The term Conversion Rate is regularly used in the Digital Marketing industry as a valuable KPI. But in fact, we´ve been working Conversion Rates before the Internet was even invented. It began with Sales and Direct Marketing techniques, but is in fact a term that may not be related to a sale at all.
Conversion rate means in fact, the percentage of prospects that take a desired action. So it can be a Click, a Lead, a Contact, a Sale, or even a Payment. But here is the prevailing law when are you measuring conversion:
Unless you are measuring conversion from the beginning of your cost structure, your conversion can be misleading.
What does this mean?
It basically means that even though you can track your conversion from Sales/Lead or Lead/Clicks, you need to keep track of your Overall Conversion, otherwise what caused your increase in a specific touch-point, might be decreasing conversion on a previous step.
Take a PPC (Pay-per-click) campaign. Your campaign cost structure begins with a Click, and in most cases you would only have the return when a Sale occurs. So even though you will monitor Impressions, be thrilled that your campaign is converting into XYZ Leads, and that your Contact and Sales numbers have gone up, here are the KPI´s you must constantly control.
A) Overall Conversion = Sales/Click
B) Campaign cost per sale = PPC Cost $ / Sales #
C) Business cost per sale = (PPC Cost + Operative costs) / Sales #
To elaborate, if you want to make sure that your campaigns are bringing value to your business, controll the Overall Conversion, ensuring that your Campaign cost per sale is at an adequate level, but that you get enough of these that your Business cost per sale actually decreases delivering a greater Return on Investment (ROI).
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