I’ll try to give an explanation to a question I received regarding “What is a conversion?” in terms of online retail selling.

Okay, the quick run-up: A prospect/suspect is someone (or likely a “demographic” of someones) you believe would likely purchase from you… and they are the people you try to reach via marketing. Think of this as what some might call “potential customer.” In some circles just requesting more information can be considered a “conversion” into a customer and in direct response marketing (“Call now – operators are standing by!”) it’s common to define conversion this way. However, I have a tighter definition for online, retail sales:

A customer is someone who has bought from you.

I think it’s important to make a technical distinction that until they hand you money and take your product they are still a suspect/prospect… not actually a customer. I reserve the term “customer” for people who have purchased already.

Conversion is basically a term to describe the process or series of steps that lead to the moment a suspect/prospect hands you money and becomes a customer. It’s important to keep track of the numbers so you can define your “conversion rate” – the percentage of people who were turned into customers.

Conversion, ideally, is done in as few steps as possible, quickly, and cheaply. For example one might describe your advertising to be, preferably, cost effective in reaching prospects and you have a two-step offer that gets them to buy something from you that, in the end, made the cost of advertising worth the money to reach them. Coincidentally this moves into what’s called “CPM” or, Cost Per Thousand (“M” being the Roman numeral for “Thousand” – hence CPM). The generally accepted standard for breaking down how much money it costs to reach and convert a customer at an expected value of that customer.

This is also where you might have heard about a customers’ “lifetime value” – the amount of money you make from that customer (and their repeat business) that can often mean more profit, over time, than the loss you may have suffered in reaching them in the first place. An example of this would be in those music CD clubs where you choose 12 albums for a penny with only 3 to buy over the next year. The company knows exactly how many customers bail (creating a loss) every year and how many customers they lose after 3 albums and then how many customers remain for years to come – purchasing “x” amount of additional albums on average. All this is factored into it still being profitable to offer 12 albums for a penny in the first place.

So, that all-important “conversion” is the critical moment you turn someone who might buy from you and you spend money on to get the attention of… and someone who pays you for your product – a customer.

Oh, and I’m out of coffee. Damn.