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You are here: Home » Interactive Optimization and Analytics » Mastering Online Conversion » Conversion Benchmarking Hell, Part #1

February 8, 2007

Conversion Benchmarking Hell, Part #1

Imagine this conversation ...

Project Manager: "So, what's our average website conversion rate?"

Internet Marketer: "Oh, I don't know. Somewhere around 3.5%."

Project Manager: "Really ... Because I just read the latest ACME Conversion Rate Report and it says that the average conversion rate for our industry is 5.8%. Why is ours so low? What are we doing wrong?"

Just replace project manager with any title that comes to mind, like CMO, CEO, CFO and any other title that doesn't do conversion optimization for a living.

Everyone wants to know about your conversion rate (CR) and everyone is keen to compare it with the latest figure they read in one of the numerous benchmark reports, naturally written by reputable research companies. "Why aren't we doing so well?" or sometimes even "Wow, we're doing great!" is the feedback you receive after reluctantly giving the answer.

Welcome to conversion benchmarking hell.

But the simple truth of the matter is, website conversion industry benchmarking is the biggest hoax of the interactive industry.

It's the one piece of data that doesn't tell you how well you're doing in comparison to anyone else, period. Simply because there is no such thing as "average conversion rate".

No Conversion is Created Equal, Period!

To bring the point home, let's compare two websites from the same industry just from the overall CR viewpoint.

Round #1: Overall Average Conversion Rate

  Website #1 Website #2
CR 4% 8%

Knowing only this data, one would assume that Website #2 is performing better than Website #1 in converting website visitors into customers.

But is it really?

Round #2: Overall Conversion Rate by Traffic Source Type

  Website #1 Website #2
Overall CR 4% 8%
Direct Traffic CR 10% 3%
SEM CR 12% 8%
SEO CR 3% 6%
E-mail CR 1% 10%
Banner Advertising CR 0.5% /

If you look at our table now, the various traffic sources utilized by the two websites come into focus, showing how well the websites are converting traffic by traffic source type.

This only makes sense, since the traffic generated to each website comes from a mix of different sources, each with its own specifics.

But because the website's efficiency is also impacted by the quality of the traffic it gets, the CR is an overall indicator of our internet marketing efficiency, not just our website efficiency.

This is where things get more complicated.

If we want to compare the two websites in terms of conversion, we first need to understand how specifically they are generating traffic.

In this case it might seem that Website #1, while being less efficient overall, is doing better in terms of converting direct traffic and SEM traffic, but is not performing as well in other departments. Website #2 is doing better with SEO and e-mail, but is not doing any banner advertising at all.

Here's the first catch. Banner advertising will almost always drive your overall conversion down. Just the fact that Website #2 is not doing any banner advertising at all should tell us that it is impossible to benchmark the two sites against eachother.

But is it enough to benchmark their internet marketing efficiency?

To be continued ...

Comments

too many redundancies and never ending loops that confuse many new users. it did cofuse me at least.

Posted by: ross a downham at April 8, 2007 3:42 AM

Ross, yes, you are correct ... but unfortunatelly conversion optimization, especially when done through split-testing, sometimes is exactly like that. We just did an 8-way offer test on a statistically significant sample, but the results were completely different for the different traffic sources. So yes, there are loops:)

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