What is Conversion Rate in Marketing & How to Calculate It

What is Conversion Rate in Marketing & How to Calculate It

3 Min Read

As marketers evolve their strategies to more effectively advertise their brand or products, there are plenty of metrics used to evaluate the success of their ad campaigns. We are doing a deep dive into the data that every marketer should be tracking.

We’ve already covered ROAS (Return on Ad Spend), CLV (Customer Lifetime Value), and next up – we’ll discuss what is conversion rate, how it’s calculated, and why it’s important for marketers.

What Is Conversion Rate?

Conversion rate is a measure of the percentage of users who complete a desired action. This action will vary depending on industry and business, and will possibly even change as a marketer moves from one campaign to the next.

By looking at your performance marketing or demand generation campaign goals, a marketer can better determine the best action to compare against the total number of users. Some examples of conversions that you can measure for both ecommerce and non-ecommerce businesses are purchases, clicks, leads, and downloads.

Why Is Conversion Rate in Marketing Important?

A higher conversion rate means your marketing efforts are effective and resonate well with your audience. Here’s why it’s so important to track.

  • Measures Marketing Effectiveness: Conversion rate allows businesses to assess the success of their marketing efforts by quantifying the number of visitors that took desired actions.
  • Enhances Customer Insight: It provides valuable insights into customer behavior and preferences, helping tailor strategies for targeted segments.
  • Increases Return on Investment (ROI): High conversion rates result in more revenue without the need for additional ad spend, thereby increasing marketing return on investment (ROI).
  • Facilitates Growth and Profitability: With more conversions, businesses can see an increase in sales and profits, aiding in overall growth.
  • Encourages Optimized User Experience: Tracking conversion rates pushes businesses to continually improve their website or landing page experience to convert more visitors.

How to Calculate Conversion Rate

Once you have decided on a goal (or three) to track, you can use the formula below to calculate conversion rate. There are a couple of versions of conversion rate formulas out there, but we think this one is the best way to measure success:

Conversion Rate = Clicks or Visits / Conversions

An Example of How It’s Used

As an example of using this formula, let’s say that 100 people saw your ad and visited your site, and 10 of those users converted. Your campaign’s conversion rate would be 10%. This formula is pretty straightforward, so just make sure you are plugging in the correct data.

What is a Good Conversion Rate?

Just like anything else involved in measuring your marketing success, determining whether you have an optimal lead conversion rate will depend on your business. The easiest way to know your conversion rate is indicating a successful campaign is by measuring it against past work. To do this, look at your marketing metrics before running a new campaign and use them as a baseline.

For example, let’s say you are a clothing company running an advertising campaign for a new sweater line and want to determine whether your ad campaign is successfully driving conversions. By comparing the new conversion rate to any campaign run in the past, you will get a baseline for measuring the success of your new conversion rate. And if you have no past campaigns to measure or benchmark against, just know that the higher the percentage, the better your campaign is performing.

No matter what business you’re in, we bet we can help improve your conversion rate. Find out how we can help boost your Conversion Rate.

Conversion Rate: Final Thoughts

At MNTN, we understand that calculating conversion rates are a fundamental element in crafting a successful marketing strategy. It provides a direct measure of your marketing effectiveness, helping you fine-tune your campaigns, maximize ROI, and ultimately drive business growth.