Conversion rates are my biggest enemies
I often have discussions with marketers that have a pretty weird view on conversion rate. Some really big companies use their website’s overall conversion rate like a metric for their marketing quality. Conclusion? It’s a vanity metric.
So why aren’t conversion rates applicable when evaluating at the performance of a website?
A conversion rate is made up of two components: number of conversions and number of visits. Mmkay?
Think about all types of traffic that come to your site. It’s everything from direct traffic, organic from Google, paid from Google, Facebook campaigns, mistypes of your domain, old link clicks going to a 404, bots you can’t identify as bots in Google Analytics, articles, blog posts, Google Display Network, display campaigns on a myriad of websites, TV campaigns, link clicks from all the emails you’ve ever sent to your customers, contests, Instagram and so on.
What you’re doing when you make up one part of the conversion rate with all this traffic is that you increase the statistical variance. That makes the number of visitors not dependable or interesting in any way (when related to number of purchases in the equation for ‘conversion rate’).
And the other part, number of conversions, isn’t relevant either. Doesn’t your products have different pricing? Order value is a factor that has to be taken into consideration.
As an example: Let’s say you get tons of traffic from a news article about your website or one of your products. In this scenario, the clicks to your site were just curious people – not people looking to buy anything at the moment. Since this traffic doesn’t have a conversion rate as high as, let’s say, your existing customers clicking on your recent newsletter with a discount, then this will lower the overall conversion rate drastically.
What does this give us? Well, the conversion rate says you did a bad job by getting that news article. But logic tells you, you did good! Therefore, the conversion rate isn’t usable. It doesn’t tell you anything!
So, what is the overall conversion rate on a website? Well, just a random number saying your server or payment system isn’t down (well, if it’s not 0%…).
So how about a conversion rate, specific to each traffic channel? Google Analytics has this as a standard report and Google is, um, a big company with, um, huge competence.. so they should know what’s best, right?
So why shouldn’t you look at conversion rate per traffic channel on a website/app?
For the same reason, you shouldn’t look at overall conversion rate. There’s too much variation in the goals and results of your various marketing campaigns. If your conversion rate from “Facebook – Paid” increases by 50%, from 2% to 3% during a particular time period, does that tell you anything at all about the ROI? No, ROI might as well have dropped like bananas under the same period.
A pretty good example is when I purchased a huge amount of “crappy” traffic from Adf.ly, in order to research if I could get a good ROI. I got a conversion rate of 0.04% (compared to 5.00% from Google Search Campaigns). However, since the traffic was so incredibly cheap, the ROI was 260%. Compared to 115% on Google Search Campaigns. My conclusion: Conversion rate didn’t help me to determine if Adfly was a good channel or not. (Yes, I just compared the conversion rate of two channels. But that was just to show you how meaningless it was.)
So, I ask you kindly to think about this: What does a conversion rate really tell you? If you really think about it?
Same goes with other metrics
The problem is: Many seem to think that metrics up and down the sales funnel are correlated.
Why is this a problem? They won’t see the truth. This leads to optimization made on wrong metrics.
Let’s take a look at some examples:
- “Higher open rates in your email campaigns”
- “A lot of traffic to your website”
- “High conversion rates”
Would you want these things for your business? (For example: An E-commerce).
If your answer is yes – you have to re-think.
These scenarios doesn’t tell you anything about how you’re actually doing.
Will higher open rates actually give you higher revenue? Why would the funnel after the email open be constant, no matter how you write the headline for your email? To give you an exaggerated example: You can simply get higher open rates by writing something like; “Get any 5 products in our store for free!” (and then you’re not actually giving away anything for free..).
In the same way, a low open rate could be good sign! Imagine being Sears, sending this; “Here’s a coupon for 5% off any lawn mower – valid until midnight”. If you’re not interested in buying a lawn mower before midnight, you won’t have a incentive to open. The opens you get will probably be few, but very relevant. But if someone is judging you by open rate, you did a bad job.
See what I mean?
If you like a lot of traffic to your website and think that is a good end in itself – why not purchase 1000 visitors from a spam service? It will only cost you $0.40. Why not invest $400 in getting 1 million visitors?
The lesson is simply; Visitors won’t earn you money – the right visitors (a.k.a. buyers) will.