Conversion Rate is commonly used for testing as the higher your conversion rate, the more conversions you have once someone clicks on your ad. The biggest downside to conversion rate is that it doesn’t take into account how many clicks your ad actually receives.
What is Conversion Rate?
Conversion rate (CR) is simply the ratio of clicks to conversions.
How Conversion Rate is Calculated
Conversions rate is calculated by diving the number of conversions by your clicks:
Conversion Rate = conversions/clicks
It is generally displayed as a percentage. Here are some examples:
In this case, ad 2 has the highest conversion rate and ad 1 has the lowest.
The Advantage of using CR as Your Testing Metric
There are two main reasons to use CR as your testing metric:
- Get the most conversions possible once you get the click
- When you are using ads to test landing pages
A common landing page testing method is to use two identical ads in an ad group with the exception of the destination URL. If you are testing landing pages, then ad 1 goes to landing page 1 and ad 2 goes to landing page 2.
If you are testing page templates, then you might duplicate this test across several ad group and use multi-ad group testing to aggregate the results across all of your ad groups by page template.
The other reason to use conversion rate as a testing metric is when you want the most conversions possible once someone clicks on your ad. We have to qualify this very carefully as conversion rate has an inherit weakness – it doesn’t care about the volume of clicks.
The Disadvantage of using Conversion Rate as Your Testing Metric
While conversion rate is great for landing page testing, it is not a good metric to use for increasing total conversions from your PPC ads since it doesn’t care about how often your ad is actually clicked. Consider these stats:
In every case, these ads all received the exact same impressions. Because CTR varies, so will the actual CPC and costs for each ad variation.
The ad with the absolute highest conversion rate is ad test 4 at a 36.36%. However, that ad only received a total of 4 conversions. The ad with the lowest conversion rate, test 5, received three times as many conversions at 12. Because ad 5 had such a high CTR, it received more traffic than the other ads and therefore, it had more opportunities to create conversions. So even though it’s the lowest conversion rate, it ends up with the most conversions.
When conducting ad tests, conversion rate is rarely, if ever, a good metric to use as your sole decision in deciding which ad is best for your PPC account. Conversion rate is a good metric to combine with CTR, which creates CPI (conversion per impression) which will be a featured metric later in this series.
For landing page tests, conversion rate is a good number as landing page testing only cares about the traffic that reaches the page; the page itself does not attract more or less clicks – it only cares about the user who actually reached your page.
Conversion rate is a very important metric – I don’t want to discount its importance as a metric in ad testing. However, since conversion rate doesn’t care about the ratio of clicks at all, it is not a great metric to use for ad testing by itself. It is very good when combined with click through rate, which then creates the metric Conversion Per Impressions (CPI).
Where conversion rate is your go-to ad testing metric is when you are testing landing pages and not the ads. If your ads are identical and you are just testing landing pages; then conversion rate will be your primary metric in your testing.
Don’t discount conversion rate as a metric, but unless you are testing landing pages, do not use it as your sole metric for determining ad winners.