Your Conversion Rate May Be Telling The Wrong Story

Your mobile conversion rate may fall this holiday season, but that may be a good thing.

As a Customer Success Manager, I work with clients to identify their mobile objectives and make sure we are doing what we can to meet those goals. With the holidays approaching, I often hear customers say that they want to increase their mobile conversion rate this season compared to 2016.  On the surface, an increase in conversion rate year-over-year sounds like a great goal, however, when we look more closely at conversion rate and the variables that influence its movement, we can see that it can often be a red herring.

An increase in conversion rate is not always a good thing. Likewise, a decrease in conversion rate is not always a bad thing. In fact, I predict that many retailers will find that their mobile conversion rates have dropped this year compared to last year even through their mobile transactions, revenue and traffic have increased year over year. Let me explain why.

Misunderstanding Metrics

Conversion rate on its own is not a good metric to use to evaluate the performance of your mobile site. Conversion rate is transactions divided by traffic (sessions or users) in a given period. Because it is a compound metric, interpreting conversion rate requires taking the extra step to understand the movement of the variables – traffic and transactions – that comprise it.

The complexity of conversion rate is best illustrated through an example (see table 1). Let’s say on Monday, you had 400 visitors to your site and 20 of them bought something. Your conversion rate on Monday would be 5%. On Tuesday, we see that your conversion rate has increased to 6%. There are five different scenarios that could have caused your conversion rate to increase by 1%.

5 Scenarios causing a 1% increase in conversion rate

Conversion rate increase chart

By percentage:

Conversion rate increase chart

  1. In scenario A, your traffic stayed constant – 400 visitors came to your site – but 4 additional people converted resulting in a 6% conversion rate.
  2. In scenario B, your transactions increased by 20% to 24 conversions but your traffic dropped by 5%.
  3. In scenario C, both your transactions and traffic increased with transactions increasing more rapidly than traffic.
  4. In scenario D, your transactions remained constant – 20 people converted – but your traffic decreased by 20%.
  5. In scenario E, both transactions and traffic decreased with traffic falling more rapidly than transactions.

The ideal scenario is scenario C – the funnel is growing (there are more customers to convert) and more customers are transacting. The other 4 scenarios are not ideal and could be detrimental to your business with stagnant or declining traffic and/or transactions. And that’s where the danger of focusing only on conversion rate to measure your business performance comes in. If you were just looking at conversion rate to measure performance, you would miss that traffic and/or transactions were stagnant or declining. All you would see is an increase in conversion rate, and you would think your site was performing well.

On the other hand, let’s walk through the scenarios in which your conversion rate may decline. Again, let’s say you had 400 visitors to your site on Monday and of those visitors, 20 of them converted. Our conversion rate on Monday is 5%. On Tuesday, our conversion rate drops to 4%, but why?

5 Scenarios causing a 1% decrease in conversion rate

Conversion rate decrease chart

By percentage:

Conversion rate decrease chart
  1. In scenario A, your transactions dropped by 20% to 16 conversions while your traffic stayed constant.
  2. In scenario B,  your transactions dropped by 20% while your traffic increased by 5% to 420 visitors.
  3. In scenario C, both your transactions and your traffic increased by 5% and 20% respectively.
  4. In scenario D, your transactions remained constant – 20 people checked out – but your traffic increased by 20%.
  5. Finally, in scenario E, both your transactions and traffic decreased with your transactions declining more rapidly (by 20%) than your traffic (at 5%).

Scenario C is again the ideal scenario for a retailer. More visitors are coming to their site (leading to more opportunities to convert) and more of these visitors are moving through checkout. Yet, if you were only focused on conversion rate, you would see that your conversion rate dropped and worry that there was a problem when in fact your business was growing.

Scenario C is the scenario I hope my customers find themselves during this holiday season. Depending on how quickly traffic is increasing relative to transactions, however, one of my customers may find that their conversion rate is dropping while the other may find that their conversion rate is rising even though both have more mobile traffic and transactions (and likely revenue) than last year.

So, as you jump into your site analytics, how should you approach interpreting your conversion rate?

  • Define your time period. The holidays are a highly seasonal period and the best way to account for this seasonality is to compare to the same holiday period in 2016.
  • Don’t look at your conversion rate in isolation. Recognize that conversion rate on its own is not a good measure of your site’s performance.
  • Analyze the movement of the variables that comprise conversion rate. How has your traffic shifted? How have your transactions shifted? If both your transactions and your traffic is increasing, you can be confident that you are growing your funnel and more effectively driving conversions this holiday season compared to last year – despite what your conversion rate may be saying.
By Melissa Andrew, Senior Customer Success Manager, Mobify

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