Saturday, October 10, 2009

Gasta Tech News: Why your conversion rate is an erroneous metric

By Brandt Dainow
September 25, 2009

The ultimate measure of a website's success is its conversion rate -- the percentage of visits that resulted in a sale or an inquiry. It is supposed to measure the degree to which the site converts visitors into customers. As such, it is deemed to provide the ultimate assessment of whether a site is successful or not. In a single number, it captures the appeal of the design, the ease (or otherwise) of navigation, the effectiveness of the sales pitch, and all the other factors that affect a visitor's willingness to buy from you.
Except that it doesn't.
The conversion rate tells us absolutely nothing about the site. It's a completely useless metric.
As a professional web analyst, my job is to analyze a site's web metrics and determine from those numbers where, and what, improvements are needed in order to increase the rate at which visitors convert into customers. Doing this over and over again has taught me that the conversion rate is of no help at all.
Let's go back to basics and work this through. I think if you follow along with my reasoning, you'll see there's no point calculating the conversion rate. Luckily, I have an alternative I think you'll prefer.
The problem with conversion rates
Firstly, the conversion rate is supposed to measure the success of the site as a sales pitch -- an attempt to turn a browsing visitor into a customer. The problem with the conversion rate is that it calculates the percentage of all visits that resulted in a sale. This means it includes people who bounced. By definition, a bounced visit is one that looked at only a single page then left. In other words, they never entered the site, they never engaged with the material within it. Thus, bounced visitors were never exposed to the site's sales pitch.
There are two steps in converting a visitor into a customer. When someone lands on your site the first thing you need to do is convince them to stay. Only after that can you try to sell them something. It's like the shop window: You've got to get people into the store before you can try to sell to them.
The overall average bounce rate is around one-third. It's extremely difficult to get a bounce rate below 30 percent simply because search engines are far from perfect and can list the wrong sites. In addition, people frequently scan a number of sites before deciding which one to return to and engage with. It's also possible to be legitimately listed in the search engines for content you don't have.

For example, I have a client who owns a chain of restaurants. Like most restaurant sites, it includes the menus available. Due to some extremely high-quality search engine optimization, the site accidently became No. 1 in Google for a series of menu-related phrases, such as "set menu," "Christmas menu," and "menu ideas." The result was thousands of people arriving who were looking for menus they could cook at home, not a restaurant. Needless to say, the bounce rate for these people was extremely high -- around 80 percent -- and none of those who remained converted into restaurant bookings. This dragged the overall bounce rate for the site as a whole up to around 50 percent, which proves how important it is not to look at the bounce rate for the site as a single figure, but look at the bounce rate for each audience segment individually.
It is especially important to look at the bounce rate for different referring keywords because this tells you how the site appeals to different audiences. In this case, we found the bounce rate for people who were actually looking for a restaurant was down around 25 percent, so the site was doing a pretty good job of holding onto new arrivals. However, the key point for our purposes is that all this inappropriate traffic, with an extremely high bounce rate, pushed the conversion rate down to less than 1 percent. This makes it look like the site is a disaster.
When I see a conversion rate calculated from the total number of visits, including bounces, I don't know how much it's been affected by that bounce rate. In other words, I don't really know if I need to improve my landing pages and engage more arrivals, or if it's my actual content that needs more work.

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