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How to Calculate Lead Conversion Rate

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Updated February 3, 2020
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Alex Kleve
Alex Kleve

I help projects and content-entry go smoothly at Hook Agency as a Project Manager. Hook Agency's specialty is where visual design and SEO combine to help get you better leads.

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By knowing how to calculate lead conversion rate, you are able to do several things. You can predict how much to spend on advertising, determine profitability, allocate your resources, and much more.

Not knowing how to calculate it though is a whole different story and can end up hurting you.

How is this?

When you don’t know the conversion rate, you could end up overpaying for your leads and sales, which will often lead to you going out of business. It is basically like you taking a shot in the dark because you won’t know if you are getting a return on your investment and if it is working.

This is why knowing your conversion rate and where you can improve it is a necessary skill for marketers and sales teams to have.

You have the knowledge and reasoning of what is behind your conversion techniques. By taking a minute to think and look over your results can give you a more in-depth insight into possible ways for you to improve your processes and see other opportunities you have missed that you can capitalize on.

When you have a better understanding of the sales funnel and know how to calculate lead conversion rate, you can make better decisions that will boost your profitability.

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What is a Lead?

A lead is defined as a person or business that may be interested in purchasing your product or service. There are different types of leads you can get with and some are going to be better than others. The different types of leads you can attract are a marketing qualified lead, sales qualified lead, product qualified lead, and service qualified lead.

There are also hot leads and cold leads. A hot lead is someone who is more ready to buy from you. A cold lead is just the opposite and may need a little more work before they are convinced to buy your product.

What is a Conversion?

A conversion happens when a visitor on your website completes a desired goal, such as online sales, leads, email sign-ups, or forms submitted and convert from a visitor into a lead or customer. However, what determines a conversion for one company may be different than another. It all depends on the action you find more valuable.

Like I mentioned earlier, when you know your conversion rate, you are able to have a better understanding of your sales funnel and can increase your profitability.

Lead Conversion Rate and How to Calculate It

When you have defined what a conversion looks like for your company, you are then able to calculate your conversion rate. Now how do we get to this number? Let’s find out.

Here are equations you can use to find your conversion rate:

  • Conversion Rate = Total number of conversions / Total number of sessions * 100
  • Conversion Rate = Total number of conversions / Total number of unique visitors * 100
  • Conversion Rate = Total number of conversions / Total number of leads * 100

While all of these formulas are logical to use, it depends on what you are looking to track for your conversion and your traffic pool, which is usually sessions on-site, unique visitors, or the number of leads you have.

Don’t Focus Strictly on Lead Conversion

One thing that can happen when you are focusing solely on lead conversion rate is losing the significance of total conversions and sales that have been made.

What I mean by this is that just because you have a good conversion rate, it doesn’t automatically mean that your company is doing well.

I know what you’re thinking, “why did I just take the time to learn how valuable conversion rate is?”

Well, the conversion rate is a good thing for you to know, but it doesn’t tell the whole story. You can have a great conversion rate, but if you are only getting a few people on your site, you are not going to have enough sales to sustain your business.

On the other hand, if you are getting an overwhelming amount of people on your site and converting a below-average amount of the people coming to your site, you can sustain and even build your business because you are getting more sales.

So if you were wondering why I am saying not to only look at the lead conversion rate, that is why.

At this point, you should now know how to calculate lead conversion rate and know the significance it can have for your business. Just remember that this is not the only thing you should be paying attention too.

Also, be sure to check around to see what’s working and where changes need to be made in your marketing and sales efforts. This will help you to improve your processes and increase your profitability.


 

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Alex Kleve
Alex Kleve

I help projects and content-entry go smoothly at Hook Agency as a Project Manager. Hook Agency's specialty is where visual design and SEO combine to help get you better leads.

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