Want to turn more of your hard-earned leads into paying customers? Struggling to improve your sales conversion rate? You’re not alone. Many businesses fight to optimize this critical metric that directly impacts revenue and growth.
But have no fear – boosting your sales conversion rate is possible with the right strategies and analysis. This step-by-step guide will explain what sales conversion rate is, how to accurately calculate it, benchmark against your industry, and most importantly, actionable tips to turn more prospects into buyers.
According to ConvertCart, the average conversion rate across various sectors within eCommerce in 2023 ranges from 2% to 4%, depending on the industry. For instance, the retail sector, which includes fashion, jewelry, shoes, and more, has an average conversion rate of 1.70%. On the other hand, personal care products boast a higher average conversion rate of 3.17%.
With the insights from this article, you’ll be armed with the knowledge to set targeted, data-driven goals around sales conversion rate and develop campaigns to move the metrics in the right direction.
Whether you’re looking to fine-tune your sales process or overhaul your lead generation strategy, you’ll uncover practical ways to convert more leads and grow your business. The first step? Understanding exactly how to measure your current sales conversion rate. Let’s dive in!
TLDR; Measuring and Improving Your Sales Conversion Rate
- Sales conversion rate shows the percentage of prospects that become customers. It’s a critical metric for revenue growth.
- To calculate it, divide total conversions by total qualified leads over a time period. Multiply by 100 for the percentage.
- Benchmark against industry averages but focus on improving your own trends over time.
- Ways to optimize conversion rate include lead qualification, lead nurturing, sales training, process improvements, and more.
- Use your conversion rate data to set realistic lead generation and sales goals based on revenue targets.
- Segment conversion rate by lead source, campaign, product, rep etc to uncover opportunities.
- Even small optimizations in conversion rate can significantly impact revenue and growth.
- Regularly track and test new strategies for turning more prospects into buyers to scale your business.
What is Sales Conversion Rate?
Sales conversion rate is one of the most important metrics for any business with a sales team. It measures the percentage of prospects that convert into customers after engaging with your sales process. Put simply, it shows how good your business is at turning leads into paying customers.
The sales conversion rate is calculated by dividing the number of prospects who converted to customers by the total number of qualified leads. For example, if you had 100 sales qualified leads last month and 10 of those leads became customers, your sales conversion rate would be 10%.
Tracking and optimizing sales conversion rate is crucial because it directly impacts revenue and growth. A higher conversion rate means more prospects are moving successfully through your sales funnel and closing deals. This provides key insights into the effectiveness of both marketing and sales efforts. It can highlight issues with lead generation, sales messaging, presentations, follow-ups, and more.
For SaaS companies, benchmarks for sales conversion rate tend to fall between 10-30%, depending on the type of product and average deal size. However, conversion rates vary widely across industries. That’s why it’s critical to track your sales conversion rate over time, segment it, and compare against your own historical baselines rather than industry averages alone.
No matter your business model, a higher sales conversion rate equals higher revenue. Improving this metric even slightly can have an outsized impact on your bottom line. There are endless ways to optimize conversion rate, from lead qualification to sales training and everything in between. But it all starts with understanding exactly how to accurately measure your sales conversion rate.
How to Calculate Your Sales Conversion Rate
Let’s walk through exactly how to calculate your sales conversion rate step-by-step:
- Determine your timeframe. You may want to calculate conversion rate weekly, monthly, quarterly, or annually depending on your sales cycle length.
- Define what a qualified lead is. This is any lead that has passed specific qualification criteria to indicate they are a serious prospect.
- Define what counts as a conversion. For most businesses, this is a new customer signing a contract and completing a purchase.
- Count the number of qualified leads for the chosen timeframe. This is your total number of prospects that entered the sales pipeline.
- Count the number of conversions (new customers) from those qualified leads for the same timeframe.
- Divide the number of conversions by the total number of qualified leads.
- Multiply that number by 100 to convert it to a percentage.
- 50 qualified leads
- 10 conversions
- 10 / 50 = 0.2
- 0.2 x 100 = 20% sales conversion rate
To get an accurate view, calculate your sales conversion rate for longer time periods as well. For instance, track conversion rate monthly for the past 6 months. This will account for any outliers and show meaningful trends over time.
You can drill down even further to calculate conversion rates for each stage of your sales funnel, specific campaigns, lead sources, sales regions, and more. Granular tracking uncovers opportunities for optimization. But it all starts with understanding your overall sales conversion rate.
How to Benchmark Your Sales Conversion Rate
Once you’ve calculated your current sales conversion rate, the next step is benchmarking against industry averages. Comparing your conversion rate to benchmarks can help you better evaluate your sales performance and identify opportunities for improvement. But blindly aiming for arbitrary industry averages alone doesn’t paint the full picture. Here’s what you need to know about benchmarking sales conversion rate:
First, understand why benchmarking is important. It provides a baseline to measure against and helps set realistic goals and expectations. If your conversion rate is far below industry averages in your niche for an extended time, that indicates systemic issues in your sales process.
Some potential sources for industry benchmark data include:
- Industry research reports
- Public SaaS companies’ SEC filings
- Competitor websites and metrics, if disclosed
- Marketing analytics tools like HubSpot and Moz
- Your network of peers and sales mentors
However, while benchmarks provide a starting point, many factors make your business and ideal conversion rate unique. Consider variables like:
- Your product type, price point and target customer
- Length and complexity of your sales cycle
- Size of deals and average order value
- Lead sources and inbound vs outbound mix
- Your sales messaging and USP
- Macroeconomic conditions affecting your niche
The key is tracking your own conversion rate trends over time, not chasing arbitrary benchmarks. Set realistic goals based on your baseline, test new strategies, and watch your conversion rate improve month-over-month.
Tips for Improving Your Sales Conversion Rate
The biggest opportunities to boost conversion rates lie within your sales process. Here are proven ways to turn more prospects into paying customers:
Lead qualification – Only pass fully qualified, sales-ready leads to the sales team. This ensures they aren’t wasting time with unqualified prospects.
Lead nurturing – Build relationships with prospects before they are sales-ready via email, social, etc. Warm leads convert better.
Marketing strategies – Create targeted campaigns that reach high-intent buyers. Send hyper-relevant content to draw them in.
Sales process optimization – Remove friction and bottlenecks. Ensure seamless hand-offs between sales stages.
Tracking and analysis – Dig into conversion rates for each funnel stage. Uncover which areas need optimization and where prospects fall out.
Other sales conversion rate optimization tactics include:
- Training sales reps on persuasion skills
- Providing social proof and trust-building collateral
- Personalizing sales outreach with relevant pain points
- Crafting compelling sales messaging and presentations
- Following robust lead management practices
- Asking for referrals from existing customers
Improving conversion rate takes time and testing. But the payoff for your sales growth and revenue makes it one of the top priorities for any business. By learning how to accurately measure your sales conversion rate and implementing proven optimization strategies, you’ll reap the rewards of higher conversions.
Using Conversion Rate to Set Goals
One of the key benefits of tracking sales conversion rate is using it to set realistic, data-backed goals for your sales team. Here’s how to reverse engineer goals based on your desired revenue target and current conversion rate:
First, determine your revenue goal for a set timeframe – for example, $100,000 in new sales per month.
Next, identify your average order value or deal size – for example, $2,000 per new customer on average.
To generate $100,000 with an average of $2,000 per order, you need 50 new customers per month.
Now factor in your current sales conversion rate. For example, if your conversion rate is 25%, that means you convert 25 prospects out of 100 into customers.
To get 50 customers with a 25% conversion rate, you would need 200 qualified leads per month (50 customers divided by 25% conversion rate).
Therefore, set a goal to generate 200 qualified leads per month in order to achieve your $100,000 revenue target, based on your current 25% sales conversion rate.
You can use this reverse engineering approach to set goals for any timeframe. The key is basing your lead generation and sales goals on your actual conversion rate, not a hypothetical best case scenario. Regularly monitor your conversion rate and adjust lead targets accordingly.
Segmenting Conversion Rates
While tracking your overall sales conversion rate is important, you should also segment it. Analyze conversion rates for different campaigns, lead sources, geographic regions, sales reps, product lines, deal sizes, industries, lead quality levels, and any other relevant factors.
This level of granular tracking accomplishes a few things:
- Identifies the highest converting lead sources to focus on
- Uncovers which campaigns or marketing channels provide the best ROI
- Reveals which sales reps or regions are underperforming
- Shows which types of prospects have the highest propensity to buy
- Helps you double down on the most promising opportunities
The more you can niche down your analysis, the more actionable insights you’ll glean. For example, perhaps your conversion rate for inbound leads from LinkedIn is 35% versus a 15% conversion rate for cold outbound email leads. This indicates you should shift more resources to expand your presence on LinkedIn.
Conversion rate segmentation provides a 360-degree view. Combine it with thorough lead qualification and tracking to maximize your share of qualified prospects turning into customers.
Key Takeaways: Sales Conversion Rate
Boosting your bottom line starts with understanding, measuring, and optimizing your sales conversion rate. Now you’re armed with the knowledge to accurately calculate this critical metric, benchmark against your niche, and employ data-driven tactics to turn more prospects into customers.
Whether you’re a startup looking to refine your sales machine or an established business seeking to improve lead conversion, a higher sales conversion rate directly drives revenue and growth. Put these tips into action to identify issues in your funnel and get more value from your marketing efforts.
Don’t leave money on the table. Start monitoring your sales conversion rates segmented by campaign, lead source, product line, and other factors. Experiment with new nurturing and sales strategies. And remember, even small optimizations can have an outsized impact. The work you put into improving lead conversion will pay dividends. What’s one change you can make today to increase sales and scale your business?