📈 Why conversion is a bad metric for e-commerce

The most frequently asked question during a demo of our guided selling software is 'what is the impact of product finders on my conversion? ' And although decision aids often have a significant impact on the conversion rate of your online store, this question is also representative of the “classic e-commerce thinking” that we are fighting against with Aiden.

What is the conversion rate?

A conversion is an action that you want visitors to your website to do. This can be subscribing to a newsletter or requesting a brochure, but is of course often making a purchase.

The conversionpercentage, or the conversionratio, is therefore the ratio between the total number of visitors to your webshop and the number of visitors who take the action in question.

Example: When 100 people visit a website and one of them buys a product, the conversion rate is 1%.

Many web shops, and agencies, focus on optimizing the conversion rate. It's no coincidence that there are around 71,000 Conversion Rate Optimization (CRO) specialists in the Netherlands (according to LinkedIn). But despite our collective obsession, there is still a lot wrong with the conversion rate if key metric.

8 reasons why 'conversion' is a bad metric for web shops

The conversion rate is probably the first metric you think of when you want to improve your online store. But is it the right one? Here are eight reasons why that's not the case:

1. The conversion rate only indicates whether customers buy. It does not measure whether an online store actually makes money from a sale. If, by mistake, all your products temporarily cost one euro in your webshop, this will undoubtedly result in an enormously high conversion rate. But perhaps also in the bankruptcy of your shop. This extreme example shows that the simple fact that someone bought something says nothing about the value of that purchase.
2. The conversion rate is a short term metric. It measures how many people now proceed with a purchase. While this should not be the right thing, or at least not the only, aim of a webshop. For many (specialist) web shops, it is desirable to help customers at the beginning of their customer journey, for example by offering inspiration and advice. The purpose of this must be exactly that: to help, not to sell. In the long term, this translates into costly brand preference and customer satisfaction. And that ultimately translates into sales. From products and with a margin that makes you happy as a webshop.
3. The conversion rate often does not measure how many people enter the webshop now and only make a purchase later. By the way, this is possible, but in practice, we see that many web shops calculate the conversion rate based on sessions instead of users. And then you miss a lot of insight.
4. In the same vein: the conversion rate therefore does not measure how many people are currently entering the webshop and making a purchase via a different route (physical store, chat, phone). While the so-called Ropo effect (Research Online, Purchase Offline) is extremely important, especially for many specialist web shops.
5. The conversion rate does not take into account how desirable it is for certain products to be sold. For example, selling an own-brand product is weighted as heavily as that of another brand (despite the margin difference). The same goes for a product with a high chance of returns versus a product with a low return chance. In the large conversion bin, these products are all worth the same amount.
6. The conversion rate does not measure customer satisfaction. People can buy and still be dissatisfied with the webshop, the service or the products. Here, too, the short term is particularly important.
7. The conversion rate shaves all visitors with the same brush. A shop with a conversion rate of 2%, which accounts for three quarters of repeat visits from loyal customers (while this is only 5-10% of total traffic), has a completely different dynamic than a shop with the same conversion rate where there are few or no repeat customers. Bringing those groups of visitors into one bin is too broad and pointless a metric: a 0.1% conversion improvement on the entire dataset may well come from a 10% improvement on a subset. The latter is actually interesting.
8. Related: The conversion rate is extremely difficult to compare. “Webshop conversion benchmark” and similar search terms are hugely popular on Google. But just because each shop is different (in terms of the type of products, visitors, margins, you name it), there is no one-size-fits-all benchmark.

Despite these disadvantages, why do we still fall back on reporting and optimizing the conversion rate? Well, it's easy to measure. And it can apparently be influenced with well-organized activities (on the one hand by attracting more visitors, for example by SEA/SEO, and on the other hand by nudging and other CRO tricks).

But if you really want to improve the performance of your shop, look beyond the length of your conversion rate.

If 97% of your customers don't buy, the solution isn't to ram more people into the funnel or change the color of your buy button. That is too simple, expensive and stupid a solution to the wrong problem. Much more interesting is a focus on the middle of the funnel: what are the motives of the group that does not buy? why don't they buy? And others well?

Because that's where, in the middle of the funnel, lies the real problem: Many web shop visitors simply don't know what to buy. And customers who are unsure don't buy. That problem is a lot bigger than the color of your buy button.

But luckily, the solution is pretty simple: Do like the offline store and ask customers what they're looking for. Make the difficult work easy and only show the products that are relevant to that specific customer. If you do that, there will suddenly be ninety instead of thirty customers at the checkout. You can then get back to work with your CRO tricks.

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