The Relationship Between Conversion and Traffic

Posted by Netmatters
28th October 2015

What Is Traffic?

Traffic is the measure of people visiting your website, which is also an incredibly important statistic in measuring the performance of your online presence. Traffic represents how visible your website is to Google, which is the greatest way to identify whether your SEO is working or not. Traffic is arguably the most important aspect for a website to aim to achieve a high value in, with high traffic often being associated with good performance. Another important factor here is how many pages that each unique visitor navigates to before they bounce off of the website, which represents how well your website retains its traffic and entices them to explore your website.

What Is a Conversion?

conversion is when a potential customer makes the decision to become a consumer. It involves a user of your website completing a common goal, such as purchasing a product, downloading a guide or enrolling in a service for example. The goal can be whatever you want it to be, as long as it is trackable. Conversion rate is an important factor when measuring the performance of your website, as it accurately portrays your websites effectiveness to sell your products in a single statistic. For websites that do not involve sales then conversion can be used to identify almost any common goal. This makes it useful for almost all websites with a multitude of different uses. 

Their Relationship to Each Other and To Your Profit.

To calculate the value of each visit to your site you will need to know the conversion rate you are achieving. Let’s say you are selling a single product that is priced at £500 and from every product sold you make £100 profit that would put the value of each conversion at £100. If you get 1000 visitors to your site, then 10 of these people convert that will be putting the value of 1000 visits at £1000 pounds, making each visit worth £1. At this point, you have the power to put a real value on each visit to your site, so you also have a real value that you can compare to the cost of acquisition per sale, which will assist you in identifying whether you are making a profit from your online presence or not.

These statistics can essentially go into 3 categories that identify your overall performance, these 3 categories being a loss, a break even or a profit. If you are paying for your traffic with a ppc campaign for example, if you were paying £1.20 for a click and each click from this was worth £1 then you would be making a loss, if each click costed £1 then you would be breaking even and anything under would be a profit. If you are making a big loss on your paid search traffic then you could be losing a lot of money, which is why in the world of paid advertisements you have to have attention to detail and act fast upon your data.

There are two main ways to increase your profitability in this regard, and those two things would be getting more traffic through an organic mean, or optimising your site to convert more visitors. Conversion rate is crucial to all websites and if your conversion rates are high then your cost per acquisition will be lowered drastically. For example, if you double your conversion rate then you are essentially halving your cost per acquisition. When you view conversion in this way it becomes openly obvious how much value there is in increasing your conversion rate.

At the same time however, if you are getting 100 visits per month and only converting 1 person then if you double your conversion rate then you will not see huge benefits in terms of profit. In this instance it would be better to focus on SEO to obtain more traffic. If you increase your traffic to 1000 people a month organically you theoretically should convert 10 people. This increase in conversions will not cost you directly from each visit you get, so this will increase your profit margins.

Ideally however you want to be focusing on both. If you did both conversion optimisation and increased your traffic you would be getting 20 sales from your 1000 visits, both halving acquisition costs and increasing the number of acquisitions you make. Both conversion rate and traffic are hugely important factors in terms of your websites performance and you need to understand both, their effects on each other and how they affect your baseline profits. If you do not understand your conversion rate then you are in a very bad situation, and if you do not understand your traffic you cannot calculate your conversion rate.

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