Measuring Conversion Rates
So you’re getting plenty of impressions to your advertising message. Is it doing you any good? Sure, you’re getting exposure to your brand, but what you really want to see are sales or leads.
For example, if you’re generating impressions to your website, you’ll want visitors to take some form of action—to demonstrate a willingness to try your product or learn more about it. That action can be subscribing to an online newsletter, filling out a form to download a white paper, or even place an initial order for your product.
To measure your performance in getting prospects to take action, you’ll want to measure your conversion rate. That’s simply the number of prospects who take some form of action divided by the number of impressions you receive.
Here’s an example:
- You receive 100,000 impressions to your website,
- 400 of those visitors take the action you’ve asked them to take, such as requesting further information, subscribing to an email newsletter, purchasing a product, etc.
- Your conversion to lead rate (or conversion to sale rate in the case of a direct sale) would be 0.4%. (400 visitors taking action / 100,000 impressions).
If you’re using direct mail, the calculations are similar—although given the expense of direct mail, your conversion rate should be higher. For example:
- You send out 10,000 direct mail pieces
- 300 of those who received the direct mail piece request further information
- Your conversion to lead rate would be 3.0%. (300 requests for information / 10,000 direct mail pieces sent).
Email works in a similar way. If you send out 20,000 emails, and get 40 recipients to click on your offer, your conversion rate would be 40/20,000 or 0.2%.
You may also want to measure conversion by open rate. If only 2,000 of those emails were actually opened, your conversion rate based on opened emails would be 40/2,000 or 2.0%. Using this information, you can estimate how many more leads you might generate if you can take steps to achieve a higher open rate.
Whichever media you use, you can calculate your cost-per-lead by dividing the amount you spent on your campaign by the number of leads you generated.
For example, in the email scenario above, if you spent $4,000 on your email campaign and generated 40 leads, your cost-per-lead would be $100 ($4,000/40 leads).