Conversion Rate Explained - Traffic Quality is Key

Alright, let's unravel one of the great mysteries of selling products online, shall we?

Ever heard of the term "conversion rate"?

Some people pretend to understand it, but most just stare at it in wonder.

But what is it, really?

Asking "What is a good conversion rate?" is like asking "What is a good hamburger?" – there are as many opinions as there are toppings at a burger joint.

The truth is, you SHOULD know everything about your conversion rate.

But it is IMPOSSIBLE to get good conversion data from Shopify without “helping” Shopify pull the correct data.

But fear not!

We're here to guide you through this jungle of numbers and percentages. This issue of ShopBytes is going to have you on your way to being a real pro - not just another poser.

Now, before you start sweating buckets, remember the wise words:

This holds true here too - we’re going to take a “Byte” out of conversion rates right now.

Imagine this email as a speed-dating event for conversion rates.

We're cramming what could be a 3-day, 8-hour-a-day workshop into one email. (Maybe we’ll host the workshop one day too).

So, buckle up, and let's take a whirlwind tour.

Elephant Burgers and the Formula That Matters

First of all, what the heck is a conversion rate and why should you care?

A conversion rate is like the scorecard of your website's ability to get sales.

It's a bit like counting how many fish you catch compared to how many times you cast your line.

It measures the percentage of visitors who actually do something useful, like making a purchase. It’s expressed as a percentage and calculated via a simple formula:

Don’t worry, if you failed Pre-algebra, you’ll still be able to get this…

For example, if 30 people out of 1000 visitors end up buying your stuff, your conversion rate is 3% (30/1000 = .03 or 3%).

Simple math, right?

Take the formula one step simpler:

Sales / visitors = Conversion Rate

Easy peasy, lemon squeezy.

Not Another Measuring Contest

Talking in terms of averages can be a little misleading, but it’s important to understand a baseline for really evaluating your store, and what’s possible

 The AVERAGE conversion rate on Shopify is 1.4% 

If you're below 0.5%, you're probably in the slow lane.

But if you're above 3.3%, you're cruising in the fast lane with the wind in your sails and in the top 20% of all Shopify stores.

Wherever you are, there’s always a good chance to easily increase your checkout conversion.

So What’s A Good Conversion Rate For Your Store?

It’s not Groundhog day, but I know that you’re still probably asking yourself the question “What is a good conversion rate for my store?”

The truth is it all depends on your traffic (who are the visitors?).

Is your traffic loyal customers who keep coming back for more, or are they bots from the depths of the internet?

It's like the difference between having a dinner party with your besties versus crashing a stranger's BBQ.

See what we mean? Repeat buyers may convert at 10-15% or more. Bot traffic will convert at 0% because it isn't real people.

Good, high quality traffic from a brand ambassador doing a product review or something similar should convert better than cold traffic that found you through an ad for example.

Real Life Examples:

Let’s look at a big supplement brand we worked with from 2020-2022.

They were pouring in traffic from YouTube influencers, but only converted at 2.08%. Yet, they still pulled in $992,824.30 in a single month.

36% of those customers were repeat buyers that month

They’re conversion rate might have “only” been 2.08%, but if your store did $992k in one month would you even care what your conversion rate was?

Exactly, not many people care much about conversion rates when they’re swimming in cash.

Here is another good supplement store with good traffic.

They averaged 4.68% conversion rate the last 12 months. This is with 37%+ Returning Customers.

There’s always a good chance to get more sales out of your existing customers too.

How To Determine Good Traffic Vs. Bad Traffic

So how do you increase your conversion rate?

The answer to that is also huge, but the single biggest step you can take toward that is learning which traffic sources are the best traffic (highest converting) for your store.

So how do we do that? It’s a simple answer (that sounds a little nerdy):

UTM Parameters (aka UTM Tags)

Think of UTM Parameters as secret agents tracking your marketing campaigns. They're like breadcrumbs that lead you to the treasure chest of data.

With UTM tags, you can uncover which traffic sources are gold mines and which are just fool's gold.

By just slapping those UTM parameters onto your URLs, they'll show up in Shopify reports and give you a backstage pass to your website's traffic (and which sources convert the highest!).

When you know your highest value traffic, you can double (and triple) your efforts on creating traffic from those sources and watch the sales roll in.

How to Use UTM Tags

To use UTM tags, you will include special links on your marketing campaigns that will show you where the traffic came from.

You can track by Source, Medium, Campaign, Term, and Content all at the same time.

UTM parameters are added to the end of a URL website address, and they always start with a question mark (?).

Here is an example:

Replace the highlighted sections with what you're tracking and here’s how it will show up in Shopify:

Got to Reports > Sales by traffic Referrer

If you know WHERE the sales are coming from you can focus on getting more traffic from that source.

UTM tags will show in your Google G4 Analytics too. This will give you more visibility into your site's traffic.

This is the single best way to know your money trail without a doubt!

It may seem a little complicated, but we promise it’s not once you get the hang of it.

To get you started, here are some additional tools for setting up UTMs on your store.

In a nutshell, understanding conversion rates and tracking your traffic sources is like having X-ray vision for your ecommerce store.

You don't need it to succeed, but boy does it make life easier.

Just keep your finger on the pulse of your traffic, and who knows? You might just stumble upon a pot of gold at the end of the conversion rainbow. 🌈💰

Talk Soon,

-Brent and Rush

P.S. Will you do us a favor because your opinion matters and we want to make sure we’re giving you the right content? If this was helpful (or sucked), will you reply to this email and let us know? It’s your world, we’re just trying to help you make more money in it.

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