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Conversion Tracking 101

Max Freedman
Max Freedman

Conversion tracking helps you better understand how your customers engage with your business and take desirable actions, whether signing up for a newsletter or making a purchase.

  • A conversion is a customer action aligned with the goals of your marketing or advertising campaigns.
  • Conversion tracking is the monitoring of conversions to assess the success of your campaigns.
  • Tracking conversions can maximize your ROI, inform your budget, identify improvement areas and distinguish clicks from conversions.
  • This article is for business owners and marketers who want to learn more about conversions, tracking conversions and tips for maximizing conversions.

Let’s say you’ve just wrapped up a marketing campaign that didn’t produce the results you wanted. In response, you take a different approach, but that too flounders. Instead of randomly trying another style, let conversion tracking show you where your strengths and weaknesses lie.

Through conversion tracking, you can determine how strongly, if at all, your advertising campaigns are leading to your desired goals. You can then keep this information in mind for all your future efforts.

What are conversions?

A conversion occurs when a member of your target audience takes the action you have aimed for with your current marketing or advertising efforts. According to this definition, a conversion isn’t always a sale; it can be as simple as a click on an ad, well before the person clicking decides to actually purchase what they’ve chosen to explore.

Key takeaway: Conversions occur when someone takes an action that’s among your goals for an ongoing marketing or advertising campaign.

What is conversion tracking?

Conversion tracking is the monitoring of conversions, or of consumer actions that move your company closer to fulfilling a preset goal. These actions can include a customer buying an item, adding something to their cart, opening your emails, clicking on links, landing pages, and more. The metrics tracked indicate how well your company’s marketing efforts, whether email marketing or social media advertising, are achieving the desired outcome with your target audience.

Conversion tracking works by putting numbers to your marketing campaigns’ results. Through conversion tracking, you’ll learn how many people in your audience are contacting your company, subscribing to your mailing list or buying your products. Conversion tracking is most commonly used in advertising and email marketing campaigns, though you can apply it to any campaign involving clickable links that direct your audience toward a desired end goal.

Key takeaway: Conversion tracking is the monitoring of conversions to determine how well your marketing campaigns are achieving your desired goals.

What are the benefits of tracking conversions?

Among the reasons you should track conversions are:

  • Maximizing your return on investment (ROI). Conversion tracking can reveal whether you’re seeing an adequate return on investment (ROI), also known as return on ad spend (ROAS), for advertising campaigns. To learn more about ROI and its importance, read the following Business News Daily article: What Is ROI?
  • Allocating your budget. Your ROI and ROAS can inform your budget structure. Let’s say you’ve allocated more money to social media advertising than to email marketing, but your conversion tracking shows a higher ROI on the latter. In this case, don’t just spend more on email marketing – move money from your social ad budget to your email marketing budget.
  • Identifying opportunities for improvement. If you notice that certain campaign approaches aren’t converting as well as others, you can compare these campaigns with more successful ones to identify potential change areas. For example, if you see several campaigns that target one keyword converting more than campaigns that target another, you’ll know to focus on the higher-performing keyword.
  • Distinguishing clicks from conversions. Clicks and conversions aren’t always synonymous. In fact, sometimes, high click rates can obscure low conversion rates. With conversion tracking, you can determine the relationship between click rates and the achievement of your desired conversion.

Key takeaway: You should track conversions to maximize your ROI, shape your budget, find improvement areas and separate clicks from conversions.

Types of conversion KPIs to track

For a full sense of how well your marketing and advertising campaigns are converting, track the below key performance indicators (KPIs):

  • Number of conversions. This metric tells you your total number of conversions. However, it does not compare the number of conversions to the number of people your campaign reached.
  • Conversion rate. This metric is the ratio of conversions to people reached. It is often applied to websites, where it determines the ratio of purchases to website visitors. Typically, multiple purchases by the same customer are not grouped as one purchase, so conversion rates can’t always tell you which of your customers makes the strongest impact.
  • Bounce rate. This metric divides the number of single-page website visits by the total number of website visits. Put another way, the bounce rate compares the number of website visits that involve looking at only one page to the number of visits that involve looking at several pages. People who visit several pages may be further along the sales funnel than other potential customers.
  • Session duration. This KPI details how much time the average visitor spends on your website during a visit. You may also encounter the metric average session duration, which divides the total session duration across all website visits by the total number of visits in question. Often, the more time people spend on your website, the better your website is at converting visitors.
  • Pages per visit. This KPI indicates how many of your webpages – product listings, FAQs and more – a visitor clicks on during a session. If you notice that someone has visited several product pages during their visit, you may be able to engage that person via ad retargeting
  • Events. This is a broader KPI category. It can include clicks on social media links, video plays, content downloads, newsletter subscriptions, submissions of contact forms and more. If these events occur with greater frequency, you can assume that your website is adequately converting visitors.
  • Cost per acquisition. This KPI determines the amount of money your company has spent per conversion. It tells you how much money, on average, you have spent to acquire a new customer. It is arguably the KPI most strongly correlated with ROI and ROAS.

Key takeaway: The most important conversion KPIs are number of conversions, conversion rate, bounce rate, session duration, pages per visit, events and cost per acquisition.

How is conversion rate calculated?

To best maximize your ROI, it’s important not to conflate number of conversions and conversion rate. It’s also important to realize that a marketing campaign can have several conversion rates, which are usually easy to calculate.

For example, if your primary conversion of concern is a user clicking a certain link, then your conversion rate is the number of clicks on that link divided by the number of people presented with the link. If you want to determine the conversion rate of the main call-to-action link in your newsletter, divide the number of clicks by the number of people who opened the email.

Likewise, you can calculate conversion rates for cart additions, purchases or virtually any other metric. Your conversion rate for cart additions would be the number of people who add an item to a cart divided by the number of people who view the product listing on your website. Your conversion rate for purchases could be the number of people who buy the items in their carts versus the total number of people who add items to carts, or it could be the number of purchases divided by the number of product listing visits.

No matter the KPI for which you’re calculating your conversion rate, you can retarget people who have come close to your conversion goal but not quite gotten there. Abandoned shopping cart emails are perhaps the best example: send an automated email to users who have placed items in their cart but failed to complete the checkout process. That’s conversion-based retargeting. That email attempts to achieve the desired conversion from cart addition to purchase. After calculating conversion rates, act to improve them.

Key takeaway: Calculate your conversion rate by dividing the action of concern by the total number of people who had the opportunity to take the action, whether they took it or not.

How do you set up conversion tracking?

Often, setting up conversion tracking entails combining two or more advertising and analytics platforms that give you all the desired information. Perhaps the most commonly used conversion tracking tools are Google Analytics and Google Ads, which you can connect to your marketing efforts for thorough tracking of all desired metrics. You should also keep the following in mind when setting up your conversion tracking:

  • Coding requirements. Often, conversion tracking tools require you to add code to your website. Know what’s needed and figure out how to implement any required code before setting up your conversion tracking.
  • Company goals. Prioritize monitoring and provide metrics that pertain to your goals, whether that’s increasing sales, website visits or something else.
  • Conversion flow. Not all sales are made during the first interaction. A customer might visit your website, follow you on social media to learn what you’re all about and then see a post days later that compels them to make a purchase. Plot out several scenarios, and plan to collect metrics pertinent to these flows.
  • Next steps. How will you use your conversion data once you have it? If your goal is to drive sales on a certain product, boost your social media following or make your website more user-friendly, know that ahead of time. With firm next steps in mind, you can best set up your conversion tracking system to help you achieve your goals.

Key takeaway: Use advertising and analytics platforms to set up conversion tracking, and as you do so, consider any relevant coding requirements, company goals, conversion flows and next steps.

Image Credit: fizkes / Getty Images
Max Freedman
Max Freedman
Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.