Conversion Rate revisited

For Yahoo! Store merchants, conventional wisdom says that “conversion rate” is the most important metric in e-commerce. You all know by now that you can see your Store’s conversion rate by looking in the Graphs section and selecting “Orders/Customer”. Whatever your conversion rate is – 0.5% or 3% – you strive to increase it. After all, if you can increase the conversion rate, you will make more money. You may also try to compare your Store against benchmarks, such as shop.org’s aggregate conversion rate (2.2% btw for Q2 2006 source.)

Fair enough, but is there perhaps more to conversion rate than meets the eye? In this excellent post, Avinash Kaushik presents his arguments why people should stop obsessing about conversion rate.

Know how you can increase your conversion rate real fast? Drop your prices by 30% and offer free next day air shipping! Your conversion rate would surely go up, but your profit would obviously be headed the opposite direction.

The main point I took away from the post is that you have to realize that most visitors to your Store never actually have the intention to buy anything from you. Perhaps they are just researching a product or looking for support information. Those people should therefore not count as a valid prospect. So you should try to segment your visitors – if possible. This may be a difficult task and may be dependent on which analytics package you use. As an idea, perhaps you could designate a visitor a “prospect” if that visitor has visited the cart page at least once; out of those you can see how many placed orders and hence calculate this conversion rate.

Another metric that may be more important than the overall conversion rate is Revenue per Visitor – I picked up this approach from conversionlab.com. Using the same example as above – dropping your prices by 20% – will yield a lower revenue per visitor metric, which is of course undesirable. The other thing you should do is segment this metric in additional ways, such as Revenue per Visitor for 1st time visitors and return visitors. Can you use these metrics to do a better job at meeting the expectations of those different visitor segments?

I think the crux of the matter is to try to understand visitor intent: “Why did you come to my website today?“  Short of asking visitors directly this question, what techniques can you use to learn more about visitor intent? Perhaps you can look at referring keywords that brought visitors to your Store. Can you group keywords together according to intent, such as “prospect”, “just looking” or “need some help”? It may not be feasible to assign an intent to every keyword, but it may be worthwhile to at least group your top keywords. This sort of information can then be used to create better content and more relevant landing pages. And better landing pages leads to happy site visitors, whether they came to your Store to buy or not.