What are conversion rates?

In order to improve your conversion rate you must first know and understand it. The conversion rate is based upon the percentage of people that visit your site and follow whatever actions you desire. For example, a site selling computers would measure the number of people that visit the site versus the number of people that buy from their site. A conversion rate of 5% means that for every 100 visitors to your site, 5 of them will become buyers. Other actions you may desire to measure could be: signing up for a newsletter, becoming a member, or requesting more information.

Once you have defined what action you want your visitors to take you can measure your conversion rate. Every industry has different averages and most conversion rates are very low. To become profitable you need to reach the point where you're making more money off each visitor than it took to get them there. That is quite a mouthful so let me explain.

If it cost you $1 to get a visitor to you site and they purchase a $10 item, you just made $9. More realistically, if you spent $5000 to get 10,000 people to your site then your goal would be to make at least that $5000 back. You do that by increasing your conversion rate. If your conversion rate was 5% then out of 10,000 visitors you could expect 500 of them to become purchasers. If your average profit per transaction was greater than $10 you just made the $5000 back.