*A conversion is when a user performs a desired action (being tracked) on your website. This could be buying a product, downloading a file, clicking a link or any other desired action. Typically conversions are linked either directly or indirectly to revenue.
** Conversion tracking needs to be setup to see conversion data in AdWords.
Quick Description = Conversions as a percentage of Clicks
Calculation: Conversions ÷ Clicks
Referred to as = Conv. rate
The conversion rate is another key metric in almost all AdWords accounts. This is represented as a percentage value 0% or higher and is calculated in much the same way as CTR:
Conversions / Clicks = Conv. Rate
For example, if we assume a campaign has 300 Clicks and 20 Conversions, we would have a conversion rate of 5%:
20 / 300 = 0.05 = 5%
Conversion rates although calculated the same irrespective of the network on which they occurred, conversion rates often vary significantly between networks. Conv. Rates also vary between devices and as such aggregating conversion rates can reduce the value of the metric.
Below we have listed some important features, behaviour, and information on Conversion rates below:
- It is possible to have a conversion rate over 100%
- Conversion rates require conversions to be recorded in AdWords, consequently tracking code will need to be implemented to see this metric
- Conversion rate is calculated using ‘conversions’ (not ‘converted clicks’)
Conversion rates vary significantly between networks and devices as such it is generally a good idea to look at conversion rates for each of these. The search network often has higher conversion rates than the display network and depending on your industry desktop devices generally have higher conversion rates than mobile devices.
Top-level conversion rates are a good indicator of performance but a more granular analysis is required to derive actionable insights.
Another valuable way to look at conversion rates rather than by campaign, ad group, keyword, etc is to look at the conversion rate of specific conversions. For example, you may have three types of conversion: Request a Quote, Call, and Download a Brochure...
Looking at the conversion rate for each by campaign, ad group, keyword, etc provides another layer of granularity. Given that each conversion may have a different value, understanding which have high and which have low conversion rates is essential if you are to maximise performance to higher value conversions.
Conversion Rates are very important when forecasting, planning for expansion, and a range of regular optimisation activities. Given a conversion rate and a conversion value you can get a very good idea what values to CPC bids at:
Conversion Rate x Conversion Value = Break Even CPC (the highest CPC can be before making a loss)
This formula is producing a 100% ROI CPC value, meaning that you make back exactly what you spend. This is based on a historical average conversion rate and is of course subject to change, but this formula does provide some guidance when setting CPC’s.
Many people do or did referred to this discipline as ‘conversion rate optimisation’, but is now more commonly referred to as conversion optimisation. Although a minor point and something of nit-picking, it can be argued that if your only concern was to improve the conversion rate, you could simply reduce non converting traffic and voila..! Improved conversion rate.
Although the aim of conversion optimisation is to improve conversion rate, it’s also to improve the number of conversions. We cover this topic in a lot more detail in the section on conversion optimisation.