Hack39.Define Conversion Events

Hack 39. Define Conversion Events

Measuring conversion events and conversion rates is one of the most popular uses of web measurement tools.

Loosely defined, a conversion rate measures the number of visitors who took the action you wanted on your site divided by the total number of visitors. Every end-goal conversion, like a purchase, is composed of many other conversion points, like the click-through path in a shopping cart. Before you can measure conversion rates and determine how to improve conversion on your site, the ultimate goal, you first need to establish a strategy for defining conversion events.

3.4.1. Identify Your Conversion Events

Most people don't really give the identification of conversion events enough thought. They simply think "Well, if a visitor makes a purchase or generates a lead, that is good enough for us," but while purchase is a very important conversion event, it is by no means the only one worth measuring. You should define conversion events as any activity visitors can engage in that is valuable to your organization. Here are some example conversion events you may want to measure once you recognize that the definition of conversion is broad.

• Makes a purchase

• Opts into a newsletter

• Submits some type of personal information

• Subscribes to an RSS feed

• Prints a page

• Uses "email this page to a friend" functionality

• Spends more than 10 minutes browsing the site

• Downloads a document or application

• Looks at a set of important pages

• Views a set number of pages during a visit

• Clicks a particular link to leave your site

• Searches for a specific product or piece of information

This list is far from exhaustive, but hopefully you get the idea. As visitors complete each of these types of events, they become more valuable to you and your company. Consider two visitors: the first makes a $100 purchase, and the second makes a $50 purchase but opts into your newsletter and sends product information to two friends. Which is more valuable? In the short-term, it is the former, but over the long run, it is very likely the latter, as she has expressed greater interest in your organization as a whole and was willing to tell her friends about you.

Here are some general guidelines for defining conversion events.

3.4.1.1 Be open-minded.

Don't be so tied to getting revenue or leads that you forget about the bigger picturein the long run, your business will be stronger if you're able to identify visitors and customers who are truly interested in what you have to offer. Consider the question "What does someone who is really interested look at on our web site?" and let the answers to this question define your conversion events.

3.4.1.2 Don't limit your definition to a single session.

Provided you have the tools, consider conversion events like "visits three times in one week" and "spends more than 30 minutes per visit" or "visits more than one of our sites," if you have multiple web properties. Again, because conversion is more complicated than just "getting the sale," you need to think big picture. Fortunately, many web measurement tools are becoming sophisticated enough to allow you to define conversion as such.

3.4.1.3 If you're not sure how to set conversion events, consult your vendor.

Since some of the conversion events are fairly complicated, you might need to call your vendor and explain to them what you're trying to do. You may need to write some additional JavaScript, track visitors using session cookies [Hack #15], or use visitor segmentation [Hack #48] to keep track of whether visitors are converting or not.

3.4.1.4 Make an attempt to assign a dollar value to non-revenue conversion events.

Once you start thinking about conversion broadly, you'll see that many conversion events are not directly producing revenue. Still, you should make an attempt to assign a dollar value to every conversion event, at least in your key performance indicator reports [Hack #94] so you don't lose track of the fact that you're measuring conversion as a gauge of business success. Even if you have to approximate or assign a relatively low dollar value (for example, each search is worth five cents), what you'll see is that the combination of conversion events will help you understand where your most "profitable" visitors come from.

3.4.2. Measure Conversion

Once you've done a good job defining conversion events on your site, the next step is to figure out how you're going to measure successful completion of each event. In general, conversion events are measured using overall conversion and scenario analysis, the former being very high-level and the latter very granular.

3.4.2.1 Overall conversion.

Overall conversion is basically a measurement of all the conversion events your visitors engage in during a period of timebasically the sum of conversion events divided by either the total number of visits or unique visitors to the site. The denominator you use will depend on whether you're trying to understand how people behave during visits or the people themselves. If you're interested in people, use unique visitors; if you're interested in behavior, use visits.

Say, for example, you define four conversion events, and 100,000 unique visitors complete those events 900 times during 125,000 different visits to the site. Your "visitor" overall conversion rate would be:

900 conversion events / 100,000 unique visitors = 0.9%

Your "visit" conversion rate for the same period of time would be:

900 conversion events / 125,000 visits = 0.72%

Neither number is particularly telling about the overall success of your site, but you want to trend that number over time and be ready to react to any significant changes in the number. Overall conversion rates are also good when trying to evaluate broad, sweeping changes. Use them to evaluate the results of a site redesign, a specific marketing campaign, or new site-search technology.

Two variations on overall conversion rates are order and buyer conversion rates for online retailers [Hack #37], which differ slightly from the previous definition because you would want to examine only actual purchase events, not all conversion events. The order conversion rate is the number of purchases divided by the number of visits; the buyer conversion rate is the number of customers divided by the number of unique visitors; and both measured for the same period of time. Each is valuable at a high level, and neither provides essential information necessary to make specific decisions, making them classic overall conversion rates.

3.4.2.2 Scenario conversion.

Scenario conversion rates are more granular, designed to help you understand how successful visitors are in completing specific conversion events, and they are often measured using multi-step process measurement tools [Hack #59]. This type of measurement allows you to determine which marketing campaigns, affiliate relationships, or pay-per-click search engine keywords positively affect your business success. Everything on your sitenew content, navigation, new link anchor text, promotions, calls to action, or merchandisingcan be measured to determine if it contributes to or detracts from the scenario conversion rate.

One key thing to remember about scenario conversions is that there are two types: linear and nonlinear.

Linear

Linear scenarios occur when visitors need to complete a registration process or checkout process. Your checkout conversion rate is the number of visits that complete the checkout process divided by the number of visits that start the process (e.g., click the "Checkout Now!" button). This one is easy to set up in most of the better web measurement tools.

Nonlinear

Nonlinear scenarios are created by visitor segments as they navigate your web site. These scenarios can be explicitly planned or implicit; occurring randomly since they were not planned. The key to measuring nonlinear scenarios is having the ability to keep track of which conversion events have been achieved.

The relationship between overall and scenario conversion is basically parent child. You will have one or two overall conversion rates for your site that are ultimately defined by how successful visitors are in completing individual scenarios. The greater the completion rates in each scenario, the higher your overall conversion rate.

3.4.3. Bringing It All Together

Now that you're well-versed in conversion rates and how they're defined, the next step is to actually set up your web measurement application to report on conversion. Depending on the application you use, you may be able to define multi-step conversion funnels [Hack #59], define and track multiple conversion events, and track success through the variety of campaigns you're likely runningall good examples of scenario conversion. You'll also use conversion rates to understand whether internal campaigns [Hack #61] are successful and whether any split-path tests [Hack #63] you're running are generating positive results. If you're an online retailer, you're going to live and die by your conversion rates.

Because conversion rates are so important and such effective indicators of other more subtle changes occurring on your site and in your marketing acquisition programs, many companies use the best practice of generating key performance indicator reports [Hack #94] to distribute information about these events throughout their organizations [Hack #91].

The most important thing to recognize and remember is that, regardless of your business model, these rates and events are among the most important pieces of data you collect. By familiarizing yourself and your company with each of the measurements described in this hack, you significantly increase your chances of uncovering a wealth of information useful in your continuous improvement efforts.

Bryan Eisenberg and Eric T. Peterson