October 11, 2011

Death Spiral: Conversion Rate

Pay close attention to conversion rate.

Not for the nominal reasons you read about.  Instead, compare conversion rate and traffic levels.

A drop in your conversion rate is fine if it is paired with an increase in traffic.  Few people understand this ... you make changes to your website, and you notice that conversion rate and traffic move in inverse proportion ... that may be acceptable.

When conversion rates drop and traffic is flat, well, that's not so good.

When conversion rates are flat, and traffic drops, well, that's not so good.

Segment your file by existing buyers, existing visitors, and new visitors ... measure traffic and conversion rate.  You want at least one metric to increase, and you want that metric to increase faster than the decrease you observe in the other metric.

Decreases in conversion rate don't necessarily require you to focus on changing orange buttons to purple buttons on your website ... decreases may signal a bigger problem, one you have to raise with Management.

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