New Vocabulary Word: “Conversion”

Sometimes, this is what the office feels like.

I would like to introduce you to a word that may not have been widely used in marketing and communication curricula, but it is the most important event in any direct response marketing you will do. “Conversion” is the moment when someone decides to become a lead or a sale in your campaign.

You will have been taught a great deal about how to get people’s attention, primarily by interrupting them. You will have been steeped in the importance of message, brand, and emotion. You will have learned the importance of creative in the communication process. You will have been shown the importance of identifying your market segments by demographic, geographic and psychographic data.

In the world of branding and image-building, these skills are largely sufficient. However, when you are asking “suspects” to call, register, or buy from you, conversion is the critical piece of the puzzle.

Conversion is important because it is a measurable event. Branding and awareness marketing must be measured by surveying the marketplace. Did they see the ad? Did they remember it? Would it entice them to buy?

Conversions can be counted: calls made, leads generated and sales completed.

What does it mean to be able to measure your marketing results? It means that you can continue to do the things that work, and stop spending on those that do not. You can effectively test your creative, zeroing in on the ads and messages that generate positive business results. Once you have identified a winner, you then continue testing, trying to beat your star performer, called the Control.

The result is marketing that gets continuously better, meaning it gets cheaper and cheaper to generate new leads and sales.

The Peculiar Math of Conversion

Focus on conversion and let the math work in your favor.

If you spend $1000 to generate 1000 impressions through an ad or email, your cost per impression is $1. Let’s assume that 1% of those impressions buy as a result. You have a 1% conversion rate. That means 10 new leads or 10 new customers.

Your Acquisition Cost is the $1000 spent divided by 10 conversion, or $10.

If you want to double your results, you can spend $2000 and generation 2000 impressions. It would be assumed that you would generate 20 new customers with your 1% conversion rate.

However, if you want to double your results without increasing your budget, how would you do that? If you increased your conversion rate to 2%, your $1000 ad campaign would now generate 20 customers, the same number that $2000 would have generated before.

Your acquisition cost drops to $5 per customer, meaning you are benefiting for half the cost.

Increasing Conversion Rates

In the online world, where almost all prospect actions can be measured, you will find that Web sites do a terrible job of converting visitors to leads or sales. Learn the ways of conversion, and you will be invaluable to companies in almost any industry.