5 smart steps to calculate conversion rates

I'll start my "metrics that matter" by shedding light on conversion rates.

Conversion Rate: Rarely Understood, Often Used Incorrectly

Although it is one of the most frequently cited metrics by sales and marketing organizations, conversion rates are rarely understood and often misused. The correct and careful calculation in the right context the conversion rate of a company is one of the most effective ways to understand the effectiveness of the organization, trends over time and total individual performance.  I want to start from the beginning of this process with an approach to the best computational methods.

The correct use of information obtained from conversion rates begins with calculations. There are many ways to apply conversion rates to sales and marketing organizations, but in this example I will use step-by-step conversion, like what you will see in a multi-step sales process.

Most people understand at the most basic level that conversion rates reflect the percentage of opportunities that pass from one stage to another within a given process. Sounds easy, right?

Well, it's not as simple as it sounds.

To calculate conversion rates, you need to combine two important values: quantity and time.

Number

From how much you started and how much you have achieved.

This can be as simple as the number of visitors to the Site in relation to the persons transmitting on white paper or as difficult as the process of sale sześciostopniowy with the results weryfikowalnymi required to progress gradually. The more detailed and realistic your process, the more consistent your results will be. Danger zone: if your process is constantly changing, you may not be able to take much advantage of conversion rates. Do the work in advance to fix the process and give him enough time to see the results.

You need some kind of system that can record data to work. Most often, organizations use CRM systems like Salesforce that allow you to see when an opportunity or prospect presents itself.

Time: a very important element that many people cannot include in the conversion calculation.

Time is critical to creating metrics that provide consistency of results, contextuality, and transparency. Follow:

A specific starting point.

To get accurate results, you need a starting point. The definition of the starting point ensures that only comparable quantities are measured against each other. For example, you don't want to consider an opportunity that appeared last week, just like an opportunity that appeared 6 months ago. Of course, they had no equal chance of a conversion. Group with a starting point (I like monthly groups) and you can add context like "first to second stage conversion rate was 50% for opportunities created in December""

Timeout defined for expected conversion.

This is important to get consistent results, but it is often the most underrated part of the conversion calculation. The conversion rate of the odds of a lifetime is useless when most of us work to achieve monthly, quarterly or annual goals. We need to measure how many opportunities are converted into set time frames and whether the conversion meets our expectations or does not meet our expectations.

If you have each of these values, the calculation will be quite simple. I'll give you an example (schematic below) that will hopefully make the process of calculating the conversion a bit clearer.

Let's say I want to calculate the conversion rate between Step 1 and Step 2 in my sales process. The steps I will take to complete this calculation are given below:

Specify a date of participation (i.e. when opportunities have moved to step 1). In this example, suppose we want to consider all the possibilities that emerged in Phase 1 in September.

Determine the time you expect these opportunities to be converted. For example, if my sales process requires an average opportunity to move to step 1 for 30 days, I might think of a 60-day deadline where I expect most opportunities to be extended or closed.

Determine the number of opportunities according to the set schedule. After setting the first parameter, I can determine the number of opportunities that went to step 1 in September. In this example, suppose the number is 100.

Defining the implemented features is the second parameter. 

By setting the second parameter, I can determine which of these 100 opportunities went to Stage 2 in 60 days. It is important to remember that the duration of 60 days depends on a specific opportunity (i.e. an opportunity added on September 1, will last until November 1, and an opportunity added on September 15, will last until November 15). In this example, suppose the number is 50.

Calculate! 

The calculation itself is relatively simple because you take the finite number (50) divided by the initial number (100), which in this example would be a 50% recalculation. Therefore, it is important to determine the conversion rate in the context of the chart : "50% of our Phase 1 capabilities created in September 2013 have moved to phase 2""