So you’ve decided to get into e-commerce – that is, selling products or services online – and you’re wondering how to go about it. Are you familiar with the term conversion rate? Perhaps you’ve heard or read something about it. Many merchants and e-commerce businesses talk about it, and it is certainly a metric used by Google Analytics to indicate the success of an online store or a website.
What Is A Conversion?
A conversion is any action by a customer that results in revenue for an e-commerce business. This could be the purchase of a product, an email sign-up, or the download of a white paper or eBook.
A conversion rate shows the percentage of visitors to a website or online store that turns into a paying customer. (Think of the analogy to a brick-and-mortar store: If you have 1% of your visitors who are buying something, you’re doing well.) The rate can be calculated by taking the total number of conversions and dividing it by the total number of visitors. For example, if you had 10,000 unique visitors to your website in the past year and you had 10 sales, your conversion rate would be 0.1%.
Why Is The Conversion Rate Important?
The reason a conversion rate is important is because it indicates the effectiveness of your marketing and sales efforts. This can be an essential piece of information for a new business or existing business that is considering an e-commerce venture. You can use this data to determine how much profit you should be expecting from your online store. (Hint: It’s not what you’d normally expect.) For example, if you expect to make $1,000 per month from your e-commerce store and you have 10,000 unique visitors per month, you would need to make about 20 sales per day to reach your target of $12,000 per year. (For the sake of simplicity, we used the present value of $1,000 per month to calculate the revenue – but, of course, you would need to multiply this by 12 to reach the annual target.)
Before you begin your e-commerce journey, it is important to define exactly what you’re looking for. Is it sales? Is it leads? Is it an awareness campaign? (For example, if you’re looking for customers in Malaysia, it might make sense to target Malaysia-specific audiences with content and offers relevant to that audience.)
How Do I Determine The Value Of My Store?
To determine the value of your store, you need to consider many factors. These include:
- Your revenue
- The size of your traffic
- The country you’re in
- The state
- The city
- The style of your store
- How long your products are on sale
- How often you discount
- Whether you offer free shipping
- Whether you offer customer support Via email or phone
- Whether you offer a money-back guarantee
- Whether you provide a tracking number or a code so customers can easily find out the status of their order
The list above is just a small fraction of the factors that could be considered in valuing an e-commerce store. (No, seriously, there are plenty more.) To get the most accurate picture, you need to develop a strategic plan and gather as much data as possible.
How Do I Gather The Data?
The best place to start is with Google Analytics. This is a free tool that can be accessed from any website or mobile device. With it, you can track every aspect of your visitors’ behavior – including where they came from, how long they spent on your site, what they clicked on, and more – all in one place. You can use this data to determine the value of your website or online store.
While you’re there, you can also set up custom alerts so you can be notified whenever a new conversion happens. Then you can examine the data to see what prompted the action.
Beyond Google Analytics, there are plenty of other tools that can help you examine your conversion rate, including but not limited to:
- New Relic
- Turnkey WooCommerce
- A/B Testing
- Customer segmentation
- Email marketing
- Content marketing
- Mobile marketing
- Display advertising
With these tools, you will be able to see exactly how many conversions you’re making and the value of each one. From there, you can determine the true ROI of your e-commerce marketing efforts.
How Much Does It Cost To Run Effective E-commerce Marketing And Sales?
This really depends on how much you want to spend, where you want to spend it, and how much you want to achieve. (For some, the answer might be nothing.) If you’re just getting started, it’s probably a good idea to invest in Organic Search Traffic via SEO or paid ads. Paid ads are relatively inexpensive and there are plenty of options for small businesses. (Remember, there’s no such thing as a free ride in online marketing. You always have to be paying for traffic.)
If you’re looking for a quick return on investment, paid ads are a great option. And remember: You’re not paying for traffic, you’re paying for results. (In other words, you’re paying for leads or sales – it’s all the same thing.)
As your business grows, you might decide to spend more on acquisition, which means targeting potential customers with paid ads and organic search engine optimization (SEO). With paid ads, you’re not bound to specific keywords or phrases. This is a great option if you’re just starting out and don’t have the time to constantly monitor your rankings in search engines. But as your business grows, you might decide that maintaining your organic SEO is more effective and less expensive. (Which is absolutely correct – as long as you know how to measure it correctly.)
Organic SEO doesn’t rely on paid ads to generate results. Instead, it uses a variety of methods to get website content preferred overpaid ads, social media platforms, and similar websites.
The important thing to remember about organic SEO is that it is constantly changing. You have to be willing to learn and keep up with the trends. Otherwise, you could spend a lot of money with no results.
To determine how much it costs to run effective e-commerce marketing and sales, first you have to figure out what those terms actually mean. Are you looking for traffic? Are you looking for leads? Are you looking for support? (Think of the different stages of a consumer’s journey and how you can best serve them.) Once you have your answers to these questions, you can roughly determine how much you’ll need to spend on each phase of your e-commerce program.