Drive and Convert

Announcer:
You're listening to Drive & Convert, a podcast about helping online brands to build a better e-commerce growth engine with Jon MacDonald and Ryan Garrow.

Ryan:
Jon, we are on our 89th episode of Drive & Convert. Probably never thought I'd get this far on a podcast with anybody. Thankfully with you, it's done well. We've never answered the question this long into it of, what's a good conversion rate? And I know you get it all the time. I get it all the time and I don't even talk about conversion rate that much, but people brag to me about their conversion rate's good, so they just need more traffic. I'm just like, "Oh," just roll my eyes. Audibly sigh. I'm like, "Oh, this is where we're starting. Okay."

Jon:
Ryan making friends.

Ryan:
Yeah, I never pull punches. I'm like, "Well, if that's what you think, that's great. Let's go with that."

Jon:
That's fair.

Ryan:
But conversion rate is, I mean it's a constant thing. If you're in e-comm, you have to be thinking about it and you want to talk about it, and a lot of e-commerce managers want to brag about it for some reason.

Jon:
Therein lies the problem, right? I mean, I think that's a big issue, and we'll talk about that today hopefully. I think that the fact that e-comm managers want to brag about this makes the numbers that are out there publicly even more suspect.

Ryan:
Yeah. Like, "Oh, my conversion rate's awesome." I'm like, "Well, okay." I won't give away all the punchlines, but I do a lot of eye rolling when I'm not on Zoom, visible, when I'm on phone calls. If I've talked to you about that, hopefully my eye roll doesn't come through in my tonality. All right. So, Jon, the difficult question, what's a good conversion rate? What do we shoot for? What's the magic number that means we've been successful and we can now sit back, relax, and let the site take care of itself, and we're just not going to do anything from a beach, drinking pina coladas?

Jon:
Yeah, I love it. That sounds amazing.

Ryan:
It does.

Jon:
I think we should just skip all of this and go to the beach, but here's the reality. You probably already know the answer to this. There's no magic number. There just isn't. And in fact, there are so many variables when it comes to conversion rates that it's just near impossible to pin a percentage across all the different industries, all the different verticals. This is the one time I tell people, "You are a unique snowflake."

Ryan:
That's a good one. I have to use that.

Jon:
Yeah, you may think you're not, but you are. And when it comes to conversion rates... So, we're going to break this down a lot more today, I promise you. But just keep this in mind while we talk about it and you're listening, that a good conversion rate is one that is always improving, full stop.

Ryan:
Done. Podcast is over.

Jon:
That's it, right? That's it. That's what you need to keep in mind. And I know it's not the answer you probably want to hear, but really, the reason we're doing a whole episode on this is so that we can discuss that point and help people understand why it's true and why they're a unique snowflake.

Ryan:
Got it. Okay. Well, let's start off by breaking this down for all the snowflakes. Live here in Portland, there's just lots of snowflakes in Portland it feels like, even though it rains more than it snows. With conversion rate basis, let's start there. We've got to at least establish a solid foundation before we can build on this truth of a good conversion rate's always improving. What does the conversion rate actually mean? So, as an expert in it, you might have a different definition than average Joe or Sally on the street.

Jon:
And I think that's fair, and I think it's a great question. It's a good place to start because of the fact that when you Google what's a good conversion rate, for instance, there are different definitions of what conversion rate are. So, how do you even know everybody's working from the same definition? It's not as simple as one plus one equals two. That's a hard fact. We all know it. We all live by it. But when you ask the question, "What's a good conversion rate?" You're probably going to get different answers around what conversion rate even is before you define what a good number is with that definition. So, there's a lot of ambiguity here. So, let's just clean up and start from scratch. What is a conversion rate?
So as whole, it defines a percentage of people who take a specific desired action out of everyone who has a chance to take that specific desired action. So, again, it is the percentage of people who take a specific desired action out of everybody who has the chance to take that specific desired action. So, that relies on two things. There's a pool of people and you want them to do a specific action, and then there's the number of people who actually do take that action. So, you're talking about specific actions or action, ideally, depending on your site, and then the percentage of the people who do that action. So, that's what a conversion rate is, but that also leaves a lot of ambiguity. What is the action you want people to take? And that differs.
So, part of the challenge is that the term conversion rate can just be applied to so many different touchpoints across every different industry. So, for example, a content site may call an email marketing newsletter subscription or a PDF opt-in a conversion, right? A software company might call a user signing up for a new trial a conversion. Heck, we have people that we work with that are software companies that consider a conversion a trial to paid subscription, and that's the only conversion they care about. They don't care about how many trials they get. I mean they do, but that's not a conversion to them because they're not getting revenue. It's a free trial. And in fact, that conversion even costs them money to have the trial and facilitate everything, and support it, and the server fees, et cetera.
And e-commerce, pretty simple. Brands typically call a product purchase a conversion, but the term is also used for how many people click through an ad on Facebook, or visit a landing page, or do an email signup. There's a lot in there. I would say the only conversion that matters in e-comm is the purchase, but I know you would say from a marketing standpoint that you just want to build that list, so you can continue to grow people that you can sell to, which is fair, but it's two definitions.

Ryan:
Yeah. Well, there's micro conversions that on a lot of e-comm sites, where it's more complicated and you'll probably touch on those. But it also depends if you're coming into a company and you're just looking at analytics, you have to make sure you're filtering your analytics data to make sure that it's not just counting a bunch of page visit conversions plus time-on-site conversions. I mean, you're like, "Oh, my conversion rate's 6%." Well, you found out that five out of six are actually weird non-transactional conversions that somebody else set up at one point to track.

Jon:
Exactly. And there's even a whole bunch of issues around you might be missing conversions. So, we often see that people who offer PayPal as a checkout option end up missing a lot of conversions because the PayPal checkout does not go through the normal checkout page. So, then the numbers are off because they get sent to PayPal to convert, actually spend the money, and then they get redirected back to the site. So, it shows a missing conversion in the end because-

Ryan:
The old referral conversions.

Jon:
Exactly, right? So, I think that just the sheer difference in the descriptions and actions just make it so tricky to decipher what a good or high conversion rate is or bad or low one is. And I just think it's interesting. That content site we talked about might have a 40% conversion rate, and then you're an e-comm site and you're like, "How the heck do they have a 40% conversion rate?" A SaaS company might have a 14% conversion rate on its free trial, and e-commerce might only have a 3%. And even within e-commerce, you look at it and you go, "Wow, that's a $2,000 couch they're buying." That's going to have a much lower conversion rate than the $10 t-shirt or the iPhone case that is 15 bucks or whatever. And it also depends how much traffic each company attracts.
So, what's the average lifetime value as well? That can make a big difference. Is somebody coming back who already knows and loves your brand, and it's a very simple conversion for them because they're just refilling or renewing their subscription, or they ran out of a product and they always just come back and buy more? You have to factor all of these things in. So, I guess my point is this is going to sound overly complicated, and I think it can be because it's proving the point that it's just too broad to compare your specific conversion rate with others, even your direct competitors, all of that should just get thrown out the window.

Ryan:
I like it. Conversion is a broad term, and it should be very specific, I think when you're talking about it. But I guess to take it to another level, how would a company measure their own conversion rates? Since there's so many different things you can measure depending on your site, what are the things I need to be thinking about as a marketing manager on my website to be even able to measure this right?

Jon:
Yeah. Well, I think that, first of all, to start, it needs to be based on what we just talked about. There needs to be two factors. Obviously, there's the number, and we'll get to how to calculate that number. But you also have to say, "This is the conversion rate for X action," right? Remember the definition we talked about right upfront, that it is a percentage of people who complete a specific action out of the entire pool who could have completed that specific action. So, for instance, if you look at a cart conversion rate, you can't say that your cart conversion rate is a specific number by taking the total number of visitors to your site. That's going to give you bad data. You need to say the cart conversion is the number of people who added something to the cart and visited the cart, versus those who actually checked out from the cart. Not your total visitors to your site, but the number who were actually in the cart.
So, there's a lot of nuance here. Okay, let's say you have a specific action and you know want to track the conversion rate for that specific action. Great. Maybe we just start with sales, e-commerce, keep it simple. How many actual sales do you have should be your conversion. So, you could do that based on total visitors because you want to know how many people who visit my site actually buy and get all the way through the funnel. High level, very generic conversion rate math here. So, you take the number of conversions, or you could say sales based off the site. Divide that by the number of visitors, then multiply by 100.

Ryan:
Oh, my gosh. Are you going to start doing math on our podcast?

Jon:
Yeah. I hate doing public math. I hate it. All right. Let's do an example just because this could be entertaining for everybody. Okay, let's say 400 people made a purchase a month and you have 15,000 visitors a month. That seems like a reasonable number for our audience. The conversion rate would be 2.66.

Ryan:
Are you sure?

Jon:
How do we get there?

Ryan:
You did much more... I would've been like-

Jon:
I did the math before we got on here.

Ryan:
I would've been like 15,000, 150 conversions. We have a 1% conversion rate. Let's keep it simple.

Jon:
Okay. Yeah, let's do something a little realistic here-

Ryan:
Yeah, okay. [inaudible 00:10:56].

Jon:
But take out your calculator. You have 400 people make a purchase. And again, that's the number of sales. Divide that by the number of visitors. So, 15,000. So, 400 divided by 15,000. Then, you multiply that number by 100 to get the percentage. That's really all you're doing there. So, that comes out to 2.66. So, that's your conversion rate. But keep in mind that conversion rate and return on investment for your efforts go hand in hand, so you need both, right? So, I can easily get you 100% conversion rate. Give your product away for free, but you're not going to have a return or a profit.
So, again, if you're measuring your conversion rate, you need to measure the right thing and have a specific action that you want to measure. You can have multiple conversion rates throughout your site. You mentioned the term micro conversion, we've talked about that before. Yes, there are lots of micro conversions that you should track and can track, but you have to be clear about what that action is. And then, you have to think about is there a return on investment possible here, right? Because you don't want to just inflate your conversions just without seeing that there's some benefit for you in measuring them. So, just keep that in mind as well.

Ryan:
Got it. Okay. So, what I'm hearing and what everybody else should take away from this is 2.66 is a good conversion rate because Jon did the math publicly. So, there you go. 2.66, right?

Jon:
Yeah, I get it. You want to know whether you're doing well, right? [inaudible 00:12:20].

Ryan:
Yeah. So, how do I feel good about taking a number to my manager or to the owner to say that, "Oh, our conversion rate is awesome"?

Jon:
I know, and that's the big issue here, and I think that's what everybody hits the easy button and just says, "Our conversion rate is X, and I went online Googled it, and we're Y." And, "Hey, manager, I'm doing great. Mr. CEO, Mrs. CEO, I'm awesome, right? We're selling a lot of product here." But here's the thing. Most of the time, e-commerce managers are just looking to determine if they're performing well in general. They just want to know whether they're better or worse than their competitors. And I think that pitting yourself against your competitors really is not going to give you an accurate depiction of where you are. It's just not. Does this mean you don't measure conversion rates? Maybe. Maybe you don't measure them. I don't know, maybe it's not a good metric for you to be reporting to your manager or your boss.
Just take it off the table and explain to them, yeah, we could look at studies and public data that's out there, but it doesn't factor in what kind of e-commerce sites are getting those rates. It doesn't factor into what the specific item they're tracking is. It doesn't factor into how they're getting the data. Maybe the data itself is dirty, right? There's a lot that can go into that. Maybe they're artificially inflating the number because they want to look good to their manager. I've seen it happen. I like to think most people are honest, but the reality is I've seen a lot of data out there that I look at that data, I'm like, "How did you calculate this?" And they're like, "Well, that feels right." I'm like, "It's a conversion rate. Math is math."
It's just worth noting that there's really a huge difference between a brand that sells luxury handmade furniture in a brand that sells iPhone cases. Going back to those two examples I mentioned earlier. One brand might get 10,000 visitors a month with 2% sales conversion rate, while another might be seeing a million visitors with only a 2% conversion rate. Which one do you think is doing better? It's really hard to tell. So, let's also talk about what are the challenges in measuring this. I think that that's something that we should touch on because there's a ton. So, many challenges.

Announcer:
You're listening to Drive & Convert, a podcast focused on e-commerce growth. Your hosts are Jon MacDonald, founder of The Good, a conversion rate optimization agency that works with e-commerce brands to help convert more of their visitors into buyers. And Ryan Garrow of Logical Position, the digital marketing agency offering pay-per-click management, search engine optimization, and website design services to brands of all sizes. If you find this podcast helpful, please help us out by leaving a review on Apple Podcasts and sharing it with a friend or colleague. Thank you.

Jon:
I know we've talked about them, but the biggest is that it's really just too easy to compare yourself with other similar sites. As we've shown in the single example above, a 2% conversion rate can mean so many different things for different size brands, different types of products. Next, the quality and quantity of your traffic you're bringing to your site can have a huge impact on conversion rates. And you know this better than most people, right Ryan?

Ryan:
Yep.

Jon:
This is what you guys do. If you don't send quality traffic, how can you possibly judge a good conversion rate? You could be sending the best branded traffic to the site or a really generic term that you've just dumped a lot of money behind and got them to the site, and they're not going to convert as high. So, two sites can have the exact same layout, products, prices, but yet, wildly different conversion rates. So, I think that that's something to keep in mind. Then the intent behind the SEO keywords shoppers use plays a major part in conversion. One site might be getting a million hits a month from people searching for generic phrases like jeans, which I just talked about, doesn't provide a lot of information.
Are these people looking for jeans? Are they looking for reviews? Are they even ready to buy or are they just carrying out initial research? So, on the flip side, another site might get 10,000 visits a month, from really focused shoppers who are in buy mode, they're using keywords like Levi's Jeans size 12. Customers in that type of buy mode are far easier to convert. So, there are practices that you can put in place to strengthen your chances of converting an on-the-fence shopper, but this is really just to say your biggest competitor should just be you. It should be measuring yourself and looking at your conversion rate and making sure it's always improving. Going back to the tenet I asked everybody to keep in mind as they're listening to this, right? Your best conversion rate is one that's improving every month, week and day. That's the best way to look at it.

Ryan:
And I think that you as the competitor is the best because that's the only one whose data you actually know. I mean, if you have access to your competitor's analytics and you know how to analyze and get in there, and really know a lot about the traffic they're driving and the intent behind that, great. You do have a pretty good potential benchmark. But if a competitor's allowed you to do that, I would question your competitor or what's going on.

Jon:
Well, but I mean, you see analytics accounts every day, right? People give them to you to be able to help them understand how they can improve, but that still misses a lot of context. You still have to dive into other things. What are the ads they're sending? What messaging are they using? What are they targeting? How much are they spending? There's so many variables that even if a competitor said, "Here are the keys to the kingdom. Go look at our Google Analytics account," you're still missing a lot of information just without being able to fully look at the picture.

Ryan:
True. And I think a lot of brands, my advice almost all the time, and I probably say this four or five times a day, you're building your traffic from the bottom of the funnel up in most cases. Where, as you add more to the funnel, that conversion rate as you move away from the purchase intent goes down. If I'm searching for jeans, I don't care what site you are, that search will convert worse than size seven women's jeans, light blue Levi's if you have it in stock. If you don't have it in stock, you can't convert anyway, but still have to take some of the weird variables out like that. But you're moving down that-

Jon:
But again, I mean, you just proved the point, right? There's so many variables here. I mean, how can you compare yourself to a competitor? You don't know if they have the product in stock or they had stock issues. Again, there's just so many variables that it doesn't make sense to measure.

Ryan:
Like men shoes, we turn off shopping in men's or women's shoes when the middle sizes are out. When we have Jon size or my kid's size, and that's all you have, sorry, you're not going to advertise that because you cannot convert at a rate that actually allows you to make a return. It's like Jon will find you if you have that size because it's difficult to find.

Jon:
For me, growing up trying to find shoes, I wear a size 15 for those who don't know, but it was impossible to find shoes. Advent of the internet, shopping for shoes online made my life-

Ryan:
Game changing.

Jon:
... quality of life 1,000 times better, I'll just say.

Ryan:
Yeah, so there's, obviously, all these variables. So, I'm hearing from you, Jon, that you don't like conversion rate benchmarks and letting people decide what they should be shooting for. Good, bad. You can't get one, right? Am I misunderstanding this?

Jon:
You're not misunderstanding. It's super easy to find benchmark data out there. Just Google it. You'll find benchmark data. But I'm going to tell you what our director of strategy, Natalie, says all the time, she emphasizes this with everybody. Benchmarks are bullshit, and it's true. Of course, industry benchmarks give you an idea of where you sit in the market, but they don't tell you anything else about your business. And how accurate can they actually be relied, right? I mean, we've worked with multiple brands in the same vertical quite a few times actually, and they have wildly different conversion rates. And that's okay because they have different audiences, different missions, different goals, different selling products that fall into all these different categories.
I mean, if we just took eyewear for instance, this is a good example, if you just took eyewear brands and you compared them, what a report is going to say is, "If you're an eyewear brand, this is the average conversion rate." Okay. But we've worked with eyewear brands that sell blue-blocking lenses. We've sold eyewear brands that sell fashionable eyewear that helps you read, readers, or sport goggles that are prescription eyewear. All three of them... And sunglass brands. All four of those have completely different use cases, but they all would fall under the generic category of eyewear.
And so, when you look at that, you're like, "Oh, wow, there's a report out there that says that they should have this conversion rate because they fall under eyewear." But I will tell you that the conversion rate for sport goggles is way different than the conversion rate for blue-blockers because they're completely different purchases for completely different purposes, and it just has different price points as well. Look, all of this is why we discourage e-commerce brands from comparing themselves to industry averages and really compare yourself to yourself. That's all I can say here.
These averages are always faulty. No fault of the person producing the report. It's just there's so many other things that they can't possibly get a number without genericizing this up some levels, and that just makes it not helpful. So, there's just no way to know what's true and there's so many questions here. So, finally, I think we find brands tend to do one of two things when they look at benchmarks, and I think this is important. They either feel really good about their conversion rate because it's higher than the average. And then what's the outcome of that? "Oh, hey, we can stop optimizing because we've done enough," right? Well, maybe, or do you not want to improve anymore? Just because you hit your best bench press weight ever, are you going to stop lifting weights? Probably not.
Or two, they just feel awful because their conversion rate's below that industry average, and they end up with an unhealthy focus on wanting to beat the competition, as opposed to serving their own customers and improving their own metrics. And I just think both of those outcomes are just really unhelpful. So, I don't see what the positive is that comes out of this.

Ryan:
Yeah, when you've put the focus on conversion rate as a goal metric, at the end of the day, it impacts so many other things that lead up to that that can lead the business down the wrong path. If the business is trying to go this direction and you focus on conversion rate, you may start making decisions that take you the other direction. And so, I think conversion rate is not a bad metric to be looking at by any means, and people should be watching that and paying attention, but you can't do that in a vacuum, I think is a great punchline.

Jon:
Yeah, that's a great point.

Ryan:
Like yesterday, I was talking to a brand and talking about their ads, they brought up conversion rates. So, I had this conversation yesterday. I was like, "Well, your conversion rate is probably not correct." They're like, "What do you mean?" I'm like, "Well, you see this little repeat rate? This tells me that you have 89% of your conversions that you're tracking repeating in 90 days, and that doesn't make any sense based on what I'm seeing. And so you're allowing your conversion rate to be inflated by something that's being tracked that keeps repeating more often than it should." So, even your pixel firing incorrectly, maybe... You have to understand correct tracking first and all these other things before you can even look at a conversion rate as a baseline to say, "How do we improve it?"
All right, Jon, so where do we go from here? We know there's no benchmark we can need to look at. There's a lot of issues comparing conversion rates. So, what do we advise brands to go from here?

Jon:
Well, at The Good, we're just big advocates of constantly striving to improve your own conversion rates. Regardless of where you're at in the market, what your rates are, I've said this a few times, but competing with yourself is the surefire way to get the results you want because you're in control of what you're doing. So, just focus on competing with yourself. And I think it's important to state that true conversion optimization involves carrying out these small tweaks, right? It's improvements that happen on a daily basis. And I think that's the biggest issue that most brands look at it as, "Hey, we're going to overhaul our site," and they're going to burn down the house to rebuild it, and that's going to fix their conversion rate problems. But really, if you just renovate room by room, just start with renovating the floor in one room, then you can paint the walls, then... You know what I mean? Take it slow and do these small marginal tweaks.
Those have such a big impact over the time because it's a snowball effect. It really builds up to a better overall user experience over time. And that requires you to focus on your own home instead of everyone else's. And that's really what's going to matter. And I have to throw out here a little plug for Opting in to Optimization because I think that that book goes into this type of issue way deeper. There's a whole chapter on this in there, and I think it's just a good overview of how you can improve your conversion rates without focusing on your competitors. And so it's something to really think about there. So, if you're interested in that, you can get it on Amazon. You can go to thegood.com/books and get it. Email me, I'll get you a copy, whatever. Easily accessible, out there.
But really, I think if you like this conversation and you want something to prove to a higher up in the organization, a CEO who is dead set on measuring conversion rates and you understand that it's not a challenge, Opting in to Optimization is a good sell to them. It's a good read for them. I wrote the book to help convince people that they need to be doing optimization in a different way. And I think that that is a great artifact to give to a manager to help them understand that. Make your life easier.

Ryan:
Yeah, and I've seen the results of that. I mean, there's a large brand here in Portland that someone in the team knew Jon, gave the entire team the book within the first couple months of him working there. And then, it completely changed how that team was looking at their web traffic. And they have multiple domains, and we've seen some very good things out of that brand.

Jon:
Yeah, it's been a good relationship. Yeah. Well, thank you, Ryan. I appreciate you humoring me with this topic because it seems like a really high level topic upfront, right? But once you start diving in, oh, man, there's a lot here.

Ryan:
It is. If nothing else, you have to have a conversation about what a good conversion rate is internally. Because if you actually do this, sit in a room and start talking through it, I think you'll come to the same conclusion that we've always come to, is that, "Okay, there's too many things going on here. We can't just decide that good or bad. All we need to do to decide as a group, we're going to get better," period. End of story.

Jon:
Awesome. So, next week, can we record what is a good ROAS? What's a good return on ad spend?

Ryan:
That's probably the exact same punchline. I like it. So, yes, next week when we record, we'll talk about what's a good ROAS because I would love to open up some eyes into what the best ROAS is.

Jon:
I can't wait. All right, Ryan. Well, we'll talk then.

Ryan:
All right. Thanks, Jon.

Announcer:
Thanks for listening to Drive & Convert with Jon MacDonald and Ryan Garrow. To keep up to date with new episodes, you can subscribe at driveandconvert.com.