The conversion rate is a percentage of potential and existing buyers that moved from one stage of the sales pipeline to the next one. Some sales pipelines extend beyond the purchase stage to the account expansion and upsell, and the conversion rate can be applied to these stages too.
The conversion rate is also applied in B2B lead generation to see how many prospects converted to appointments.
Why is the conversion rate important?
Calculating the conversion rate allows us to:
- Estimate the overall “healthiness” of the pipeline;
- Identify which stages of the pipeline have problems;
- Make financial predictions;
- Analyze the work of salespeople (SDRs, sales managers, sales researchers);
- See which channels of lead generation work best and which worst;
- Determine the efficiency of various lead generation tools:
– phone scripts,
– website content (main page, solution pages, blog, etc.).
- Check the efficiency of sales tools (buyer personas, demos, ROI proof, etc.).
How to calculate the conversion rate?
To calculate the conversion rate you need to know the total number of potential buyers you had in the given period of time in the given stage of the sales pipeline and see how many of them made it to the next stage of the sales pipeline after a certain period of time.
Sales conversion rate formula:
Conversion rate = No of remaining potential buyers at the stage N+1 / No of potential buyers at the stage N
For example, on April 2, 2019, you reached out to 50 leads. And by March 2, 2019, you set appointments with 1 of them.
Your conversion rate = 1/50 = 2%
Conversion rate is one of the key indicators of a sales process. It is used both for making financial predictions and monitoring your pipeline, as well as the work of your team. Conversion rate can also help you make important decisions on choosing your strategy and rewarding your employees.