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How to Calculate Conversion Rate

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How to Calculate Conversion Rate

Right, this blog may be a bit maths-heavy so please bear with me. How do you calculate conversion rate is a question we get asked a lot, so I thought I’d put this helpful article together to provide you with an insight into what goes into working out your conversion rate.

In short, the basic conversion rate formula is: Conversion Rate = Total Number of Conversions / Total Number of Sessions. So, if your website reaches a total of 100,000 sessions and registers a total of 10,000 orders, your conversion rate is: 10,000 / 100,000 = 10%.

So, now that you understand the basics of PPC management and how to calculate conversion rate, here’s everything else you need to know in the meantime.

Calculate Conversion Rate: Cost Per Click

In the first of my maths-laden paragraphs, I thought I’d explain how we work out cost per click in a standard marketing campaign.

In doing so, we use this formula: Cost per click = campaign budget / number of visitors. Indeed, it’s also recommended that you bear in mind that changing the average bid per click can impact your ROI, so it’s important to keep your keywords competitive and your bids succinct.

Furthermore, the average Google cost per click across the majority of industries is £2.32, so keep this in mind when you’re building your next campaign.

Conversion Rate Vs Profitability

Now, it’s no good knowing how to calculate conversion rate for it then to negatively impact your campaigns profitability.

Unlike previously when I worked out how to calculate conversion rate based on an average rate of 1%, if this rate increases to just 2%, for example, your business can more than double its profits. Though, on the other hand, if your campaign has a conversion rate of 0.5%, this can impact profits significantly.

So, what I’m trying to say is that profitability is a finite concept that can be both positively and negatively impacted by how you manage your conversion rate.

Image showing cost per click

Calculate Conversion Rate: Customer Acquisition Cost

Now, every Google Ad specialist can work out customer acquisition costs, but here’s how to work it out for those who don’t.

For example, at a 0.5% rate, a business can acquire 500 customers. Considering an investment of £24,000, a business then operates at a £48 cost of acquisition per customer.

To figure this out, I used this formula: Customer acquisition cost = total investment / number of customers acquired.

Lifetime Value

Regardless of how you calculate conversion rate, you achieve advertising nirvana by acquiring a lifetime customer. Indeed, For most companies, the first sale is the first step in a long-term relationship.

The average lifetime value of a customer is £187.00. So, with an average bid of 25p per click, your business can generate around £160,000 when it comes to calculating conversion rate based on LTV.

PPC Geeks – Conversion Rate Specialists

We pride ourselves on what we achieve for our clients on a daily basis, be that the results themselves or, in fact, how we calculate and present them in a way you can understand . So, if you want to work with one of the top PPC agencies in the world, then PPC Geeks is the place to be in order to maximise your conversion rate.

As we always have your best interests in mind, if you require any help or want to improve your PPC or Google Ads, then why not invest in one of our 100% FREE, completely comprehensive PPC audits or Google Ads audits?

Author

Dan

Has worked on hundreds of Google Ads accounts over 15+ years in the industry. There is possibly no vertical that he hasn't helped his clients achieve success in.

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