Everybody wants to know the benchmarks. What’s a good conversion rate for our business? What range should we be in?
The data is out there. Beautiful charts showing conversion rates for ecommerce, YouTube, paid search, SaaS, fashion, fitness, and so on.
Sadly, all that data is useless for helping you figure out a good conversion rate for your business.
Your company, your customers, your profit margins — not some industry standard — determine the percentage of visitors you have to convert in order to grow.
What Makes a Conversion Rate Good?
A conversion rate measures how many people completed a desired action — like making a purchase, signing up for a free trial, or engaging with a TikTok ad — compared to how many total people saw the offer.
In simple terms, it’s the percentage of visitors who took the action you wanted.
So what specific percentage do you need to aim for?
Nobody can give you the perfect number, but anyone who has experience with conversion rates will tell you the same thing:
A good conversion rate is viable for business growth.
In other words, it has to be profitable. The conversion rate must be high enough that you are making money (not losing money) to acquire paying customers.
Some of the big factors to consider are:
- Traffic costs: The amount you spend to bring a visitor to your site impacts how many conversions you need to break even or generate a profit. Higher traffic costs generally require higher conversion rates to remain profitable.
- Customer Acquisition Cost (CAC): The average amount it costs to acquire a new customer taking marketing and sales into account. If CAC is too high, even an amazingly high conversion rate may not translate to profitability.
- Customer Lifetime Value (CLV): The total amount of revenue generated by a customer over their entire relationship with the brand. A higher CLV means you can afford a lower conversion rate while still being profitable.
There are certainly other factors to consider, but you need to have some sense of how expensive conversions are to know whether the rate is profitable or not. What percentage of people do you have to convert to ensure that your business is sustainable over the long run?
The specific conversion rate number must account for the basic unit economics that underpin your business.
To illustrate this point, let’s look at two examples of companies with 4% conversion rates — for one company, 4% is great, for the other, it’s terrible.
Example 1: A profitable 4% conversion rate
A company sells project management software for $100/month. They have a 4% conversion rate on paid traffic that costs $4 per visitor. This means:
- 4% conversion rate = 1 out of every 25 visitors becomes paying customer
- $4 per visitor × 25 visitors = $100 cost per paying customer
Assuming that customers stay with the brand, each one brings in $1,200 per year, which far outweighs the $100 acquisition cost. This makes 4% a great conversion rate.
Example 2: A struggling 4% conversion rate
An online store sells phone cases for $12.They have a 4% conversion rate on paid traffic that only costs $1 per visitor. This means:
- 4% conversion rate = 1 out of every 25 visitors becomes paying customer
- $1 per visitor × 25 visitors = $25 cost per paying customer
Because customers only buy one phone case, the company is losing $13 per sale. This makes 4% a disastrous conversion rate until the store can reduce traffic costs, raise pricing, or improve repeat purchase rates.
The Danger of “Good” Conversion Rate Data
Maybe it’s valuable for some people to have a general sense of what the average conversion rate is in their particular niche of the market. I’m not sold, regardless of how meticulously the data has been collected, cleaned, and presented.
There are two big risks when it comes to using an external benchmark to set goals for your own business.
Risk one: there are too many variables. Look in any forum for any platform where conversion rates impact profits and you will find the veterans all saying the same thing when asked about “good” conversion rate goals. Here’s a good example from Rob Skelton, a Diamond Product Expert, responding to just such a question on the Google Ads support forum.
“There is no such thing as a typical conversion rate,” says Skelton. “Even if you could compare yourself with advertisers offering the exact same thing at the exact same price with the same amount of competition, what you count as a conversion can vary.”
This echoes what you find on community forums for Etsy, Ebay, Google Ads, Meta Ads, HubSpot, Kit, and others. The experts sometimes note the typical benchmarks, but they always stress that there are too many variables at play to rely on an industry benchmark.
Risk two: there is no regard for your business model. External conversion rate data doesn’t account for the unit economics of your business, profit margins, customer purchasing habits, and other factors that matter enormously.
Chasing external conversion rate benchmarks can be a trap — yes, the numbers are deeply researched, but they might not align with your business. There are situations where you can hit the industry average and it still won’t lead to a profitable, sustainable business.
The way to find a conversion rate that makes sense to shoot for — and to achieve it — starts with looking inward.
5 Steps To Lock In Good Conversion Rates
Go through this cycle anytime you want to work on conversion rates. For businesses that are hyper-focused on conversions, this process will be ongoing.
- Find the baseline
- Determine a sustainable conversion rate
- Optimize for meaningful conversions
- Test changes and validate wins
- Protect your higher baseline
1. Find the baseline conversion rate
Look at your own numbers — what are the conversion rates for each channel you care about?
Where your company is at, right now, is a major determining factor for what’s reasonable to expect and what’s worth shooting for in the near term.
If you are starting from scratch, you need to define what constitutes a conversion for your business — this could be a sale, activation, a sign up, a download, or another action that aligns with your goals.
Set up accurate conversion tracking, which provides reliable data and gives you the ability to segment by traffic source, time of day, and other factors. Google Analytics, CRM software, and platform-specific analytics dashboards (e.g. on Linked In Ads or Meta Ads) can help you monitor conversions and find areas you need to improve.
2. Determine a sustainable conversion rate
The goal here is to determine the minimum viable conversion rate that keeps customer acquisition profitable. You’ll have to look at traffic costs, CAC, LTV, among other factors that impact the net business value of each conversion.
These factors force you to consider your customers, the cost of getting in front of them, and the potential revenue you can expect. This allows you to determine the break-even point for your conversion rate — this is the percentage of visitors you must convert in order for this channel to be profitable.
A “good” conversion rate is somewhere above break-even with regards to the traffic costs. The bottom end of your good range is what’s barely profitable enough to justify using the channel for customer acquisition. The high end of your range is what you think is possible. Adjust your ranges as new data comes in.
3. Optimize for meaningful conversions
At this point, you know:
- Where conversion rates are today.
- Where they need to be in order for your business to make money.
You may have a big gap to close or a high rate to defend — either way, the goal is to make more of the people who visit your site or read your email take the next step and convert.
There are many proven conversion rate optimization (CRO) tactics that improve these percentages by removing friction, confusion, and uncertainty from the user experience. Essentially, CRO aims to make it easier and more attractive for people to take action.
Keep the ultimate goal of getting more valuable customers in mind as you optimize. Removing a credit card requirement will absolutely boost free trial signups — but if those users don’t convert to paying customers, the change is meaningless.
Not every optimization is going to deliver the desired results. Some will backfire. If a page or ad campaign is performing well, I’d be reluctant to make drastic changes, whereas if an asset is in desperate need of a conversion lift, I would be more willing to try bigger things.
4. Test changes and validate wins
Monitor how optimizations perform. You are looking for rates to steadily climb upwards and to the right. Over time, the well-implemented optimizations lead to a more enjoyable and engaging user experience, which maximizes your chances of converting visitors.
If your standard CRO tactics aren’t delivering the lift you need, you should investigate deeper and propose bigger improvements.
To investigate, consider using website heatmaps and click maps that show you where people are engaging and where they start to lose interest. This gives you real user data to back your decisions instead of a best guess — you can really see where users struggle, what they ignore, and where you are losing clicks.
A/B testing is another great way to find major improvements on landing pages, pricing pages, checkout flows, email subject lines, and other places where conversion rates matter. Essentially, A/B testing divides traffic between two versions of a page and tells you which one had the higher conversion rate.
Every test should tie back to the bigger picture — does it make the business more profitable, or does it just make one metric look better?
5. Protect your higher baseline
At this point, you have a new baseline conversion rate (hopefully higher than it was), and you can start the process over again. The cost of traffic is constantly changing, as are CAC and LTV — using stale data to determine a viable conversion rate is not a good idea.
Monitoring conversion rates, reevaluating costs, identifying trends in customer behavior — it’s an ongoing process if you are serious about trying to maintain high conversion rates in a category where you can make decent money.
Your competitors are going after the same clicks, updating their strategy, and optimizing their landing pages. Defending a healthy conversion rate requires consistent oversight.
When you find those real conversion rate wins, you can scale them out to other pages, or tweak them to see if the improvement transfers to another channel.
Improving Traffic Quality for Better Conversion Rates
A conversion rate is only as strong as the traffic that feeds into it. Is traffic composed of users with high purchase intent that fit squarely in your target audience — or is it just random social media traffic composed of people looking for amusement?
Bringing in better-qualified visitors can improve conversions without needing to change the product or offer.
Here are some methods everyone uses to get better traffic:
- Refine ad targeting: Use in-platform tools to get in front of an audience with the specific demographic and psychographic traits of your ideal customers. You can zero in on the highest CLV customers and relevant ads at the right time — you can also avoid targeting segments that are good in theory but have low conversions or low CLV.
- Revamp messaging: Use the text of your ads, social posts, and headlines to attract people that will actually buy your product or sign up for your service. Clickbait strategies can get you more visitors, but they’ll never convert. Use copywriting and persuasion techniques to connect with the fears, desires, and frustrations of potential customers.
- Optimize timing: Use customer engagement metrics to figure out when your audience is most active. Most brands find particular days of the week that convert better than others, or times of day where certain channels see the most sales.
- Adjust keyword strategy: Use keyword research to find out what your specific audience is trying to discover. Analyze your competitors’ keyword strategy to see where they are finding traction. Search intent changes erratically, and if you can speak the language your audience is using today, you will be found in search results, YouTube, and social platforms, and AI Overviews.
Closely monitor the results of any of these changes. How they impact conversion rates is important, but so too are things like average order value, traffic costs, and other factors that impact business viability.
The click through rate can tell you a lot about the success of your messaging and targeting strategy. Are you getting more people interested? Are you getting fewer people interested but seeing a higher conversion rate?
What if a Good Conversion Rate Is Impossible?
Say you have redesigned your landing page twice, tried every CRO hack in the book, and the conversion rate won’t budge.
Or, maybe you are confident that you have hit the top end of what’s possible, and believe that shooting for still higher conversion rates is not a productive use of your time.
Sometimes, it’s not about pushing harder for more conversions. It’s about adjusting your approach to generating leads and sales for your business.
Here are a few strategies that can relieve the pressure of needing unrealistically high conversion rates:
- Shift to lower-cost acquisition channels: Less expensive channels might bring in a volume of visitors that doesn’t need the same level of conversion efficiency. Email marketing, affiliate marketing, and display advertising can all be cost-effective ways to reach your audience.
- Focus on customer retention and loyalty: Strengthening relationships with your current customers can be just as valuable as attracting new ones. Repeat customers and higher CLV can offset the pressure for constantly high conversion rates.
- Run retargeting campaigns: Retarget visitors who have already shown interest but didn’t convert. This strategy is often cheaper and more effective than paying for new traffic, as these individuals are already familiar with your brand.
- Set up referral programs: A well-structured referral program not only lowers costs but can bring in really high-quality leads, as referrals often convert better than cold leads.
I am all for trying to drive conversion rates as high as possible, but it’s not always the lever you need to pull.
