It's a well established stat: A well designed website stocked with a great product or products will convert some of the visits to sales. Yes, it's a fact! Some people will actually buy. The conversion rate for a well-known company with a well-designed website and well-stocked with great products WILL convert. The conversion rate is approximately 2%. That Means 1 visitor out of 50 will actually buy something. Lesser quality may actually net you nothing.
I saw on a "traffic exchange" site which I shall not name... a guy raving about his number of hits and conversions. 903 hits. 18 purchases. Let's assume for a moment some factors:
1. He's using a PPC system. Let's say he's paying 10 cents per click.
2. He's selling something of value at a price of $10.00. Figure standard markup
at double his cost (shich is standard, folks.)
3. He has registered his biz name (say $10.00/year, more likely a higher amount.)
So, his advertising for the PPC is $90.30. His cost for the items is $90.00. (He has to purchase one at a time)
How much has he earned? More appropriately, what is his Profit?
ACTUALLY, HE HAS A LOSS FOR THOSE 18 Buyers!
Well, well. What's the problem here? And the rave is that he has a conversion rate of less than 2%. I'll grant you, it's close. It's 1.99%. But it's still less than 2, and the competetion is likely fierce. If the guy has a "HOT" item, somebody else will offer it for less. This person will probably have a higher budget for buying the product, which will result in a smaller cost for person 2. He'll be able to outbid the ad by just a penny, and therefore will get the traffic the other person had.
Let's say the 2nd guy has a PPC system, bids .101 per click.
His advertising costs are $91.20. His DISCOUNT on the items is say -- 3% for 18items. So, his cost for the same items is 87.30 First guy spent 180.30, second guy spent less. So, He sells at the same price -- but the ads point to him. His costs 91.20+87.30 =178.70 Look who's got the profit: The guy who can afford to spend more. And if he discounts the item just .05, he still beats the other guy. And remains in the black.
FYI, these figures aren't guesses. I'm using a WHOLESALER as the middle-man. Buying direct from the manufacturer is better, but you need a much higher budget. You need to have a HOT PRODUCT. 2% isn't going to do it. You need a higher conversion rate.
What it comes down to is simple: Don't rave about 2%. If your conversion rate is 5% you've got something to brag about. 2% is only hype. 5% deserves to be investigated more. It's probably an outright fish story.