Conversion rate refers to the percentage of users who complete a desired action, such as making a purchase, filling out a form, or subscribing to a newsletter, out of the total number of users who interacted with an ad or visited a website.
Significance and Uses – Conversion rate
Performance Measurement: Conversion rate provides insights into the effectiveness of a marketing campaign or website in driving desired actions.
Campaign Optimization: By monitoring the conversion rate, advertisers can identify areas for improvement and make adjustments to maximize conversions.
ROI Calculation: The conversion rate, along with the average order value or customer lifetime value, helps evaluate the return on investment (ROI) of advertising efforts.
User Experience Enhancement: Analyzing the conversion rate can highlight potential barriers or friction points in the user journey, leading to optimizations that improve the overall user experience.
Example – Conversion rate
If an e-commerce website receives 1,000 website visitors from an ad campaign and generates 50 conversions (purchases), the conversion rate would be 5% (50 conversions / 1,000 visitors x 100). This means that 5% of the website visitors completed the desired action.