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How to Calculate and Reduce Cost Per Conversion In Ecommerce Business

What is Cost Per Conversion?

Cost per conversion (CPC) is a vital metric used by e-commerce businesses to gauge how well they convert leads into buyers. The lower the cost per conversion, the more effective your advertising campaign.

In eCommerce businesses, this metric can be used to determine if you're selling your products at the right price or not. It's also an important part of choosing the best practices for managing production costs to keep your business running efficiently.

This blog post will explain the cost per conversion, how to calculate it, and the best practice to optimize your conversion rate.

Cost Per Conversion And Why Is It Important To Know

Cost Per Conversion And Why Is It Important To Know

In eCommerce, many people are looking for ways to improve their customer acquisition rates. And one of the most important measurements is the cost per conversion.

Cost per conversion is a measurement of the cost of acquiring a customer that makes a purchase. It can be used to compare various strategies and tactics, including the effectiveness of advertising campaigns or even the company's overall strategy for marketing and sales.

Understanding your cost per conversion will help you optimize your marketing efforts and get more revenue. For Instance, knowing how much it costs to acquire a customer that makes a purchase will help you make better decisions about where to invest your advertising budget.

CPC is one of the main key performance indicators for your eCommerce store. Organic traffic and paid advertising campaigns will want to keep track of their CPC to ensure that you're spending less than your revenue per visitor. It's easy to calculate, but budgeting and controlling that metric is much harder.

All your sales efforts, including advertising and search optimization, need to support a lower cost per conversion to stay competitive in your industry. If your cost per conversion is high, there's a good chance you're spending more money than you need on advertising and other marketing efforts.

You will also want to ensure that your ads target the right people. The ideal target customers are those who have expressed an interest in your product or service.

How To Calculate Cost Per Conversion In Ecommerce

It’s not always easy to calculate how much you are spending on eCommerce ad campaigns, but one thing you can do is track the cost per conversion. 

You can use this information to help you identify which areas of your eCommerce Ads are performing well and which aren't.

The cost per conversion is the amount of money you spend on your campaign divided by the number of conversions. 

The formula for calculating Cost Per Conversion is as follows:

Cost per conversion = Total cost of ads/number of conversions

To calculate your cost per conversion, simply divide the total amount spent on conversion-related marketing by the number of conversions generated from this spending. 

For example, if you spend $10 on a Facebook ad campaign and generate 10 conversions from this spending, then your cost per conversion would be $1.

A good cost per conversion results in the best return on investment (ROI). It doesn't matter if your marketing campaign costs $10 or $100. What matters is whether or not it produces a positive ROI for your business.

Ways To Reduce the Cost Per Conversion in Ecommerce

Cost Per Conversion And Why Is It Important To Know

1- Use More Targeted Ads

The cost per conversion for eCommerce ads can be reduced using more targeted ads. A lot of businesses are choosing to use ad campaigns that are highly customized and relevant to their customers. 

This is because it allows them to reach out to the right people at the right time, thus improving their chances of converting a customer.

For example, suppose you are selling clothes. In that case, you can use your ad campaign specifically to target men between 25 and 35 living in the city. This will ensure that you reach out to those who have already shown interest in your business and may be interested in purchasing something from you soon.

2- Reduce the number of steps required to convert

This is especially important if you run an ad campaign where your goal is to drive traffic to a specific landing page. In this case, it is better not to clutter the ad with too many steps and options. They might confuse users and make them less likely to convert on their landing page.

Make sure you have only one or two easy steps your users must go through to convert. For example, if you have a checkout process that requires users to fill out a form and submit their payment details every time, then this can be a costly conversion step. Avoid this by creating an automated email sequence or integrating it with your payment gateway.

If users enter information into multiple fields, they are more likely to abandon the conversion process altogether. Make sure that all of your forms are simple and easy to complete.

3- Track and Analyse visitors' behavior

Ads that don't track users' behavior are a waste of money. It's important to track users' visits and note what they do when they are on your website. The more you know about your customers, the more you can tailor your ads to them.

For example, suppose you notice that people visit your site from a mobile device but never return. In that case, you're likely missing out on many potential sales because they don't have a good experience on mobile devices. 

You can use cookies or other tools to track these visitors and learn how they interact with your site. By knowing what factors influence their behavior, you can make changes to improve the experience for everyone.

4- Optimize your eCommerce website for conversions

Once you know what actions lead to conversions, optimizing your website for those actions is time. Here are some tips:

  • Build pages that are easy for shoppers to find 

Ensure all relevant product pages are easy to find on your website. You might want to use sitemaps, content hierarchy, or a simple search bar at the top of each page.

  • Use Simple Product Descriptions

Another way to improve the user experience is by making your product descriptions more concise. Your users will appreciate it if they don't have to deal with unnecessary words or phrases that don't add value to their shopping experience.

  • Create product variations

Use a simple filter in your eCommerce software, such as Shopify or BigCommerce, to automatically add different images and prices for different sizes and colors of a particular item. This will help shoppers find exactly what they're looking for and keep them on your site longer.

  • Add customer reviews 

Add customer reviews on the product detail page so shoppers can see what other people thought about an item before buying it. This is especially helpful if you have multiple stores with similar products but different prices or sizes.

  • Integrate with social media networks 

Many eCommerce platforms now offer tools that allow you to easily connect with social media accounts like Facebook and Instagram, so your products show up in their feeds and timelines without additional work from you.

In addition, make sure that there are no errors or technical issues that might prevent visitors from taking certain actions or making purchases. 

  • Create A Sales Funnel

One of the most important things about eCommerce advertising is creating a sales funnel. A sale funnel is the sequence of steps that leads customers through various stages of the buying process until they decide to buy something (or don't)

When you create a sales funnel, you can set up tracking events around each step in the process to know where your customers are headed. This will help you optimize your advertising campaigns and ensure that all your ads lead to a sale. 

You can also see how many people complete each sales funnel step. What percentage of them don't convert (i.e., visit your website but don't make a purchase). 

This information allows you to create better ads and campaigns focusing on specific actions people take after seeing your ad or campaign. Your ads and campaigns will show up at the right time with the right message and offer.

  • Set up A/B testing

A/B testing is another way to improve your eCommerce advertising performance. A/B testing allows you to test different versions of an ad to see which performs better. This data can help you make changes that will lead to higher conversions.

The idea behind A/B testing is simple: You want to find the best combination of copy, image and timing for your ads. For example, using Facebook Ads, you can set up a campaign with two different ads.

One ad might be optimized for desktop users and another for mobile users. Once you've found the most effective version, you can continue to test more variations until you find the one that performs best for your business outcome.

This method can test out different headlines, images, and even Ad copies. You can even test out other targeting options such as location or device type. 

Leverage AI to Lower Your Conversion Cost

You may be spending a lot of money on ads without getting people to buy your product. Perhaps, you have people converting but at a very high Ad cost. Both scenarios can be saved by using an automated AI-powered customer ads platform for e-commerce like Converted.In.

ConvertedIn is an AI-powered customer ads platform for e-commerce that can help you increase ad revenue and get more leads. 

You can use the platform to create ads to target your specific audience who are interested in your products or services. It can also help you improve your conversion rate by identifying the best keywords and ad copy to generate conversions from different audiences.

Optimize your eCommerce store cost per conversion now with ConvertedIn. Get started with a free trial.