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Updated Oct 23, 2023

Conversion Tracking 101

Conversion tracking gives you a better understanding of how your customers engage with your business and take desirable actions, such as signing up for a newsletter or making a purchase.

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Max Freedman, Business Operations Insider and Senior Analyst
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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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 your strengths and weaknesses.

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

What is conversion tracking?

Conversion tracking is the monitoring of conversions, 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 links on landing pages and more. The tracked metrics 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.

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.

What are the benefits of tracking conversions?

Here are some reasons to track conversions:

  • Maximize your return on investment (ROI). Conversion tracking can reveal whether you’re seeing an adequate ROI, also known as return on ad spend (ROAS), for advertising campaigns. [Read more about what ROI is and why it’s important.]
  • Allocate 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.
  • Identify 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.
  • Distinguish 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 TakeawayKey takeaway
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 these key performance indicators (KPIs):

  • Number of conversions: This metric tells you the total number of conversions. However, it does not compare the number of conversions with 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 customers make the strongest impacts.
  • 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 with the number of visits that involve looking at several pages. People who visit several pages may be farther 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 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 broader KPI category 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 that’s most strongly correlated with ROI and ROAS.
Did You Know?Did you know
The most important conversion KPIs are the number of conversions, conversion rate, bounce rate, session duration, pages per visit, events and cost per acquisition.

How is conversion rate calculated?

To maximize your ROI, it’s important not to conflate the number of conversions and the conversion rate. It’s also crucial 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, 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 which KPI you’re using, you can retarget people who have come close to your conversion goal but haven’t 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; the email attempts to achieve the desired conversion from cart addition to purchase. After you calculate conversion rates, act to improve them.

Key TakeawayKey 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.

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 of 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 aspects 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 you set up your conversion tracking.
  • Company goals: Prioritize monitoring, and provide metrics that pertain to your goals, such as increasing sales or website visits.
  • 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 that are 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 set up your conversion tracking system to help you achieve your goals.

Improve your conversion rate with conversion tracking

You can’t encourage more conversions if you don’t know when or why customers convert in the first place. Conversion tracking keeps tabs on customers as they navigate the sales funnel. That way, you can identify the best opportunities to encourage them to take an action you want, such as making a purchase or landing on a certain webpage. Conversion tracking gives your team the best insight into how to drive conversions, thereby boosting the return on your marketing and sales budget while providing a superior customer experience.

Jacob Bierer-Nielsen contributed to this article.

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Max Freedman, Business Operations Insider and Senior Analyst
Max Freedman has spent nearly a decade providing entrepreneurs and business operators with actionable advice they can use to launch and grow their businesses. Max has direct experience helping run a small business, performs hands-on reviews and has real-world experience with the categories he covers, such as accounting software and digital payroll solutions, as well as leading small business lenders and employee retirement providers. Max has written hundreds of articles for Business News Daily on a range of valuable topics, including small business funding, time and attendance, marketing and human resources.
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