What is the average conversion rate?

October 15, 2009

This is a question that I hear time and time again.  Everyone wants to know how to evaluate their conversion rate performance.   Well, fact is, there is no such thing as an average conversion rate …at least one that carries any meaning.   It is kinda like asking what is the average height of every person on the planet?  If such a number could be calculated, it would be useless.  

When reviewing your conversion rate performance, it is continuous improvment that counts.   Actual conversion rates will vary just like actual mailing response rates.   The actual rate will depend upon the product, the customer or prospect segment being targeted, the offer, the timing, etc. etc.   What is meaningful and actionable is to track your conversion rates by incoming unique visitor streams and test programs or actions that deliver a better result.   (i.e. Test against the control.)  

Let’s say you are evaluating customer conversion rates.   They will be much higher than prospect conversion rates.  Also, higher if they are multi-buyers with higher RFM performance.   Conversion rates will also be boosted if you have a lot of unique or hard to find products and if you have a high percentage of consumables (repeat purchase needed) items in your offer.   List, offer, creative, pricing, media channel will also affect the conversion rate.   You goal is continous improvement over time on like for like marketing programs.    So, catalog multi-buyers, after a mailing of a new catalog might convert at 15-20%.   Lapsed customers responding to a reactivation mailing or email might only respond at 2%.   

On the prospect side, here again it depends on the offer, list/segmentation,  prospect profile, promotional vehicle , timing, price, landing page, etc.   Having said that, I would not be surprised to see a prospect response online of .5-2.0%.   If you hit 5% you have a real winner! 

Remember too, conversion rates are just one short term measurement.  Important, yes.  Are they everything?  No.   Your overiding measurement should always factor in  your expected LTV (lifetime value) of a new or repeat customer.   It is not what you spend to get a new customer, nor is it solely about the conversion rate or AOV  but rather what you get in return over a one, two or three year period.   It’s all about measuring the necessary steps to achieve the maximum ROI over the LTV of the customer. 

So don’t be mislead by an average conversion rate statistic that is higher or lower than your current conversion rate.   Keep focused on the detailed performance measurement of all prospect and customer streams that come to your site and make sure you are testing to achieve continuous improvements.


“The Onion Search”

October 8, 2009

By Terry Jukes, President, Ability Commerce (terryj@abilitycommerce.com)

Search engines allow us to shop even when we have no clue of what it is we want to buy.

Recently, I needed a replacement part for my small fishing boat. I knew it was a part of a fishing rod rack, a fitting or holder or flange than went through the cabin wall….but had no clue what to call it.   It attached by two screws that were 3” apart and the diameter of the hole was 2”. I went shopping online….but just what was I shopping for?

Into the Google search box I entered “replacement boat parts” and got the predictable overwhelming result. Next it was “fishing rod holder” only to learn about the difference between fishing rod holders and all their component parts and fishing rod racks and all their component parts. Along the way I noted several key sites that were in the business of selling replacement boat parts…obviously, a huge product category that needed further refining.

Next, I typed in “fishing rod rack, flange, 2” diameter” hoping that the item specification search might lead me to the item. This returned hundreds of pages of results.

Next I tried going to several of the key sites I had noted and used their internal site searches.  Sadly, many of these sites had dismal site search functionality. (Functionality most online merchants need to improve!).  It took several sites before I came across a photo of the item I needed (I had to have a photo to be sure of a match…do all the items on your site have photos?) of the item I needed.  Only problem was, it was the manufacturers’ site and they would not sell direct.   After searching for “find a retailer” and not finding anything (make sure your manufacturers list you as a retailer.) I sent them an email and got no response after several days. (Let’s face it, manufacturers aren’t good at customer service.)  Next it was a phone call and a voice mail message….then another reminder email.  (I was desperate to buy their product!) Finally I got a reply….”Yes, we manufacture that item, but we only sell retail, we will find a retailer for you”.  Another week past. After a reminder email from me, the manufacturer admitted that they could not find a retailer who stocked the item (a good reason for them to sell direct!) and relented on their no-retail policy. They took my credit card over the phone and sold me the product directly. I got it two days later via UPS. (For not being a retailer, they seemed to know how to take my order efficiently!)

The point of this story is simple. Firt, I am amazed at how poor most sites are at meeting my expectations, failing to answer even the most basic questions. (Heh, where can I buy your product??)  Second, I,  like most other addicted online shoppers, have long since evolved from brick and mortar shopping mentality to the “let’s Google it” world and Google (or our search engine of choice) has us very well trained.  We use Google to solve problems, not just buy products. Our searches are intuitive and cumulative. The answer to the first search leads us to the next search, and so on. It is like peeling back the layers of the onion. It is “the onion search”. It is an important distinction for the online marketer.  Imagine if I had seen a site called www.hardtofindplasticboatparts.com or www.fishingrodrackparts.com.  Imagine how that product offering and site might have ranked in my search results as I described my problem or perceived need in the search box.   Better still imagine if the merchant had a “Let us find it for you!” button on their site.  Imagine too if the part marketer made sure that all the product specifications were included in the product description and keywords so that there would be a faster match between me “the searcher” and “the seller”. Imagine if more online marketers realized that shoppers have problems and often search for solutions, not knowing what actual item or product they really need.  Ask yourself how well your site and your items sell during “the onion search”.   I am sure you will see opportunity and when you do, send me some examples of how you made more money by peeling onions.