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Do you know how to calculate your conversion rate?

I had a great time yesterday delivering the keynote at the Wednesday live conference in Stockholm, which featured an all-too-typical show of hands. First, I asked how many of the marketers in attendance had a Web Analytics system installed on their site. Every hand in the room went up. Then I said, “Keep your hands up if you check your results at least once a day.” Every hand went down. Why is this so? Having an analytics system and not using it regularly is like having an extra car in your garage that you don’t drive. What is stopping us from using these numbers that we generate every minute of every day?

I don’t know for sure, but I think there are a few reasons. Some marketers think they can skate through to retirement without really adapting to the Internet. Others might feel like they just don’t know how to do it and it’s too scary to learn. But every year, I think those groups become more and more of a minority.

Stockholm Port
Stockholm Port (Photo credit: Wikipedia)

I think the real problem is that marketing analytics are still too hard for the average person. Think of all the steps required:
  • Choose an analytics system
  • Get an account or install the software
  • Configure your Web site with JavaScript to start counting visitors
  • Choose your conversions
  • Instrument your site to report the conversions
  • Learn how to analyze the reporting

And after doing all this work, you haven’t even learned anything about your customers yet.

No wonder there are books and consultants galore to help you. The average marketer is swimming in details without getting anything back for quite a while. This takes a commitment.

And even after you have done all of these things, you still need to grapple with what you are looking for. Just take one seemingly simple metric: conversion rate. Conversion rate is the number of conversions divided by either the number of visits or the number of visitors. So, marketers need to make a decision before they even can use this metric!

I typically take clients through a very basic set of concepts to get them started:

  • Visit: A single session at a Web site. Every time a person comes to your Web site, it counts as a visit. Visits are not people. They are the online equivalent of a trip to the store. Some people make several trips to the same store before buying something while others make just one, but if you count visits, you are adding up all the trips to the store across all people.
  • Visitors: People who come to your Web site–sometimes called Unique Visitors. If someone comes to your Web site, the person is a visitor and they have made one visit. If that same person returns to your Web site later, you still tally one visitor, because it was the same person, but you count two visits.

Some industries should calculate their conversion rates using visits, while others should use visitors. Because the same person could visit Amazon five times in fives days and conceivably buy something each time, Amazon should divide conversions by visits to calculate its conversion rate.

On the other hand, if a person comes to Honda’s Web site five times in five days, it doesn’t make sense that they might buy five cars. Instead it makes more sense to figure that they are getting more information in each visit for a single purchase, so Honda should calculate its conversion rate by dividing conversions by visitors.

Now, notwithstanding all of that, for some businesses it might not be that easy to know whether visits or visitors is the right number to divide by. HP sells printer cartridges and laptops–so they don’t have a clear-cut argument for using either visits or visitors across their whole site. But you should know that as long as HP makes a decision and sticks with it, they’ll always be comparing their metrics consistently, which is the most important thing.

After walking through this entire blog post, I have immense sympathy for all those marketers that put their hands down yesterday. Instead of us thinking these poor saps are too dumb to be Internet marketers, maybe this should be a wake-up call to the entire Web analytics industry. If we don’t start making it easier, marketers aren’t going to do it.

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Mike Moran

Mike Moran is an expert in internet marketing, search technology, social media, text analytics, web personalization, and web metrics, who, as a Certified Speaking Professional, regularly makes speaking appearances. Mike’s previous appearances include keynote speaking appearances worldwide. Mike serves as a senior strategist for Converseon, an AI powered consumer intelligence technology and consulting firm. He is also a senior strategist for SoloSegment, a marketing automation software solutions and services firm. Mike also serves as a member of the Board of Directors of SEMPO. Mike spent 30 years at IBM, rising to Distinguished Engineer, an executive-level technical position. Mike held various roles in his IBM career, including eight years at IBM’s customer-facing website, ibm.com, most recently as the Manager of ibm.com Web Experience, where he led 65 information architects, web designers, webmasters, programmers, and technical architects around the world. Mike's newest book is Outside-In Marketing with world-renowned author James Mathewson. He is co-author of the best-selling Search Engine Marketing, Inc. (with fellow search marketing expert Bill Hunt), now in its Third Edition. Mike is also the author of the acclaimed internet marketing book, Do It Wrong Quickly: How the Web Changes the Old Marketing Rules, named one of best business books of 2007 by the Miami Herald. Mike founded and writes for Biznology® and writes regularly for other blogs. In addition to Mike’s broad technical background, he holds an Advanced Certificate in Market Management Practice from the Royal UK Charter Institute of Marketing and is a Visiting Lecturer at the University of Virginia’s Darden School of Business. He also teaches at Rutgers Business School. He is a Senior Fellow at the Society for New Communications Research. Mike worked at ibm.com from 1998 through 2006, pioneering IBM’s successful search marketing program. IBM’s website of over two million pages was a classic “big company” website that has traditionally been difficult to optimize for search marketing. Mike, working with Bill Hunt, developed a strategy for search engine marketing that works for any business, large or small. Moran and Hunt spearheaded IBM’s content improvement that has resulted in dramatic gains in traffic from Google and other internet portals.

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