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Understanding Conversion Rate (CR) and Conversion Rate Optimization (CRO)

by SylvesterMarch 13th, 2023

Too Long; Didn't Read

Conversion rate (CR) and conversion rate optimization (CRO) are terms commonly used in ecommerce and digital marketing. By understanding what CRO is and how it works, you can start taking steps to improve performance of your business. CR refers to the percentage of website visitors who take a desired action, such as making a purchase or filling out a form. CRO involves analyzing user behavior and making changes to a website to increase the likelihood of visitors converting.

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Conversion rate (CR) and conversion rate optimization (CRO) are terms commonly used in e-commerce and digital marketing. By understanding what CRO is and how it works, you can start taking steps to improve the performance of your business.

What is a conversion?

A conversion is an action taken by a visitor that is a desired goal usually associated with selling products, and services or collecting leads.

An example a conversion could be:

clicking on a specific button (e.g., "download"),
filling out a form,
leaving contact information,
signing up for a newsletter,
watching a video,
adding a product to a shopping cart,
making a phone call to schedule an appointment,
viewing a specific subpage,
and finally buying a product.

In other words, conversion is a goal we set that takes into account user behavior and that serves to grow our business. Conversions are often measured in online marketing, during advertising campaigns, in newsletters, or on landing pages.

It's important to note that conversions and events occurring on a website are not the same thing. For example, watching a video or visiting a page might be an event, but they are not conversions.

Conversions are usually a part of the sales funnel or sometimes a standalone event designed to support a sales goal. There may be many other events happening on a website, but not all of them are conversions.

Conversion optimization

Now that we know what a conversion is, it is easy to deduce that conversion rate optimization involves activities aimed at improving the performance of achieving set goals. This is usually associated with an increase in revenue and profits for our company.

To increase conversions, you need analytics data to understand what's happening on your site. Conversion optimization itself, however, is a long-term effort that needs to be carried out on an ongoing basis when managing an online store or website.

To measure and improve conversions, you might need to add something called a conversion tracking code. This code is sometimes called a conversion pixel or just a pixel. To find out how many conversions there are and the conversion rate on a website or online shop, you need to put the code in the right place before you start the campaign and measure how well things are going.

The best place to put tracking codes is usually in the <head> section of a website. This is because the script can measure user behavior more accurately when it is placed higher up. One common tool for implementing tracking codes is Google Tag Manager. It is important to add the conversion tracking code correctly so that we can collect analytical data on the progress of the marketing campaign and daily events on the site.

We can classify conversions into two basic groups:

micro-conversions,
macro-conversions.

Micro-conversions

Micro-conversions are often a step towards achieving a main goal. It’s rather rare to see a customer which clicks “buy now” just after visiting for the first time an online store. Usually, it takes a little more than that, and that’s where micro-conversions come into play.

Examples of micro-conversions include signing up for a newsletter, visiting a specific subpage that describes a particular product, or any other step that’s closer to the end of the customer journey and marketing funnel (Below-of-the-Funnel a.k.a. BoFo) - adding a product to a shopping cart.

Measuring these actions can help assess user engagement and identify bottlenecks where users abandon further interaction with the website.

Micro-conversions can help define the sales funnel by representing certain milestones in achieving the final target conversion. By breaking down and detailing the next steps leading to a sale or other goal, as well as analyzing the customer journeys, you can optimize the conversion rate more effectively.

There are two basic types of micro-conversions:

Milestone micro-conversion

An action leading directly to MWR (Most Wanted Response). It could be adding a product to the shopping cart or leaving a contact in the callback service. These are usually events that directly support the purchase process, collecting leads, or any other main goal of the given application.
Supportive micro-conversion All auxiliary and secondary activities that increase consumer awareness and engagement, contribute to macro-conversion in an indirect way, e.g. adding a product to a wish list, leaving a comment under a blog post, or downloading a freebie. They often help to attract potential customers and increase sales indirectly.

Why micro conversions are important in conversion rate optimization

Micro-conversion analysis, as mentioned earlier, helps identify, among other things, the weaknesses of a website. For instance, it helps in identifying breakpoints where people leave your site without the desired action.

In a case where 8 out of 10 visitors left the site after visiting a subpage of a product category, it is possible that it needs a closer look and optimization. The reasons behind visitors leaving it could be:

the page loading speed,
a big popup that can’t be closed
a script error that makes it impossible to make a purchase.

Analysis of statistical data is not the only source of information. When running an online store it is also worth including customer service in conversion optimization. For example, collecting feedback and insights from customers on different stages of their journey could help identify problems and areas for improvement.

Consumers may encounter various technical problems or it may not be obvious to them what to do next. For instance, a low conversion rate may be caused by poor usability of the website for the viewer due to the site's unreadable design, UI, or poor technical optimization. In general, that stands for user experience (UX) on any website or application. Encourage them to initiate contact or leave feedback.

Micro-conversions also help in assessing the performance of different channels. Collecting insights about high-converting actions can help you improve sales funnels.

Macro-conversions

As already mentioned a macro-conversion is defined as a main desired action that is relevant to our business. It is the goal we want to achieve with our application, such as purchasing a product, making an inquiry through a form, and/or making a reservation.

A macro-conversion is what we consider to be the most valuable action a user makes on our site or off-site. Indeed, there can be off-site actions like phone calls or visiting the physical venue of our business.

Why do we measure conversions?

Conversions are measurement indicators for assessing the effectiveness of our activities. We can track successes and identify what brings the most value to our business. We can use conversions to verify introduced changes. Did the changes help in achieving our goals? By seeing positive marks and increased sales, we can better assess performed actions.

Measuring and analyzing conversions can also provide valuable information about potential customers, and possible directions of business development. As a result, measuring conversions can help with increasing company profits, and achieving set goals.

When analyzing marketing efforts, there are two terms that we definitely stumble upon:

CTR, or click-through rate,
CR, or conversion rate.

These two metrics are different but both play important role in measuring the effectiveness of digital marketing actions.

What is CTR?

Click-Through-Rate (CTR) is the ratio of clicks to views expressed as a percent in a given range of time. This ratio tells us, what percentage of people clicked on our ad, a link in an email, a link to a page in organic search results (SERPs), or a button on a specific sub-page.

CTR can tell us how well content is tailored (or not) to a given audience. Writing the right copy for our email can improve CTR significantly. However, optimizing CTR shouldn’t just be a goal on its own. We should have in mind an increase in conversion rate as a final objective.

That being said it’s worth noting that misleading or clickbaity call-to-action that increased our CTR, could have a poor effect on conversion. The same applies when we target the wrong audience (e.g. we advertise an expensive, premium product for customers looking for cheap or free options). We can have high CTR metrics, but a poor conversion rate.

How to calculate the CTR?

We calculate CTR using the following formula:

CTR (Click Through Rate) = clicks / impressions * 100(%)

Conversion rate

The CR conversion rate is the percentage of visits (sessions) that ended with the desired action in a specific period of time. We can determine many conversion rates on our site. As was mentioned before, the conversion could be:

product sales,
the submission of personal information and a completed application form,
installation of an app,
sending an inquiry via a contact form,
signing up for a newsletter,
downloading a file.

Knowing that, we can calculate the conversion rate and increase in conversion rate conversions for each of these events if we have the right data, e.g.:

20 sessions/visits out of 1000 were finalized with a single transaction - we have 20 sales, the conversion rate is 2%.

Notice that we take into account visits or sessions not users.

How to calculate CR?

We calculate the conversion, or more precisely its coefficient, using the following formula:

CR (Conversion Rate) = conversions (achieved goals) / traffic (number of visits) * 100(%)

Tools, techniques for conversion rate optimization

Optimizing conversion rate requires using different methods and techniques to help understand users, and their behavior and to identify problems and areas for improvement. It would be difficult to achieve without complex tools that help to gather and visualize data.

Call to Action

Call to Action (CTA) is a method aimed at improving conversion rates by getting the user to take an action (activity). Most often, it is a marketing solicitation that encourages a specific action like contacting, setting up a trial account, or buying a product. A CTA can appear, for example, in the form of a banner or a button.

Example of use:

Clear communication of benefits and incentives to visitors on the product page that support sales.
Soft CTA to encourage reading more related articles for undecided visitors on a landing page.

Chatbots

A chatbot is a program for automated conversation based on artificial intelligence. Chatbots enable users to get quick responses, so they are often used to automate customer service on websites.

Chatbots are interactive tools that increase consumer engagement and enable direct communication with customers, helping in making a final decision about a purchase. It also helps to save staff time by answering general, repetitive questions. For customers, benefits are not less important. They can quickly get answers about products and services.

Example of use:

The customer easily gets an answer about the store's return policy before making a purchase decision.
The customer informs about a problem with online payment and can be directly contacted by customer service.

A/B tests

A/B testing (also known as "split testing") is a conversion optimization technique, which involves splitting the audience into two groups. Conducting A/B tests involves serving half of the users one version and the other half another, an alternative version. The two groups are then subjected to analysis, which helps to assess which version had better performance.

Example of use:

Comparison of two sales copies on a product page.
Comparison of the best placement of the CTA button.

Heatmaps

Heatmaps like hotjar are among popular tools for optimizing conversions using visual data representation. That type of tool can help analyze user behavior and monitor areas of main focus points by capturing mouse movement. Mustered data are displayed in the form of a heatmap, where colors depend on the intensity of mouse movement.

Example of use:

Determine the best placement for CTA.
Find pages that are not engaging for users.

Analytics tools

Any application analytics is usually an advanced web tool, that allows you to better understand your consumers and website visitors, which then allows you to take action to improve your conversion rates. Google Analytics is one of the most notable ones. However, there are other alternatives or tools that we can use as complementary. Matomo and Bing Analytics are widely used alternatives to GA.

Example of use:

Measure and count conversions.
Check user behavior and bottlenecks in sales funnels.

Final thoughts

CR refers to the percentage of website visitors who take a desired action, such as making a purchase or filling out a form. CRO involves analyzing user behavior and making changes to a website to increase the likelihood of visitors converting. Knowing the terms and understanding them can help businesses improve their performance.