Chapter 54
Conversion Rate

To measure how many of the customers who responded to an ad or promotional offer convert to purchasing customers.

The conversion rate is the percentage of prospective customers or visitors (to a website) who both respond and buy a company’s products and services.

Where

Cr = conversion rate

Pb = number of people who both respond and buy

Pr = number of people who respond to your ad

Measure 53 described the response rate and cautioned that customers who respond to a direct marketing campaign are not necessarily buyers yet. Continuing with Metric 53’s example, if 75 of the 200 responses actually buy the product, then the conversion rate is 37.5%:

Without question, companies should strive for a higher conversion rate because it is an indication that their offering was attractive enough to attract a response and a purchase. Achieving a high conversion rate depends on many variables, including the relevance and appeal of the offer to the target customer, how easily accessible the offer is, the visual design, appropriate price, and how it compares to competing offers. With this list of qualifiers, it does appear to be a daunting task to develop a successful campaign. But that is the beauty of marketing—it is part art and part science. Marketers must be able to balance the quantitative performance demands with the qualitative aspects of sound judgment. Additionally, marketers must market their plans and ideas inside their own organizations if they want to achieve internal support and, consequently, deliver on the promises their programs make to the marketplace.

Similar to the response rate’s limitations, the conversion rate is highest when the marketer is exceedingly clear in his objectives, target audience identification, and message design. An appropriately chosen direct marketing media is also important. To achieve high conversion and response rates, marketers must exercise surgical precision in their marketing efforts and resist the temptation to develop a one size fits all campaign. By using direct marketing for its intended purposes—to either build a relationship with loyal customers or general short-term increases in sales through promotional offers—the resulting rates will likely satisfy the marketing campaign objectives.

The data for the number of people who actually buy will be captured in the company’s chart of accounts on a regular basis (daily if online, or weekly/monthly for other retailers). More specifically, it will be contained in the customer accounts summary (or its equivalent), in the sales department, customer service, or a similar order-taking department. A sophisticated marketing operation will also keep track of customers who bought products as a result of any direct marketing campaign by putting a reference code in the campaign message asking consumers to mention the code to receive the special offer. Similar types of reference tags can be used to track response to specific campaigns.

iJustin Driskill, What Is a Conversion Rate? The Online Advertising Guide, June 7, 2017. Retrieved June 22, 2017 from http://theonlineadvertisingguide.com/glossary/conversion-rate/