Conversion rate is the percentage of the time that the desired action occurs given a specific amount of events. The most common example of conversion rate is the number of website visitors that take a specific desired action on a website.

A good conversion rate is typically said to be between 2% to 5%. However, it can vary wildly depending on the type of business or vertical. Small increases in conversion rate yield large results. A jump from 2% to 3% over a sample of 1000 is the difference in 20 to 30 (which is huge if it’s sales).

The actual math for a funnel conversion is no different than calculating a conversion rate. It is the total number of desired actions divided by the total number of potential desired actions. However, you can calculate the conversion rate throughout an entire marketing funnel to calculate funnel conversion. One would calculate the total desired actions at each funnel step by the total potential actions at each step.

The conversion rate percentage is important because it is directly connected to the cost of acquisition for the desired action. If you can get the desired action to occur more frequently per 100 instances you will make more money. Conversion rate optimization is important because it will lower your customer acquisition costs and pay for itself over x amount of time.

There is no quick and easy answer to this question. Rather it involves several activities. One primary tool is A/B testing is important as it allows you to test alternatives and find a winner based on the conversion rate. Another tool is creating landing pages with best practices.