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Ignore Marketing and Increase Your Revenues?

January 1, 2001

You want it quick and straight. You pull up to the window at the fast food place. My voice crackles over the intercom, "May I help you?"

"Hey, Grok! Two burgers, large fries, a medium diet soda, and what's the most important statistic I should pay attention to in my e-business?"

"Conversion rate. That'll be $4.59 at the second window, please."

You can get as fanatical about your website metrics as baseball fans do about player stats if you want1, but the number one measure that is going to give you the best indication of your success online is your conversion rate. "Any serious company on the Internet should have an absolute awareness of conversion rate. Small gains on low conversion rates can have unbelievably powerful effects on a company's performance," says J. William Gurley.2

"So what is a conversion rate, really?" you ask. Conversion rate the number of folks who visit your site within a specified time period divided by the number of folks who actually do something productive on your site (like buy or register or subscribe). These days, a conversion rate of 2-4% is considered average, below 2% is shabby and 10% or more is spectacular. (Notice, though, if you compare these percentages to the bricks and mortar world, they are all pretty tragic. Offline, the average conversion rate is around 50%. So, your site can do better than 2% or even 10%, and isn’t that great to know?)

Gurley has done the math for you:

Let's assume you spend $10,000 [in advertising] to drive 5,000 people to your site, and your conversion rate is 2 percent. This means that 100 transactions cost you $10,000, or $100 per transaction. Now let's assume your conversion rate rises to 4 percent. The same $10,000 buys you 200 transactions at a cost of $50 per transaction. An 8 percent rate gives you 400 transactions at a cost of $25 per transaction.

It all seems so simple. Higher conversion rates mean more money coming in and less money spent to attract a customer. Here’s a flash: it IS simple; don’t make it complicated.

So how do you get those higher conversion rates? Here’s a recap of a lot of the stuff I’ve talked about. For more details, check out the archives.

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