Conversion rate is a term used to refer to the percentage of users or potential customers who take the desired action after viewing an advertisement, website, or other form of marketing. For example, if an online clothing store has 100 visitors and 10 of those visitors make a purchase, the store’s conversion rate would be 10%. Conversion rates are essential for businesses wanting to measure how effective their marketing is at enticing customers to complete a desired action.
Conversion rate can be compared to another similar concept called Click-Through Rate (CTR). CTR is the ratio of clicks on an advertisement or link out of the total impressions served. Whereas conversion rate measures how many people complete a desired action such as making a purchase, CTR measures how many people clicked on an advertisement. The difference between these two concepts is that while conversion rate measures the success of advertising in terms of achieving its end goal, CTR only measures whether someone clicked on the advertisement or not.
Businesses usually have more than one channel for advertising and it’s important for them to track which channel drives more conversions and sales. By tracking both conversion rate and click-through rate they can identify which type of ad campaigns are performing better and use this information to adjust their strategy accordingly. Conversion rates are also something that businesses need to keep an eye on when budgeting for advertising costs as higher conversion rates often mean higher returns on investment (ROI). Ultimately, understanding both terms helps businesses optimize their spending by focusing resources where they will get the best results in terms of customer acquisition.
