conversion math

 by Jo Magliocco

by Jo Magliocco

People who don’t love conversion rates hate conversion rates. I really haven’t found a middle ground within the entrepreneurial community. Personally, I love them - but I also like math and am a glutton for punishment.

I especially get a sick pleasure out of calculating social media conversion rates because they usually shock my clients into speechlessness, feed my skepticism, and generally help me reinforce the idea that 90% of social media efforts by small businesses are futile. The 10% that work are the ones that are meticulously planned by the only other people in the world who love conversion rates.

Conversion math is the foundation of effective sales strategies. So whether we love it or hate it, we need to learn how to do it. Thankfully conversion math is, like everything else in small business, simple.

It all starts with a user behavior. All business want someone to do something. Buy this. Become aware of this. Share this. Come here. It’s best to build a separate strategy for each user behavior we need. Conversation math starts with one behavior.

Conversion math also starts with history (analytics). In lieu of history for a new business we have industry standard.

The only 3 things you need to know to ace conversion math:

1. A conversion rate is how many people (in the history one marketing effort/campaign/call to action) execute your user behavior divided by how many people you ask to do the behavior.

Example: 100 people saw your web page that says “sign up for our newsletter here”, and 1 person signed up. So your conversion rate is on that newsletter sign up is 1%.

Example: You ask 100 people if they want to add a cookie to their food order. 20 people say yes. So your conversion rate for cookie sales at point of purchase is 20%.

2. There are multiple factors that affect conversion rates, but almost all are predictable if you know your audience.

The better you know your audience, the more you can predict their behaviors. Market research allows you to position everything from aesthetics to messaging to timing to maximize the occurrence of the behaviors you want. Branding, pricing, delivery method, social media messaging, and any other kind of business methodology use psychology to increase the occurrence of a behavior in a specific audience.

3. Each behavioral step in a sales process has its own conversation rate - meaning that every behavior added to the process will exponentially decrease the number of people who make it through the entire multi-step process (hence the name “sales funnel”).

This is why the fastest way to make revenue is to have as short of a sales cycle as possible for your business model and continually work to reduce friction. Reducing “friction” in a business means making improvements that cause conversation rates for one behavior to increase or a behavioral step to be removed completely. This is why ideas from Amazon’s One-Click ordering to fast food drive-thrus are successful in increasing revenue.

Example: If you ask 2,000 people who are viewing your Instagram bio to visit your website and 100 click the link, your conversation rate for that step is 5%. Then, if you ask those 100 to sign up for your newsletter (from the example above), which has a conversion rate of 1%, 1 person will oblige. That means the conversion rate from your Instagram profile page to your newsletter is .05%.

Building our small businesses on solid conversion math is the best way to ensure their success. It also allows us to give ourselves permission to drop the aspects of marketing that aren’t producing the best numbers. If we follow the math instead of our whims or personal preferences we can grow a more profitable small business in much less time.

It can help to map out conversion rates on a funnel or pyramid to see where you can remove steps or work on increasing the rate. This example shows how you could map out the conversion rates in a process for a product that is shared in a social media post.

Conversion Rate Pyramid by choose basicWEBSITE PURCHASEPRODUCT DETAILS ON WEBSITESOCIAL MEDIA PRODUCT LINKCONVERSION RATE(LINK CLICKS DIVIDED BY POST VIEWS)CONVERSION RATE(PURCHASES DIVIDED BY PAGE VIEWS)
methodJo Magliocco