Dear Jeff,

I track conversion rates on our website. A consultant says I need to track take rate, too. What is take rate, and should I care? —Shari Rosen

Conversion Rate is the ratio of the people who took a particular action compared to the total number of people who could have taken that action.

Typically the action is a purchase but it could also be a newsletter sign-up, a request for more information, downloading a demo, etc. How you define “conversion” depends on your goals.

For example, say you send an e-mail promotion to the 2,000 people on your mailing list. You want them to click the link in your email and visit your website to learn more about the offer.

170 people click the link. 170/2,000 = .085, or 8.5%.  Your conversion rate was 8.5%.

Of course “converted” can mean different things.  In the example above, your goal was to get the people on your mailing list to come to your website and check out your promotion.  Since that was your intended action, the people who came to your website as a result of the e-mail are considered a conversion.

But if your goal was to actually sell the product being promoted, the people who visited weren’t converted.  If 41 of those visitors actually buy the product your conversion is a much lower 2.05% (41/2,000).

Some people measure “take rate” separately from conversion rate.  Take rate refers to the percentage of visitors who took interest in an action but did not actually follow through with that action.

Say you have a link on your home page for visitors to download a white paper. Clicking that link leads to a separate page with download instructions, etc.  Visitors who click the link to go to the download page count towards your take rate. Some will not actually download the white paper. Only the people who do are counted towards your conversion rate.

So, if you have 3,000 home page visitors and 430 go to the download page, your take rate is 14.3%.  If 188 download the white paper your conversion rate is 6.2%.

If you like you can compare conversions to “takers.” Out of 430 takers, 188 downloaded the white paper for a conversion rate of 43%.  That means 43% of the people who went to your download page actually followed through with the download.

Now you know two things: You know the rate at which visitors respond to the link on your home page, and you know the rate at which visitors complete the download once they reach your download page from that link. (You could also say each is a conversion: People who click the link to go to the download page converted—because you wanted them to click the link—and people who completed a download once on the download page also converted. If multiple actions are required, measuring each conversion makes sense.)

Just keep in mind conversion rate, viewed in the aggregate, can be misleading. That’s why Larry Freed, the CEO of Foresee, focuses on what he calls true conversion rate. Larry feels true conversion starts by measuring intent.

Say 100 people come to your website and three make a purchase. Your conversion rate is 3%.

But what if only ten of those 100 visitors intended to make a purchase? The rest were looking for warranty information, or maintenance advice, or just wanted to know your store hours.

In that case your true conversion rate is 30%, because three out of ten people who came to make a purchase did in fact make a purchase. The others never intended to make a purchase. (If 50 people came to the site looking for maintenance advice and all of them are happy with the information they found, your true conversion rate—based on that intention—is 100%.)

So does take rate matter? Sure. Every action customers and potential customers take matters. If you don’t measure those actions, you don’t know what’s working and what you need to fix.

The goal is increase all conversion rates by through streamlining processes, targeting your marketing more effectively, and removing obstacles to desired actions.

Easy to say, tougher to do—but if you don’t measure, it’s impossible to do.

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