Conversion Rate Optimization, or CRO as it is commonly referred to in the industry, is the art and science of taking website visitors on the journey to convert for the site. This conversion, or end goal, can be anything from signing up for a newsletter to making a purchase through a checkout funnel. The goal are as finite as the internet itself.Conversion Rate Optimization, or CRO as it is commonly referred to in the industry, is the art and science of taking website visitors on the journey to take an action for the site (a conversion). This conversion, or end goal, can be anything from signing up for a newsletter, making a purchase through a checkout funnel, completing a survey, reserving a service/room/seat, etc. Goals are as finite as the internet itself.
The top use metrics for CRO are:
- Conversion Rate (CR)
- Average Order Value (AOV)
- Revenue Per Visitor (RPV)
Every site is different, so which one to use is entirely reflective of the purpose of the site and ultimately of the business. For e-commerce sites, my favorite metric is RPV as it combines the metrics of CR and AOV.
Common Metrics and How to Find Them
The most common, as it's in the literal name for the industry, is conversion rate, sometimes referred to as CR. This is the primary metric for just about anything. A conversion is when the site takes a visitor and has them complete an action. As stated previously, this action can be anything: adding an item to the cart, booking a room, signing up for a service, calling a sales rep, etc. It is anything that moves the visitor closer to being a customer or patron.
To figure out the CR for a specific goal, take the number of conversions (for the sake of demonstration, we'll say 1430 conversions for the goal), then take the number of visitors (for the sake of demonstration, we'll say 100,000), and divide the conversion by the visitors.
c/v = cr
1,430/100,000 = 0.0143 or 1.43%
Other metrics that are named differently but are essentially just CR with a more specific name:
CTR - Click Through Rate
AR - Acquisition Rate
ER - Engagement Rate
As mentioned before when explaining CR, conversions are the literal total number of goals reached. This is the 1430 that we see in the above example. Why am I stating this separately from CR? Because it is a very important metric. CR only tells you part of the picture. Conversions show you more of the picture.
Let's say we ran a report on CR for a period of two separate months. In the first month, our CR was 1.5%. The second month states that our CR was 1.2%. This would mean that our overall lift for the second month is -20%! Yikes! But when we look at the total conversions for the months, we see that the first month had 30 conversions and the second had 70 conversions, which is a 133% lift. So while CR might tell you something, it is not the whole truth.
Probably the most straightforward metric, it can be based upon the actual site revenue as dictated by the selling of goods or services (the site took in 1430 orders for a total revenue of $204,490), or it can be based on a more ethereal value prescribed by an actual and tangible value that is assigned to each customer. For example, if you have a lead generation site and each lead brings in $1 due to whatever you do with the lead (selling the referral, ad revenue, dues or fees charged, etc.) then out of 1430 leads, your revenue is $1430.00 if each lead is valued at $1.
Average Order Value
This is a pretty standard metric used in business analysis. Average Order Value, or AOV, is calculated by taking the number of orders Value, or AOV, is calculated by taking the number of orders (in our example above, we gave the number 1430), then taking the overall revenue of $204,490. We then take the revenue and divide it by the total number of orders.
r/c = AOV
$204,490.00/1,430 = $143.00
With the above variables, our AOV would be $143. Now, this isn't saying that every order is $143 or even that any order is $143. It merely states the average.
Revenue Per Visitor
This metric is my favorite for e-commerce sites. It is also the most complex, but only in terms of realization. Revenue per visitor, or RPV, takes the value of the AOV and the CR into consideration. It is a measurement of the revenue that each visitor to the site generates. To figure out the RPV, you take the total revenue and divide it by the number of visitors.
r/v = rpv
$204,490.00/100,000 = $2.04
Now the benefit of knowing the RPV value is that, should AOV and CR remain constant, the more visitors you attract, the more revenue you will reap based on that value. Now, $2.04 might not sound like much, but if you doubled your traffic, that's another $204,000.00 in revenue being brought in. Granted, all that hinges on the CR and AOV remaining consistent.
Bounce Rate / Exit Rate
Though rarely used as a primary metric, bounce and exit rates are great metrics to use to see if the site is not meeting visitors' expectations, the page is confusing, or the page has technical issues.
The bounce rate is the percentage of visits where they were the only one in the session, meaning that the visitor only ever saw one page and then left. To calculate the bounce rate of a page, take the total number of single-page visits (Tv) and divide it by the total number of entrance visits (Te). To think of it in terms of looking at a single page, like a landing page, let's say 1000 people started their journey on your landing page (an entrance, or Te) and out of these 1000 people, 438 of them didn't progress to anywhere else on the site (a single page visit, or Tv). Basically, they arrived and just exited. After calculating the data, we see that this landing page has a bounce rate (Rb) of 43.80%.
Tv / Te = Rb
438/1000 = 0.438 or 43.80%
Exit rate, is similar to bounce rate with the exception that it is the percentage of visits that were the last in the session, meaning they visited more than one page in their session. To calculate the exit rate, take the total exits (Tx) and divide it by the total page views or visits (Tv). As an example, let's say that 6000 people arrived at your product page, and out of that total, 298 people just exited at that point.
Tx / Tv = Re
298/6000 = 0.4966 or 5%
They are similar, but each one tells a different story. The bottom line is that a high bounce rate tends to mean the visitor came to the site with certain expectations and these expectations were not met, while a high exit rate may reveal that there might be a problem within that specific area of the funnel, whether that is technical or not, and it may need to be investigated.
Exit and bounce rates can be high, even 100%, if that is the intent of the page. Take a confirmation page or thank you page as an example, these pages generally have a 99.9% exit rate, and it is expected that they do. However, the home page should not. Overall, it is best to take these metrics seriously, but not as seriously as CR. It is always good to have these as part of your toolset to determine problematic areas of the site and do so with a huge dose of context and critical thought.
End of part 1
I originally thought this would be a quick and short post, but 16,000+ words later I see now that I need to break this up into multiple posts spanning different aspects of the CRO industry. Join me soon for part 2 where I will take you through the steps of testing, as well as explain in depth as to the various forms it may take.