Learn more about the key metrics of conversion rate optimization.
When measuring the success of your conversion rate optimization (CRO) efforts, the most vital metric is also the easiest to track. You should know exactly how many of your visitors you are successfully converting into customers. As a general rule, it is beneficial for your business to have an increasing conversion rate. Meanwhile, a decreasing conversion means your business may be in trouble. However, there are other important metrics that you need to track if you want to understand the success of your conversion rate optimization strategy. Read more about the essentials of CRO here.
1. The cost of converting a visitor
Calculating how much it costs to convert a visitor to a customer is easy: simply divide the cost of your conversion rate optimisation strategy for a month by the number of visitors you converted in that time period. This information is vital because you can compare it with the other metrics to work out whether your conversion rate optimization strategy is cost-effective.
2. The approximate value of each visitor
You can calculate how much each visitor is worth to you by simply dividing your total profits for a given month by the number of customers who used your business in that month. Ideally, you should use the previous month, as this will give you the most up-to-date figure. The calculation will tell you the average amount of profit each customer generated for your business in the space of a month and therefore indicate how much each visitor to your site is potentially worth.
Once you know this figure, you can compare it to the amount it costs to convert a viewer into a customer and therefore work out if your conversion rate optimization strategy is delivering value for money in the short-term.
3. The life-time value of a customer
If you know the per-month value of a customer (as described in point one) and you know how long each customer tends to stay with your business, you can calculate how much profit that customer is likely to generate throughout the course of their relationship with your business. When you compare this figure to the amount it costs to convert a viewer into a customer, it will tell you whether your conversion rate optimization strategy is delivering value for money in the long-term. It will also allow you to decide how much money to invest in converting each viewer in future.
Do remember that not every customer stays with your business for the expected length of time! So there is always an element of risk in over-investing in each conversion.