Conversion Rate: the Holy Grail of online businesses, the ultimate measure of success, the be-all and end-all of eCommerce. Or is it?


While the conversion rate metric is definitely an important metric to pay attention to, it's important to remember that it's not the only metric that matters. In fact, focusing solely on conversion rate can be detrimental to your business's long-term success and frankly, doesn’t tell you anything useful.


How exactly?


Well, that’s what we’re going to tell you. We’re also going to shed light on a better way to think about the success of your business and how you can stay ahead of the game this year by cutting that soul tie you have with Conversion Rate.  

Why Conversion Rate is a Skewed Metric

First of all, let's define what we mean by Conversion Rate. Simply put, it's the percentage of visitors to your website who actually make a purchase or take some other desired action. So if 100 people visit your site and 10 buy something, your Conversion Rate is 10%. This is a simple example of the conversion rate formula in action. 


Easy peasy.


 But here's the thing: Conversion Rate only tells you how many people are buying from you right now. It doesn't give you any information about how much money those customers will spend with you in the future. Nor does it consider the conversion rate benchmarks that can vary greatly across different industries and types of businesses. 


And that, friends, is where Customer Lifetime Value (CLV) comes in.


As you know, CLV is a metric that estimates the total amount of money a customer will spend on your business over the course of their lifetime. So while Conversion Rate tells you how many people are buying from you, CLV tells you how much money those customers are going to bring in. And trust us, you want to know that number.


For example, let's say you have a website that sells high-quality, premium skincare products. Your Conversion Rate is 10%, which is excellent! But let's say that each customer only buys one product and never returns to your website again.


On the other hand, you have another website that sells customisable skincare subscription plans, their Conversion Rate is only 5%, but each customer subscribes for a year and comes back to renew their subscription every year. Which website do you think is more successful in the long run?

How Hyperfocusing on Conversion Rate Can Hurt Your Business

One of the main drawbacks of focusing too much on Conversion Rate is that it can lead to a narrow-minded approach to business. When all you're looking at is how many people are buying from you right now, you need to get all the important information that can help you make better decisions.


Let's say you're running an eCom store, and you notice that your Conversion Rate is low. In an effort to improve it, you start cutting prices and offering more discounts. While this might boost your Conversion Rate in the short term, it could also be hurting your bottom line. By lowering your prices, you're also reducing your profit margins, which could ultimately lead to financial trouble down the road.


Another downside of focusing too much on Conversion Rate as a conversion rate KPI is that it can also lead to a lack of focus on customer experience and satisfaction, which can ultimately hurt the reputation of your business. If all you're concerned with is getting people to buy from you, you might not be paying as much attention to things like product quality, customer service, or website usability. This could lead to negative reviews or poor customer feedback, damaging your brand reputation and making it harder to attract new customers and keep the ones you already have.


Conversion Rate is a great metric to keep an eye on, but you don't want to be fixated on it. It's essential to take a step back and look at the bigger picture. Consider other metrics such as CLV and customer satisfaction, both of which can give you a complete picture of your business's success.

CLV: The Better Alternative

As mentioned before, CLV is a powerful metric that can help you understand the true value of your customer and make more informed business decisions. It allows you to take a long-term view of your business rather than just focusing on short-term gains. 


And it's not only a great way to measure customer value but also to optimise your marketing and sales efforts in a way that maximises Customer Lifetime Value.


So how can you increase your CLV? Here are a few tips:


  • Offer a loyalty program: This can be as simple as a rewards program for repeat customers or a VIP program for your most valuable customers.
  • Upsell and cross-sell: Encourage customers to buy more by suggesting complementary products or upgrades.
  • Provide excellent customer service: Happy customers are more likely to come back and spend more money with you.
  • Invest in email marketing: Sending out regular newsletters and promotions can help keep your customers engaged and coming back for more.
  • Personalise the experience: Personalisation is the key to making your customers feel valued. By personalising the experience, whether it's through personalised product recommendations, tailored email campaigns, or customised packaging, you are showing your customers that you care about their individual needs and preferences.
  • Focus on retention: Retention is key to increasing CLV. By focusing on customer retention and repeat business, you can reduce the cost of acquiring new customers and increase the lifetime value of your existing customer base. Implementing a retention strategy can be as simple as offering a loyalty program or sending out a survey to understand the reasons for customer churn.
  • Measure and Analyse: Measure and analyse your customer data to understand their behaviour and preferences, then use that data to optimise your marketing and sales efforts. Regularly analysing your customer data can help you identify trends, patterns, and opportunities for improvement.

What is Customer Lifetime Value?

CLV stands for Customer Lifetime Value. It's a metric used in business and marketing to estimate the total revenue a business can reasonably expect from a single customer account throughout the business relationship. The lifespan of the relationship is a key variable here and can vary greatly between different types of businesses and industries.

CLV helps businesses understand the value of maintaining long-term relationships with their customers. It's an important concept because it can be more cost-effective to retain existing customers than to acquire new ones. By calculating CLV, businesses can make informed decisions about how much money to invest in retaining existing customers and acquiring new ones.

Don’t Be a Sheep 

It's easy to get caught up in the hype of Conversion Rate, but it's important to remember that this metric is just one piece of the puzzle. As an eCommerce merchant, you can’t afford to fall in line with the rest of the world blindly.  Instead, think outside the box and take risks to focus on alternative aspects of your business that can do much more for you.


Don't be afraid to question the status quo and experiment with new strategies. The eCom landscape is constantly changing, and being open-minded and adaptable is key to staying ahead of the game.


If you're ready to think differently and take your business to new heights, let's connect. We're here to help you explore new opportunities and find the best strategies for your business!

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Marketing Executive One of our Marketing Executives and the vibrant heart of Blend Commerce, Jo has an infectious enthusiasm for taking on new challenges, making her a driving force in our team. Her talent spans the realms of both marketing and design, and her growth has been nothing short of remarkable, exceeding all expectations. With Jo as part of our team, we’re not just working; we’re creating, innovating, and setting new standards in the eCommerce world.

Published: February 21 2023

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