March 10, 2023

CTRs and conversion rates: why they matter, and why businesses need to start tracking them as early as possible

Author imaage
Hiya Chaplot
Associate Growth Manager
CTRs and conversion rates

Every business needs to keep going through a build-improve-repeat cycle if it wants to survive or grow. However, the ‘improve’ step can’t be based on hunches or intuition: ideally, the basis for deciding what to improve and how should be cold, hard data.

For online businesses, the actions taken by their website visitors represent a wealth of useful data that can be analyzed to arrive at certain concrete steps the business should take. Combining such data in certain ways can also produce a few handy metrics that business owners can use as general barometers for monitoring how well their offerings are doing, and what they can do differently. 

Two such metrics are the ‘click-through rate’ (CTR) and the ‘conversion rate’. Let’s understand how they’re calculated, what they indicate, and why every business should track them.

CTR and conversion rate: definition and calculation

Sometimes, some slight variants of the CTR can be more useful than the “pure” CTR, such as the total number of clicks by unique shoppers or cohorts.

Formula: total clicks / total impressions. Here, an impression is any instance of a person being shown the on-screen element in question.

Example: Suppose a certain search result was shown to 2000 people (the number of impressions), but only 500 of those 2000 people actually clicked the search result. In such a scenario, the CTR for that search result would be 500 / 2000 = 25%.

Formula: total number of site visitors who perform action X / total number of site visitors

Example: Suppose that 1200 people have visited the page for a certain product, but only 400 of them actually bought the product. In such a scenario, the conversion rate for that product is 400 / 1200 = 33.33%.

What can CTRs and conversion rates do for businesses?

While they may seem extremely elementary, these two metrics can provide businesses with a wealth of useful information. Indeed, their very simplicity makes them extremely versatile: they can be used as the starting points for taking several different business-related and technical decisions.

Let’s take a closer look at the inferences that can be drawn from different values of the CTR and the conversion rate.

Ultimately, the ability to make smart decisions based on such metrics is what can allow a business to increase the number of people who buy from it, the amount of sales, and ultimately, the revenue that it generates.

Why it’s important to start tracking clicks and other events as early as possible

Many key features on business websites, particularly ecommerce websites, are heavily dependent on AI-based algorithms working behind the scenes. Some such features are a ‘Frequently Bought Together’ or ‘Related Products’ section, or the personalization of recommendations. But these algorithms can’t work in a vacuum: they need user behavior data to operate on, and the more data they have access to, the better the results they produce.

In addition, implementing analytics on an as-needed basis comes with a large number of future hassles. Such headaches can be avoided by gathering as much visitor behavior data as possible (even something as seemingly innocuous as the mouse cursor lingering in one area for too long) right from the very beginning. In this way, regardless of what features may be needed in the future, the raw data that will power them will already be available, which should allow you to have more peace of mind.

Ideally, you should track what your visitors do on your site in as much detail as possible by including a lot of information in each “event” that is stored. In addition, wherever possible, you should also track interactions that occur off-site, such as when potential customers open your emails or see your ads.

CTRs and conversion rates: simple but critical for businesses

Thus, it should be clear that gathering the data required to calculate and usefully analyze various kinds of CTR and conversion rates is something that every business needs to take very seriously from day one.

For a powerful AI-based site search engine that provides you with several different search-related analytics, look no further than Zevi. By leveraging the power of Natural Language Processing (NLP), Zevi can understand the search intent behind queries and produce highly relevant search results as a result. Try our Shopify App, or reach out to us today for a free demo!