August 5, 2013

Are You Tracking Your Conversion Rates…You should be!

Attention acquisition marketers! by the very act of reading this blog post, we are counting you as a conversion.  Please read on for this edition of Covalent Marketing’s 15 Metrics for Marketing Success as we discuss the Transaction Conversion Rate. 

This is a marketing metrics that can carry many different definitions, depending on the type of business you are in.  Even within your business, you may have multiple conversion rates that you measure depending on the type of marketing activity and its objectives.

So what is the definition of a Transaction Conversion Rate?  In a general sense your conversion rate is a ratio of prospects to completed transactions.  The variance in how you define your conversion rate is driven by the specific marketing activity that defines a completed transaction.  Additionally, in order to measure your Transaction Conversion Rate, you will need to have a tracking system so you can identify transactions triggered by your marketing activity.

Once you have defined your different Transaction Conversion Rates and you have the ability to track the transactions you need to create your conversion rate formulas.  Below are two examples of a conversion rate based on different transaction types:

Lead Generation Transaction Conversion Rate

In this example, a b2b company is sending a prospect/acquisition email that directs them to a specific landing page or microsite that includes additional marketing information.  When the prospect completes the form (this is the transaction definition) asking for more information, we would define them as a conversion.

Lead Conversion Rate =   (# of Lead Forms Completed/Total Traffic on a Landing Page) * 100

Website Sales Conversion Rate

In this example, an online retailer wants to track sales activities related to their digital marketing activities.  In the email to their prospects the retailer includes a discount promotion code to be used at the time of purchase (this is the transaction definition).   When the prospect uses the promotion code at check-out and completes the purchase, the retailer will track this transaction as a conversion.

Sales Conversion Rate = Number of Sales with promo code/Number of Visitors * 100

In summary, a Transaction Conversion Rate is a commonly used metric for prospecting especially in digital marketing.  It should be used to track the performance of your acquisition efforts across multiple conversation rate definitions like those in the examples above.  Higher conversion rates lead to higher revenue, which is hard to argue with.  Good luck with your acquisition efforts!