Win an athletic competition like a race and you might get a trophy, cash, a paper certificate or simply bragging rights. All of these things represent a sort of prize, but they can make the experience of victory feel very different.
This is not unlike achieving a “conversion" within a business. Though the definition can change based on the department in which you work, it tends to refer to a "before" and “after" story involving a customer.
To put it another way, a conversion often represents major milestones companies use to mark stages of a customer journey.
Usually, the more conversions in a business, the better. A higher conversion rate -- no matter what the conversion brings -- tends to be an indication that a process or strategy within sales, marketing or service is working.
When the words "conversion rate" mean different things to different people in an organization, there can be false perceptions about the progress a company is making on achieving its business objectives. Part of this is that conversion rates often evolve in silos rather than in a top-down way that ensures everyone understands what's being measured and why. It takes leadership to establish metrics that can be understood and applied across the company, while taking into account the key performance indicators that might be unique to a particular team.
To make this a little easier, let’s start with a fairly universal metric that most businesses care about -- revenue -- and explore how different kinds of conversion rates could all be used to help contribute to revenue growth:
It makes sense to start here because this is often where the customer journey begins — by learning about a firm and its products and services through advertising or thought leadership content.
For a long time, conversion rates were fairly loosely applied to marketing activities, and were used to describe almost any kind of result from a campaign or tactic.
A click-through on an ad might be considered a conversion, for example. Same is true for registering for a webinar, downloading an eBook, opening an email message, following the company on social media or even reading a company's blog post.
Today, these would probably be better described as engagement metrics. They indicate interest, but not necessarily a conversion from an unknown entity into an actual customer.
A better conversion rate for marketers focused on revenue might be whether the engagement turns into a willingness to subscribe to a newsletter or to actually show up to that webinar. Even better would be those who give their contact information and other details (such as whether they're actively in market for a product) and want to be contacted by a sales rep.
In that case, the previously unknown entity has been converted into a strong lead for the sales team, which in turn represents a revenue growth opportunity.
This one probably seems easy: a conversion rate in sales is when a customer agrees to a purchase, right?
While the frequency of getting a “yes" from a prospect should be measured, sometimes things happen before they actually sign off on a deal or make an actual payment. What you’re really talking about here is a win rate.
Even if every "yes" turns into cash, companies truly focused on revenue growth might want to think about their conversion rate in more ambitious terms. Knowing how difficult it is to keep acquiring new customers, do your sales conversions lead to ongoing business, or a series of one-off purchases?
If it's the latter, you should think about how to use CRM and other tools to foster a stronger relationship -- where a conversion rate also means a lower churn rate.
Lower turnover from customers who might otherwise leave for a competitor after encountering a problem could also work as a conversion rate in customer service departments. That's not the only way to think of conversion rates here, though.
Remember that the best customer service teams not only answer questions and solve problems. They also make customers more likely to recommend a company and its products and services to their family or friends. Even if you haven't formally adopted a metric like Net Promoter Score, you could still measure the rate of “detractors" who convert into “promoters," which could have an impact on future revenue.
An even more direct way to see the relationship between service and revenue is to look at those who “convert" into a higher-value customer because they accept an upsell or cross-sell offer an agent makes. The higher this kind of conversion rate becomes, the more your customer service department starts to look like a profit centre.
Sales pros have often used the phrase "always be closing" to illustrate the consistent effort it takes to crush your quota and close more deals. Given how sales, marketing and service all work in tandem along the customer journey, however, maybe it's time to change that to “always be converting.”
Conversion rates are rarely going to stay the same, for example. There might be a strong rate of people who convert through a marketing campaign into a sales lead, but who don't bother coming back after they've made a purchase. Sometimes there will be fewer customers showing interest in converting to a premium version of the product.
When you look at top-line metrics like revenue, however, you can begin to assess the true value of a conversion rate as it applies in every area of the business. Then it's a matter of making changes or improvements that boost conversions -- and accelerate business growth.