What makes a “good” conversion rate?
If you write a promotion and it converts 3% of traffic, is that good?
Should you aim higher? Is that a home-run? What the heck does it even mean?
We’ll get to all of that in today’s essay.
First, a reminder. Normally I set aside every Monday for answering reader questions. But like Santa Claus this time of year, my mailbox is a bit stuffed.
So I’m answering reader questions all week.
Here’s today’s question about what makes for a great conversion rate…
In your professional opinion, would you be happy with a 3% conversion rate to cold traffic on a $49 info product?
Thanks for any level of response to my question.
First, defining conversion rate…
First things first, I do want to make sure that we answer the most basic of questions here.
The conversion rate referred to here is, I presume, that 3 out of every 100 people who visit the sales page ends up purchasing the $49 product.
In other words, 100 visitors would result in three $49 sales. 1,000 visitors would result in 30 sales. And so on.
Basically, for every 33 people who view the sales page — on average — there will be one $49 sale.
Is that a good thing? Bad thing? Average?
Is 3% a good conversion rate?
In short, I don’t know.
There are plenty of promotions that have higher conversion rates. There are also plenty with much lower conversion rates.
When I launched my Copywriters Guide to Getting Paid to my internal list, that sales page converted 71% of visitors to sales.
But there are all kinds of considerations. That was a small internal list of people with whom I had a preexisting relationship. They’d been under-marketed to. And the people who clicked through had essentially already bought into the promise of the book, as presented in the title.
The question above is about cold traffic. With cold traffic, you tend to have much lower conversion rates than with warm or — in the case above — hot traffic.
You don’t have a relationship with them. They may be only tangentially qualified (depending on your strategies for getting traffic).
… Or, your copy may suck at converting cold traffic. You may need to do a better job of establishing your credibility and your USP.
If you should be able to convert 15% but you’re converting 3%, then it’s a bad conversion rate. If you should be able to convert 2% based on a mix of factors but you’re somehow pulling off 3%, good on you.
All that said, even conversion rate is a vanity metric on its own.
Sure, it’s valuable in comparing the performance of two competing test panels in a split-test.
But in the absence of so much other data, saying a sales page has a 3% conversion rate doesn’t tell me anything.
What other data? Glad you asked…
What’s the cost of traffic?
Let’s do a little math here.
First, let me make a couple assumptions. First, I’ll assume that you’re running this through a payment processor like Stripe. So, after fees, a $49 sale generates $47.28 in revenue. Multiply that times 3% and you have just shy of $1.42 in revenue per visitor.
(I’m also assuming no other platform fees. Your math would have to change if you’re paying a per-transaction fee with your platform.)
So if you want to know if 3% conversion rate is good and you know the value per visitor at that conversion rate, the question is…
Can you get traffic at less than $1.42 per visitor?
If so, every penny less is a penny more in profit per visitor.
But if you’re paying $3 per visitor to generate $1.42 in revenue, that’s a dismal conversion rate (unless you have additional monetization strategies, which we’ll chat about below).
Let’s say you’re getting traffic at 42 cents per visitor. If you are, that means you’re making $1.00 per visitor on your front-end transaction. That would be great.
Same conversion rate. Different traffic cost. Totally different picture.
What if it’s an affiliate program?
I’m going to throw this in here, because it’s quite possible you could be getting traffic through some affiliate program, where you only pay based on a percentage of sales generated.
If so, the math you have to look at is different.
Because you only pay based on performance, your economics are totally different. You’re not paying for traffic, only a commission on sales.
In this case, let’s say you offer a 50% commission on gross revenue. Which means for every $49 sale, you pay the affiliate $24.50.
While novice affiliates will look at that 50% and be happy, top affiliates look at a different number.
The best affiliates that drive the most traffic actually pay attention to EPC — earnings per click. Which means they want to know how much you pay them based on how many clicks they send your way. In your case, that would be 3% of 24.50, which is about 74 cents.
Now here’s where this is important…
Top affiliates run their traffic like a business. They’re constantly looking for where they can get the best numbers, based on the traffic they offer.
If your offer earns them 74 cents per click but your competitor can offer a buck, you’re out.
If your offer earns them 74 cents per click and your competitor can give 50 cents, you win.
But there’s another question that’s critically important to answer…
What’s the quality of traffic?
My book offer example above illustrates this point well.
I had a solid list of people who were ready, willing, and able to buy. They were a targeted audience that had never seen that offer, and because it was ultra-low priced, it was accessible to pretty much anyone who clicked.
That’s how I got an impressive 71% conversion rate.
On the other hand, l could run ads all day to people who search for “Advertising” on Google, which would be minimally-targeted.
I may get a lot of clicks, but the quality of traffic there — because it’s not as targeted — would be substantially lower.
Or, to push the example to the point of absurdity, I could run internet ads to random people who weren’t copywriters, with a promise along the lines of “Make money while you sleep.” Running to the same sales page, which is written to working (and aspiring copywriters), the conversion rate would be remarkably low.
The more qualified the traffic, the higher your conversion rate should be. The less qualified, the lower conversions you’ll see.
But here’s the rub…
There’s more less-qualified traffic. The more you pre-qualify traffic, the less of it you’ll have.
This is why most of the best copywriters in the world do a significant amount of “acquisition” work — writing copy meant to go to extremely cold audiences, that moves them through the market awareness spectrum to the point of purchase.
This tends to work best in the big markets like health and wealth that everyone has at least a potential interest in. The more niche your offer, the less likely it is to be a relevant strategy.
(Side note: mass market products tend to trend toward lower prices, especially when selling to new customers. Niche market products tend to trend to high prices, because of the limited size of the market.)
What are the funnel economics?
What we’ve ignored so far is the power of upsells and customer lifetime value.
If you’re converting at 3% to a $49 product but you have a solid funnel in place, your $49 sale could be worth $499.
This is probably the fastest, easiest, quickest way to juice your ROI, by the way.
If you have a $49 product and you can get a significant percentage of buyers to jump to a product that’s 3X, 10X, 50X as expensive…
Suddenly everything in your business changes.
You’re able to spend more on traffic, offer affiliates bigger cuts of the front-end sale, and scale to lower-quality traffic.
Without increasing the conversion rate on the first sale, you could still increase your “cart value” — the average amount spent per new customer — and be in great shape.
There’s another related number you can look at as well…
What is the lifetime value?
Depending on your resources, you may not need to make back your traffic costs on the first day.
Even if a $49 customer isn’t worth $499 that first day, they could be worth that much in 30 days, 60, 90, or a year. Or 10 years.
Depending on what you’re able to finance, it could make all the sense in the world to acquire customers at $49 if you know that within 12 months you’ll break even, and within 10 years you’ll make 10X.
This is covered in detail in The Most Valuable Customer Strategy. But here’s the gist of it…
Once you really understand a customer’s value over the lifetime of the relationship with your business, you can afford to spend much more to get them in the first place.
In which case, you may go to media or buy traffic that converts at a lower percentage.
But because you know the overall economics, you’re still in great shape.
Again, it’s NOT about a percentage conversion rate. That’s mostly a vanity metric, and only useful for comparing things side-by-side (although even limited compared to ROI in that instance, because a better offer could lower conversions but increase ROI).
It’s about long-term ROI.
Are you aiming for scale or profitability?
If your short-term need is to create ROI from this project, you have one consideration. If your bigger picture need is to scale a business, you have another consideration.
When I sold videos on How To Cut Foam Wings for Model Airplanes with my dad, I built it for ROI.
There was a very limited niche market, with limited traffic I could access. I spent on highly-targeted search traffic, and aimed to make more in sales every month than I spent on traffic.
(This kind of side project is an incredible training ground for a direct response marketer, by the way.)
So I kept really high conversion rates, but only because I limited the total audience to the most qualified traffic.
On the other hand, most of my clients today sell financial offers to investors. They have low-priced front-end products, and high-priced back-end products, and a great grasp of the numbers.
They’ll go to lower conversion rates and even negative up-front ROI just to maximize the number of new customers coming in the front door. Because the market is HUGE and their numbers are about long-term growth, this is their best strategy.
To each their own.
You can think in terms of immediate ROI from a one-shot marketing piece — for which conversion rate is of the utmost importance.
Or you can build a more complex campaign that has remarketing, email autoresponders, and more, and probably convert a bigger percentage of the market.
Or you can think of your marketing in terms of building a lifetime relationship, and likely have the biggest total results in the end.
I like the last strategy. Sometimes the results are less immediate, and even smaller up front. But in the long run, it’s the strategy that will serve you best.
Yours for bigger breakthroughs,
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