When a better conversion rate means less money

It is an uncomfortable moment. The rate is up, everybody is pleased, and the bank balance disagrees. This happens more often than people expect, and the reason is always the same.

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Conversion rate counts actions and ignores their value, so it rises whenever you attract cheaper, easier customers and falls whenever you attract larger ones who deliberate longer. Watch it beside the value of what converted, or you will slowly optimise your business toward its least profitable corner.

The blind spot in the number

A conversion rate treats every conversion as identical. The customer who wanted your smallest service and the one who commissioned a project ten times larger count as one each.

For a metric that is used to judge marketing decisions, that is a serious omission, because almost every meaningful change to a website affects who converts as well as how many.

Four ways the two come apart

These are the common situations. Recognising which one you are in usually explains a confusing month.

  • You started ranking for a cheaper search, bringing many small enquiries.
  • You began attracting larger clients, who take longer and enquire less readily.
  • You made the offer smaller and simpler, which is easier to say yes to.
  • You added a low-value action, such as a download, and counted it as a conversion.

The slow drift nobody decides on

The dangerous version of this is not a single month, it is a gradual pull. If the rate is the number people are judged by, every decision leans, slightly, toward whatever raises it.

Over a year or two that produces a business serving cheaper customers than it intended, without any meeting where anybody proposed that change. The metric decided it quietly.

What to watch beside the rate

The pairing does not need to be sophisticated. Keep the count of enquiries beside the value of the work they produced, and look at both together.

Where the sales cycle is long, use the value of a typical enquiry rather than waiting for every deal to close. Update that figure occasionally rather than constantly, since it moves slowly.

  • Enquiries, counted properly.
  • Value of work won from those enquiries.
  • Typical value per enquiry, updated a few times a year.
  • The same figures for the same period last year.

Where the rate is still the right tool

None of this makes conversion rate useless. Within a single page, comparing before and after a change, with the same audience and the same offer, it is exactly the right measure.

The trouble comes from comparing across pages, across channels, or across periods where the mix of visitors changed. Then you are comparing two different populations and calling the difference an improvement.

Beware improving the rate by shrinking the pool

There is a tempting shortcut worth naming. Make the enquiry harder, add qualifying fields, hide your prices behind a call, and your rate of enquiry to sale will rise beautifully while the number of sales falls.

Qualification has its place, but check it against the total. A filter that removes ten poor enquiries and two good ones is only worth it if handling those ten cost more than the two were worth.

How Licheo reports it

We report enquiries and the work they produced together, rather than a rate on its own, because the rate alone has misdirected a great many businesses toward their cheapest customers.

Where the value side is not yet known, we say so instead of implying a conclusion the numbers cannot support.

Part of a larger guide

This page is one part of Revenue per visitor. The other parts:

Questions people ask

Can conversion rate go up while revenue goes down?
Yes, and it is common. Attracting smaller, easier customers raises the rate and lowers the value of what converted. Counting low-value actions such as downloads has the same effect on the number without any effect on revenue.
Should I stop tracking conversion rate?
No. It is the right tool for comparing one page before and after a change, with the same audience and offer. It goes wrong when used to compare different pages, channels or periods where the mix of visitors changed.
What should I look at instead?
Enquiries beside the value of the work they produced, and the same figures for the same period last year. Where deals take months to close, use a typical value per enquiry and update it a few times a year.
Is a low conversion rate always bad?
Not if the enquiries are valuable. A page attracting substantial projects will convert a smaller share of visitors than one selling something simple, and it can still be the more profitable page by a wide margin.
Does qualifying harder improve things?
It improves the rate and may reduce total sales. Check the trade against the total: a filter that removes ten poor enquiries and two good ones only pays if handling those ten cost more than the two were worth.

Watch the number that includes value

We report enquiries and the work they produced together, so nobody optimises your business toward its cheapest customers by accident.

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