When B2B clients want to improve lead generation on their websites, one of the first things we look at is each website’s conversion rate. This metric refers to the percentage of website visitors who complete a specific goal to become a website lead. It can be calculated with this simple equation:
Number of leads ÷ unique website visitors = conversion rate
Of course, the flip side of the equation is:
Unique website visitors × conversion rate = number of leads
If businesses want to get more website leads, they must increase their websites’ traffic or conversion rates. Therefore, the conversion rate is a critical website metric.
‘Industry average’ conversion rates
Many businesses understandably want to know how their conversion rates stack up against others in their industries. Determining an average or “good” conversion rate for your industry is a difficult and fruitless task because you’re never comparing apples to apples.
Here’s why: Every business defines a “website lead” differently, and most companies’ websites generate different tiers of leads if they’re doing it right. Within one company, for example, a software demo request would have much greater value than a newsletter sign-up because each prospect is entering a different stage of the sales funnel. Marketing departments often mistakenly consider these equal “leads” when calculating conversion rates.
Even among companies that offer similar products, it’s difficult to compare website conversion rates without knowing other variables. Whom, for example, are they converting? Are they highly qualified decision-makers or low-level information gatherers? What channel did the leads come from? How much do their products cost?
Without the context of this data, comparing your website conversion rate to a competitor’s or an “industry average” isn’t effective.
Evaluating your conversion rate
The only conversion rate that matters is your own, so forget about measuring against so-called industry benchmarks. Instead, measure where you are now and then set targets for improvement. To accomplish this, it’s essential that you’re tracking your website conversions accurately through Google Analytics. You should have a goal set up for each type of lead (contact form, phone call, content download, etc.), and you should be able to see the conversion rate for each one.
Next, assign a value to each conversion. To do this, you’ll need to know the percentage of each lead type that your sales team closes into customers (a good customer relationship management system will do this for you). You’ll also need to know the average lifetime value (LTV) of new customers.
For example, let’s say you run Software Company A. Your sales team closes 5 percent of demo request leads into customers, and your average customer generates a total of $20,000 in revenue over his “lifetime” as a customer. You can calculate the value of a demo request lead this way:
$20,000 (average LTV) × 5 percent (sales close rate) = $1,000 (demo request lead value)
Last month, 15 people out of your 1,000 website visitors submitted a request for a software demo, for a conversion rate of 1.5 percent – well below “industry averages” you’ve seen of 3.4 percent to 7 percent.
Now, let’s look at Software Company B, which also had 1,000 website visitors last month, but received 30 requests for a software demo, giving it a conversion rate of 3 percent, double that of yours. That sounds like you’re doing poorly in comparison to Software Company B, doesn’t it?
But wait! Software Company B’s sales team only closes 3 percent of its demo request leads and it doesn’t retain its customers as long as you do, so its average LTV is only $15,000. Now, let’s compare the numbers in context:
Software Company A:
1,000 website visitors × 1.5 percent conversion rate = 15 demo requests
15 demo requests × $1,000 lead value = $15,000 total monthly lead value
Software Company B:
1,000 website visitors × 3 percent conversion rate = 30 demo requests
30 demo requests × $450 lead value (3 percent close rate × $15,000 average LTV) = $13,500 total monthly lead value
Assuming the two companies are spending the same amount on marketing, Software Company A has a better return on investment, even with a conversion rate half that of Software Company B.
Setting your target conversion rate
Conversion rate optimization should be an ongoing effort driven by analytics and testing. Following the above example, a reasonable, attainable goal might be to increase your demo request conversion rate by .1 percent each month. To do so, you might test a different form style, tweak your calls-to-action or improve your website load time. Five months later, you will have generated an additional $15,000 in total lead value and improved your monthly lead value by 30 percent.
By focusing on the website metrics that matter most to your business instead of on industry standards, you can watch as small improvements have a huge effect on your bottom line.
How do you track your website conversion rate? Do you see month-over-month improvement? Let us know in the comments below.