When looking at advertising performance, the overall advertising conversion rate and what is considered good you actually need to step back for a minute and understand that the conversion rate is all relative to a couple other metrics.
So the short answer to what is a good advertising conversion rate is… It depends! Since most people don’t like that answer let’s dive in a bit deeper so you can understand why we answer it that way.
What is a good advertising conversion rate?
The answer of “it depends” was simply because the conversion rate in some cases doesn’t matter. There are companies out there that would be extremely happy with just a 1% website conversion rate while others couldn’t make it work for anything less than 5%.
What really matters more than the actual advertising conversion rate are a couple different metrics… Your CPA (cost per acquisition) and your AOV (average order value) or ALV (average lead value).
You will see what we mean by the actual advertising conversion rate being relative in a second.
If you understand the above mentioned metrics then you just have to make the numbers work in your favor by adjusting the website conversion rate to increase your profit.
For example say you are spending on average $100 to acquire a new customer and you know that a new customer is worth on average, $150 in the first 30 days. Which basically means that for every $100 you spend you make approximately $50 profit within 30 days of acquiring the customer. (These are just rough numbers for sake of example)
If this is the case then your advertising conversion rate doesn’t necessarily matter, at least at first.
If you can predictably generate a customer for every $100 spent and you are profitable on that customer within 30 days how many times could you spend $100? Hopefully you answer, “as many times as I can”.
But let’s take it a step further and actually look at the advertising conversion rate. You find out that customers are buying at a rate of 1%. So for every 1000 unique visitors to your site you generate 10 new customers or in terms of advertising dollars and our average CPA value example you are spending $1000. (a profit of $500)
The point we are trying to make here is don’t focus on the advertising conversion rate at first. You must start with knowing the other numbers and then you can go back and make it better by increasing the conversion rate.
Let’s see what that looks like…
You optimize your website for a better conversion rate from the advertising to say 1.5% (more than possible).
1000 unique visitors with a 1.5% conversion rate = 15 new customers.
Same $1000 spent… but now you are showing a profit of $1250.
So to answer the question again on what is a good advertising conversion rate? It depends!
But you can take steps to make your advertising dollars go farther and generate more profit by increasing the conversion rates but only AFTER you know your other numbers.
It’s relative in the fact that if you can make your other numbers work… you can then increase your advertising conversion rate to make it more profitable.
Pay attention to all of your metrics such as how much you are spending to acquire a lead or customer and how much those leads and customers are worth to you on average during a certain length of time.
Then tweak, test and improve.
We hope this shed some light on advertising conversion rate and why what the average is doesn’t matter if you can make the other numbers work.
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Be sure to reach out if you are having trouble increasing the profitability of your campaigns we are happy to point you in the right direction and help out.