR

 

Summary

Conversion Rate Definition

 

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