Why Conversion Rates Are More Important Than Click-Thru Rates

ClickZ recently published an article that included a few predictions about global online ad spending.

According to Zenith’s predictions, global spending on Internet ads will grow 14 percent year-over-year, totaling $70.5 billion in 2011 and representing 15.2 percent of overall ad spend. GroupM was more bullish, predicting digital spend will contribute 37 percent of global ad growth next year, resulting in $82 billion in revenue.

Meanwhile in the U.S., eMarketer – which aggregates forecasts from a variety of sources – projected a 10.5 percent increase in U.S. online ad spending next year, followed by double-digit growth every year through 2014 when spending will reach $40.5 billion.

The article also talks briefly about online ads compared to earned, new media and traditional media. The biggest focus though is on the upward trend in online ad spending.

While it’s encouraging to see marketers investing dollars in measurable advertising, what happens after the click on the ad often presents a blind spot.

Are you tracking conversions?

A lot of marketers are still hitting a wall after measuring click-thru rates. Undoubtedly, knowing how many people click your ads is a good statistic to have around. However, it’s only really insightful when you can compare that number in relation to a second number: the amount of people who do what you want them to do once they land on the page you send them to.  

To determine your conversion rate, or the percentage of people who land and then become a lead or a customer (meaning they made a purchase or download a white paper, filled out a form, etc.), you simply divide the number of people who take the action by the number of people who entered the page from your ad.

It’s important to look at your conversion rate because click-thru rates only tell you how many eyeballs potentially scanned your landing page; the conversion rates tell you how many new leads or customers you have. This is directly tied to your online marketing ROI, and more importantly increased revenue for your company.

Warning: this may hurt your ego, but it will improve your conversions

Tracking your conversion rate, rather than simply your click-thru rate may temporarily hurt your ego. The average conversion rate for most landing page is only 3%; however, that doesn’t mean your conversion rate has to be 3%. Through testing and optimization, you’ll likely reach numbers well beyond that.

You can do A/B testing, which means testing two completely different landing pages against each other, or you can do multivariate testing (MVT) which means testing certain elements within a single page.  If you’re not already familiar with these two methods of testing, or online testing in general, grab a copy of our Online Guide to Testing – it’s free!