Conversion Current 5.0

Kanika popping in here today! Which means this email will be much less pretty, but hopefully packed with some great value to make up for it.

“What should my conversion rate be?”

This is one of the absolute TOP questions I receive, over and over again, without fail. And the truth is: that’s basically like asking, “how many customers should I have?”

Well… as many as you can get. Obviously!

While there is no “right” answer to this question, most people are looking for some sort of benchmark across other companies. But once again, just like all other metrics in your business, your conversion rate is one of many that is extremely individual and wildly dependent on many other factors within your business: your AOV, your traffic channels, your audience demographics, etc.

But, luckily, as many things in business are - there is a way to figure out what your target conversion rate should be in a perfect world.

It all starts with your target cost of acquisition (CAC). If you don’t have that figured out already - and ideally figured out per each of your products/services - go do that before continuing to read on. That is essential to growing your business so you need to know that information yesterday.

For those of you who already have that information (phew), keep reading! I’ve even made it simple with a step-by-step breakdown. Since we’re talking about your acquisition costs, this applies best to your paid campaigns:

1. Identify your target cost of acquisition (CAC)

2. Calculate the number of sessions or visitors you’ll be driving (monthly), based on your ad spend and cost per click.

   • Total Sessions = Total Budget / Cost Per Click

   • Note: Every click won’t turn into a session, so be mindful of this and adjust your targets accordingly if you’d like to be more accurate. You can also adjust your CPC by ~15-25% to account for this.

3. Calculate the maximum number of conversions you could achieve, based on your budget and target CAC.

   • Number of Conversions = Total Budget / Target Acquisition Cost

4. Use this information to then calculate the goal conversion rate.

   • Goal Conversion Rate = (Number of Conversions / Total Sessions) * 100

Let's break this down with an example:

Suppose you have:

- Total Budget: $150,000

- Cost Per Click: $2

- Target Acquisition Cost: $50

Step 1: Total Clicks = $150,000 / $2 = 75,000 clicks (or sessions)

Step 2: Number of Conversions = $150,000 / $50 = 3000 conversions

Step 3: Goal Conversion Rate = (3000 / 75,000) * 100 = 4%

Therefore, your goal conversion rate would be 4% based on the given parameters.

This helps you set a target conversion rate you need to achieve to meet your target acquisition cost within your budget. It's important to note that this method assumes all conversions have equal value (so it makes sense to do this individually for each of your funnels/products). Also keep in mind that your actual results may vary based on factors such as ad quality, fluctuating CPCs, and market conditions so be conservative with your projections and inputs.

This information will also help you prioritize your efforts properly. If that conversion rate (CVR) feels way out of reach based on your historical data, then is there another place you may be able to focus to bring that target CVR down? Is it possible to improve your Cost Per Click, or can you increase your target CAC through reducing overhead?

Or… of course, if you want an expert opinion on whether your target CVR is achievable or not, reach out to us! We’re always happy to help.

We believe big swings get big results, so if you need to improve your conversion rate by 10%+ and have already tried traditional methods of CRO, our Disruptive CRO Testing methodology will be of interest for you. Reach out and we can chat more.

Either way, I hope this helps more of you get better control of your business growth, your targets & projections, and - importantly - your sanity ;)

Thankful for your support,

Kanika