When ecommerce store owners discuss their most important marketing metrics, conversion rate is almost always near the top of their list.
That’s with good reason—the number of people who visit your online store and make a purchase is crucial for any store’s success.
But conversion rate optimization is easier said than done. It’s important to understand how to calculate conversion rate, how to optimize conversion rate, and what factors inform what a good conversion rate is for your business.
What is a conversion rate?
Conversion rate measures the percentage of people who completed an action on your website. That action could be a newsletter form signup, lead magnet download, free trial signup, product purchase, or any number of other actions. It’s up to you to define what a conversion means for your business, but it’s helpful to keep this best practice in mind: Your conversion rate should reflect an action that has a measurable impact on your business growth.
Store owners consider conversion rate to be highly important because it affects the return on investment (ROI) of all your other marketing efforts.
For example, whether a potential customer visits the site via a social media campaign or Google Ad, a higher conversion rate means you’ll see a bigger return on those marketing campaigns. Assuming you continue to get the same or more traffic, if your store can convert at least 2% of website visitors into buyers instead of only 1%, your revenue doubles.
Conversion rate formula
Conversion rate is calculated by dividing the total number of conversions by the total number of visits to a webpage, expressed as a percentage of site visitors who completed the desired conversion action.
The conversion rate formula is:
Total conversions / Total visits to your website
Total conversions
This is the number of desired actions completed by visitors on your website. Total conversions could include actions like making a purchase, signing up for a newsletter, or filling out a form. Each of those would be separate types of conversions to track independently from one another.
Total visits to your website
This represents the overall number of site visitors who have accessed your website within a specific time period. It includes all the interactions and sessions on your website, regardless of whether a conversion occurred.
Many marketing analytics tools have a built-in conversion rate calculator. Shopify Analytics calculates it automatically, and Google Analytics calculates it once you set up its conversion tracking (or set up its automatic integration). These tools also provide more options for segmenting this number, such as by marketing campaign or device.
Sometimes, marketers calculate conversion rates with a slightly different conversion rate formula: based on the total number of visitors to their site instead of the total number of unique visits. This conversion rate formula helps account for customers who visit multiple times before purchasing. It’s referred to as a user-based conversion rate.
That said, a visit-based conversion rate is the industry standard for conversion rate benchmarks.
What factors can affect my conversion rate?
Many store owners want to know a universal benchmark for a good conversion rate. However, the truth is that a high-performing conversion rate is highly dependent on a series of factors outside of website performance itself.
Any holistic analysis of conversion rate performance should consider these factors:
Channel mix
Different traffic sources, or channels, will naturally convert differently. For example, visitors who find your site when searching a keyword with high purchase intent (e.g., “best cheese grater”) in a search engine tend to convert at a higher rate than those from social media. Why? These visitors are already seeking out a specific answer, as opposed to just browsing their feed.
Funnel mix
If a business is focused only on the bottom of the funnel, with tactics such as email marketing and remarketing ads, it will naturally have a higher conversion rate than a business that runs lots of awareness-focused ads reaching new audiences. That doesn’t necessarily mean one site is stronger than the other from a conversion perspective—it just means the business’s marketing is more focused on attracting pre-qualified people.
Product price
High-price products often naturally require more consideration. A site selling $2,000 products will have a lower conversion rate than one selling $20 products, all else being equal. In ROI terms, expensive products make up for this with a higher average order value.
Returning customer mix
When a customer has already purchased, they are much more likely to purchase again. Sites that have regular returning customers, such as those that sell consumable goods like food, will have a naturally higher conversion rate.
How to improve your conversion rate
When a website has a high conversion rate, that means the value of what it offers is clear, the shopping experience is simple, and the customer feels the need to buy as soon as possible.
Understanding how your website can improve on these three factors is the key to conversion rate optimization:
1. Communicate your value proposition
Ultimately, customers make purchases online because they see the value of the item they’re purchasing.
The value customers see in a product could be:
- Practical: “This vacuum is designed to pick up dog hair, which is a problem I have.”
- Economic: ”This vacuum is 20% cheaper than the alternatives I found.”
- Emotional/Personal: ”Buying this vacuum will make me feel like a smart homeowner.”
Your job is to understand what value your customers see in your products and communicate that value. Your website’s copy, images, video, and brand personality can communicate a value proposition.
2. Reduce friction
If a potential customer wants a product but doesn’t buy it, there’s likely something standing in their way—and it may be due to friction in the shopping experience itself. Any part of the customer’s experience on your shop’s website that creates hesitation is called friction.
Some of the main causes of ecommerce shopping friction are:
- Poor checkout experience. This can be caused by a lack of payment options or by unnecessary form fields.
- Unclear product/shipping information. For example, not clearly displaying how big a product is.
- Lack of clarity around which product is the best fit. This is common in stores with lots of product variants.
- Bugs or poor branding. This hurts the customer’s trust.
- Slow landing page site speed. This makes the customer impatient and can derail their experience, especially on mobile.
To diagnose friction issues on your site, start by looking at page-level conversion rates. If some pages drive conversions better than others, there may be issues on specific pages, rather than your site as a whole.
3. Increase urgency
Sometimes, customers are interested in purchasing; they just aren’t sure if they want to purchase at the moment or come back later. This is a particularly common issue if there are also value proposition or friction issues.
Stores can work to overcome this by establishing a sense of urgency on the website. If customers have a logical reason to purchase that day instead of later, the website’s conversion rate will be higher.
Some of the common ways to increase urgency are:
- Time-sensitive sales
- Informing customers when product stock is low
- Seasonal/limited product drops
- Education about shipping cutoffs—for example, letting customers know that if they want a product by Christmas Eve, they need to order 14 days before
Of course, if your store creates fake urgency, such as saying products are low in stock all the time, you will lose your customers’ trust. Ultimately, that would damage your conversion rate. So it’s important to apply urgency both ethically and strategically.
3 tools and software for tracking conversion rates
1. Shopify Analytics
A great tool for ecommerce brands is Shopify Analytics. The conversion tracking tool gives you insight into customers’ previous visits and behavior leading up to a purchase.
You can see an overview of the customer’s:
- Total number of orders from your store
- Total visits to your store in the past 30 days
- Origin of their first visit to your store
- Total number of visits they’ve made to your store
Within the conversion details, you can see information about a customer’s visit, including:
Session-referral
Provides an overview of where the customer was referred from, the landing page, visit date and time, and any referral code.
App details
If an order was referred from an app, you’ll see it here.
UTM parameters
A UTM parameter is a tag at the end of a URL that you can give to your customers (like https://www.yourstorename.com/?utm_source=campaign).
When a customer clicks the link, Google Analytics sends the tags back to it so they can track and report.
2. Google Analytics
An essential tool for conversion rate tracking is Google Analytics. This free website analytics platform gives you a ton of information about your visitors’ behavior, acquisition, and profitability.
Google Analytics can track conversion behaviors like:
- Transactions
- Revenue
- Products purchased
With enhanced ecommerce tracking, you can track more granular information, such as:
- Product clicks
- Product page views
- Add to cart
- Checkout steps
- Shopping behavior analysis
- Refund tracking
3. Improvely
For a useful paid tool for tracking performance across all marketing campaigns (e.g., social media, PPC, organic search), Improvely is a popular option.
Improvely also helps you run A/B tests on your landing pages and campaigns, build custom funnel reports, and detect click fraud as it happens. Pricing starts at $29 per month.
👉 Get the Improvely Shopify App today
Understanding conversion rate metrics in different industries
Every industry, whether it’s food and beverage or electronics, has its own standard conversion rate benchmark.
A recent study from Ruler Analytics found the average conversion rate by industry were as follows:
- Agency: 2.3%
- Auto: 3.7%
- B2B ecommerce: 1.8%
- B2B services: 2.7%
- B2B tech: 2.3%
- B2C: 2.1%
- Dental & cosmetic: 3.1%
- Finance: 3.1%
- Health care: 3.0%
- Industrial: 4.0%
- Legal: 3.4%
- Professional services: 4.6%
- Real estate: 2.4%
- Travel: 2.4%
Calculating conversion rate FAQ
What is a good conversion rate?
Although conversion rates should always be considered in the context of the type of site or store (see above), for ecommerce sites, 3% is generally considered a good conversion rate.
How to calculate the conversion rate in sales?
Divide the number of successful sales by the number of leads or visitors, then multiply the result by 100 to get a percentage. The formula is Conversion Rate = (Number of Sales / Number of Leads) x 100.
How can I improve my conversion rate?
To improve your conversion rate, focus first on improving how you communicate your value proposition. Additionally, improving your site’s shopping experience to reduce friction or add urgency for shoppers will improve your conversion rate. Assessing, improving, and testing these factors is the practice known as conversion rate optimization (CRO).
What tools can I use to improve my conversion rate?
Shopify Analytics and Google Analytics are the two most common tools for conversion rate tracking. Channel-specific tools, like Google Ads, will also help you calculate more segmented conversion rates, such as your keyword conversion rate.
