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What is a conversion? What is my cost per conversion? Are you confusing Cost per Action (CPA) with Cost per Acquisition? When evaluating your return on investment it is important to know what a conversion is to you and ultimately how that should affect increases and decreases in your marketing budget.

A conversion is simply when a user takes a desired action within your web site. You can further analyze conversions through funnels or simply a series of desired actions. It is important to know what your funnels are so you can monitor which ones are working, which ones are not and why. This way you can make modifications to improve conversions within a particular funnel.

You must first determine what a conversion is to you. Is a conversion a sale, a lead, or both? If both, then you would have a separate cost allowance for each action. If you offer multiple products or services at varying levels of price your cost per conversion should vary by individual product or service price level.

Finding the cost per conversion can be tough to figure out and can be very complicated. Depending on how your business is organized, you may or may not be able to come up with an exact figure. If you are unable to come up with an exact figure you can at least come up with a rough number or a range. This is better than not knowing at all and applying increased budgets to the wrong campaigns.

It is also important to understand the stages of your users. Customers who are in research phases are still valuable to you as they are gathering information in order to compare and make a decision to buy. However, you would assign a lower cost per action in acquiring them as they would not be likely to spend money in the short term and chances of a sale are lower. Also, pay attention to what actions these types of users take over the ones who actually purchase. This will help you create user specific funnels.

Measuring the performance of your campaign can be gauged in many ways. Overall you can get a quick glimpse based on traffic, which most web site owners are familiar with. This generic statistic by no means is the only method for determining success. Did you know you can see what web sites send you the most traffic? It is typically called Top Referrers. You can even see the top search engine keywords used to find your web pages. This data can be used to help you understand what your users are looking for and how to shape your site to encourage more traffic and increase conversions.

Be sure you are not comparing apples to oranges by determining what a conversion is to you. Break products and services into categories based on price points. Associate various funnels or actions with the types of users who use them. Use analytics to help determine if you are focusing on the right campaigns. You have to come up with your own cost per conversion before you can measure your campaign success.