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What is Conversion Rate?

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Definition​

Conversion Rate (CVR) is a key performance indicator that represents the percentage of users who complete a specific goal action among those who visit a website or app. Simply put, it's a number that shows what percentage of total visitors took the action we wanted. Conversion rate is one of the most important metrics in digital marketing and website optimization, as it can directly measure business success.

The definition of conversion varies depending on business goals. For e-commerce sites, "purchase completion" is a conversion, but for blogs, "newsletter subscription", for B2B websites, "quote request", and for mobile apps, "sign up" can be conversions. Conversions are divided into macro conversions and micro conversions. Macro conversions are the final business goals (e.g., purchases), and micro conversions are intermediate steps in the process (e.g., adding to cart, product comparison).

The conversion rate calculation formula is very simple: Conversion Rate = (Number of Conversions / Total Visitors) × 100. For example, if 1,000 people visited a website and 50 of them completed a purchase, the conversion rate is (50 / 1,000) × 100 = 5%. The higher the conversion rate, the better the efficiency of marketing investment, and the better the website meets user needs. Average conversion rates vary greatly by industry, but generally, e-commerce is 2-3%, SaaS (software services) is 3-5%, and lead generation (B2B) is 5-10%.

Features​

  • Direct Performance Measurement: Unlike vanity metrics like traffic or pageviews, conversion rate directly shows actual business performance. Even with many visitors, if the conversion rate is low, business growth is difficult.
  • Cost Efficiency Indicator: With a high conversion rate, you can acquire more customers with the same marketing budget. A 1% improvement in conversion rate directly impacts revenue.
  • User Experience Barometer: If the conversion rate is low, it's a signal that there are problems with website usability, content, design, pricing, etc. Through conversion rate analysis, you can identify areas that need improvement.
  • Segment Differences: Conversion rates vary greatly depending on traffic source, device, region, and new/returning visitors. By analyzing conversion rates by segment, you can know where to focus marketing resources.
  • Continuous Improvement Possible: Conversion rates can be steadily increased through A/B testing, landing page optimization, user experience improvement, etc. Many successful companies invest heavily in Conversion Rate Optimization (CRO).

How to Use​

Here's how to effectively measure and improve conversion rates:

Step 1: Define Conversion Goals First, you need to clearly define what you consider a conversion in your business. Set both macro conversions (e.g., purchases, sign-ups) and micro conversions (e.g., add to cart, brochure download, video viewing). Assigning a value to each conversion enables more accurate ROI (Return on Investment) analysis.

Step 2: Set Up Analytics Tools Use tools like Google Analytics 4 (GA4), Google Tag Manager, and Hotjar to track conversions. In GA4, marking events as "conversions" automatically calculates conversion rates. Set up all major conversion events and monitor conversion rates by page and traffic source.

Step 3: Measure Current Conversion Rate and Compare with Benchmarks Measure your website's current conversion rate and compare it with industry averages. Analyze not only the overall conversion rate but also conversion rates segmented by traffic source (search, SNS, direct, ads), device (desktop, mobile, tablet), and page. Identifying where the problem is is the first step to improvement.

Step 4: Conversion Funnel Analysis Identify the steps users go through to reach conversion and analyze the drop-off rate at each step. For example, the conversion funnel for e-commerce consists of steps like "homepage → product page → cart → payment information → purchase completion". Find out at which step the most users drop off.

Step 5: User Behavior Analysis Use heatmap tools like Hotjar, Crazy Egg, and Microsoft Clarity to observe how users behave on pages. Understanding where they click, how far they scroll, and where they hesitate can help you find elements that hinder conversion. Reproducing actual user experiences through session recordings is also very useful.

Step 6: Improvement Through A/B Testing Formulate hypotheses and conduct A/B tests. Change one element at a time, such as CTA (Call to Action) button color, text, position, changing headlines, or replacing images. You can use tools like Google Optimize (now discontinued, use alternatives like VWO or Optimizely) and Unbounce. Run tests for a sufficient period until you get statistically significant results.

Step 7: Landing Page Optimization Focus on improving landing pages with low conversion rates. Try adding clear value propositions, strong headlines, persuasive copy, visually prominent CTA buttons, trust elements (customer reviews, security certifications, award history), and removing unnecessary form fields. Page loading speed also greatly affects conversion rates, so optimization is essential.

Step 8: Mobile Optimization We're in an era where mobile traffic accounts for over 50% of total traffic. Mobile conversion rates are often lower than desktop, so special attention needs to be paid to mobile optimization. Provide touch-friendly button sizes, simple forms, fast loading, and mobile payment options (Apple Pay, Google Pay).

Step 9: Retargeting and Email Marketing Bring back visitors who left without converting through retargeting ads and email marketing. Sending emails to users who abandoned carts or showing ads to users who viewed specific products are strategies that can greatly increase conversion rates. The rate of conversion on the first visit is very low, so it's important to approach repeatedly at multiple touchpoints.

Step 10: Continuous Monitoring and Improvement Conversion rate optimization is not a one-time project but a continuous process. Monitor key conversion rate metrics weekly or monthly and test new improvement ideas. Market conditions, competitors, and user behavior are constantly changing, so continuous improvement is the only way to maintain competitiveness.

Examples​

Example 1: E-commerce Conversion Rate Calculation

Online Shopping Mall Case:
- Monthly website visitors: 50,000
- Purchase completions: 1,000
- Conversion rate = (1,000 / 50,000) × 100 = 2%

After improvement:
- Landing page optimization and checkout process simplification
- Monthly website visitors: 50,000 (same)
- Purchase completions: 1,500
- New conversion rate = (1,500 / 50,000) × 100 = 3%

Result: 50% increase in conversion rate → 50% increase in revenue

Example 2: B2B SaaS Conversion Funnel Analysis

SaaS Product Conversion Funnel:

Step 1: Homepage visit - 10,000 (100%)
Step 2: Product page view - 5,000 (50%)
Step 3: Free trial sign-up - 1,000 (10%)
Step 4: Trial usage start - 700 (7%)
Step 5: Paid conversion - 140 (1.4%)

Analysis:
- Homepage to product page transition rate: 50% (good)
- Product page to free trial sign-up rate: 20% (needs improvement)
- Free trial sign-ups who actually use: 70% (needs improvement - onboarding process issue)
- Trial users' paid conversion rate: 20% (good)

Improvement points:
- Add clearer CTA and value proposition to product page
- Improve trial usage rate to 80% through better onboarding email sequence

Example 3: Conversion Rate Comparison by Traffic Source

Blog Newsletter Subscription Conversion Rate:

Search traffic:
- Visitors: 20,000
- Newsletter subscriptions: 600
- Conversion rate: 3%

Social media traffic:
- Visitors: 15,000
- Newsletter subscriptions: 150
- Conversion rate: 1%

Direct visits:
- Visitors: 5,000
- Newsletter subscriptions: 400
- Conversion rate: 8%

Analysis:
- Direct visitors have high loyalty, so conversion rate is highest
- Search traffic has clear intent, so mid-level conversion rate
- Social media traffic is exploration-focused, so low conversion rate

Strategy:
- Focus on increasing search traffic (SEO optimization)
- Focus on awareness building on social media, induce revisits through retargeting
- Brand building to increase direct visitors

Example 4: A/B Test Case

Landing Page CTA Button Test:

Version A (existing):
- Button text: "Buy Now"
- Button color: Blue
- Visitors: 5,000
- Conversions: 150
- Conversion rate: 3%

Version B (changed):
- Button text: "Get 50% Off Now"
- Button color: Orange
- Visitors: 5,000
- Conversions: 225
- Conversion rate: 4.5%

Result:
- 50% increase in conversion rate
- Statistical significance: p-value < 0.05 (95% confidence)
- Apply Version B to increase revenue

Example 5: Device-specific Conversion Rate Analysis

E-commerce Site Performance by Device:

Desktop:
- Sessions: 30,000
- Purchases: 1,200
- Conversion rate: 4%
- Average order value: 80,000 KRW

Mobile:
- Sessions: 60,000
- Purchases: 1,800
- Conversion rate: 3%
- Average order value: 60,000 KRW

Tablet:
- Sessions: 10,000
- Purchases: 350
- Conversion rate: 3.5%
- Average order value: 70,000 KRW

Analysis:
- Mobile has the most traffic but lowest conversion rate and order value
- Mobile optimization is an urgent task
- Desktop has the highest conversion rate and order value

Improvement plan:
- Simplify mobile checkout process (add Apple Pay, Google Pay)
- Improve mobile page loading speed
- Provide mobile-specific promotions

Example 6: Retargeting Campaign Conversion Rate

Cart Abandonment Email Campaign:

Scenario:
- Users who added products to cart but didn't purchase: 2,000
- Emails sent: 2,000
- Email opens: 800 (40% open rate)
- Email clicks: 320 (16% click rate)
- Site revisits: 300
- Purchase completions: 150
- Conversion rate: (150 / 2,000) × 100 = 7.5%

ROI calculation:
- Recovered revenue: 150 purchases × 80,000 KRW = 12,000,000 KRW
- Email marketing cost: 100,000 KRW
- ROI: (12,000,000 - 100,000) / 100,000 × 100 = 11,900%

Conclusion: Retargeting emails bring very high ROI

Example 7: Landing Page Element Impact Analysis

Landing Page Before and After Optimization:

Before optimization:
- Headline: "Introducing Our Product"
- CTA: "Learn More"
- Image: Generic stock photo
- Form fields: 10
- Customer reviews: None
- Conversion rate: 2%

After optimization:
- Headline: "Triple Your Blog Traffic in 30 Days"
- CTA: "Download Free Guide"
- Image: Actual results graph
- Form fields: 3 (name, email, company name)
- Customer reviews: 5 with photos
- Loading speed improvement: 5 seconds → 2 seconds
- Conversion rate: 6%

Result: 200% increase in conversion rate

Pros and Cons​

Pros​

  • Clear ROI: Knowing conversion rate and cost per conversion allows you to calculate direct returns on marketing investment. Data-driven decision-making is possible for ad budget allocation, channel selection, etc.

  • Improvement Possibility: Unlike traffic increase, conversion rate can be improved just by website optimization. It's the most efficient way to increase revenue without additional marketing costs. A 1% improvement in conversion rate can lead to millions to tens of millions of KRW increase in revenue.

  • User Understanding: Through conversion rate analysis, you can deeply understand customer needs, decision-making processes, and purchase barriers. This provides insights that affect all aspects of business, including product development, pricing, and marketing messages.

Cons​

  • Possibility of Ignoring Context: Looking only at conversion rate can miss the big picture. Even with a high conversion rate, if the average order value is low or customer lifetime value (LTV) is low, long-term profitability may suffer. Multiple metrics must be analyzed comprehensively.

  • Difficult to Improve Immediately: Conversion rate optimization takes time and effort. A/B tests can take weeks to months to achieve statistical significance, and immediate results are hard to expect. Patience and a systematic approach are needed.

  • Dependence on Traffic Quality: Low conversion rates may be due to traffic quality issues rather than website problems. Visitors who come through irrelevant keywords won't convert no matter how great the website is. Targeted marketing is as important as conversion rate optimization.

FAQ​

Q: What is a good conversion rate? A: The "good or bad" of conversion rate varies greatly by industry, product price, and traffic source. General benchmarks are: e-commerce 2-3%, SaaS free trials 5-10%, B2B lead generation 5-10%, blog newsletter subscriptions 2-5%. Research your industry average, and most importantly, check if it's improving compared to the past. If it's better than last year, you're heading in the right direction.

Q: What's the most effective way to quickly increase conversion rate? A: There's no single solution, but generally the most effective are: 1) Improve page loading speed (1 second delay = 7% conversion rate decrease), 2) Clear and prominent CTA button, 3) Add trust elements (customer reviews, security certifications, money-back guarantees), 4) Minimize form fields (conversion rate decreases with each added field), 5) Mobile optimization. Improving just a few of these can significantly increase conversion rate.

Q: What's the difference between conversion rate and click-through rate (CTR)? A: Click-through rate (CTR) is the percentage of people who clicked among those who saw an ad or search result. Conversion rate is the percentage of people who completed a goal action among those who visited the website. For example, if ad CTR is 5% and landing page conversion rate is 10%, ultimately 0.5% (5% × 10%) of people who saw the ad convert. Both metrics are important and should be optimized together for best results.

Q: Which is more important: increasing traffic or increasing conversion rate? A: Both are important, but generally it's more efficient to optimize conversion rate first. Increasing traffic when conversion rate is low just increases wasted visitors. For example, sending 10,000 people to a website with a 1% conversion rate generates 100 conversions, but if you first improve conversion rate to 3% and then send the same 10,000 people, you get 300 conversions. Also, conversion rate improvement doesn't require additional marketing costs, while traffic increase incurs ongoing costs. The ideal strategy is to first optimize conversion rate and then expand traffic.