How Do You Calculate Your Conversion Rates?

Let us say you are selling affiliate products. I know the most basic conversion rate is calculated by dividing the sales by the number of hops or affiliate links click count.

But conversion rate could be any one of the following - I just want to know from people which is the figure that they focus on and if they can throw out the averages that they have seen in each category.

Let us assume that a website gets 1000 visitors and makes 10 sales.

Now, this can be looked at in several ways.

1. 10/1000 = 1% Conversion Rate for all people visiting your website
2. 10/500 = 2% Conversion Rate for people who haven't bounced (Assuming 50% bounce rate)
3. 10/200 =5 % Conversion Rate. I got the 200 from the 500. Not everyone who comes to your site is going to click on the affiliate link. Some will bounce, some will just look around and my experience is that only about 40% click on the affiliate link. So I got the 200 from the 500 with the 40% CTR.

Now, when people throw about their conversion rates - they are probably referring to number 3.

I would be really interested to know what you guys have for a figure for number 2. Or, what is your CTR on the affiliate link as a % of all the people who come in to your site? Do share your thoughts if you don't mind as it will help me analyze the effectiveness of one of my sites.

Thanks

Usual conversion rate which people talk is no 3 option... i.e. How many people bought product after clicking your affiliate link... But in depth all three are important and display different aspects which can be used to optimize your website...

1) first option will help you in decreasing bounce rate, you will have idea how good your site is and how good that particular niche is which you are targeting, you will have to track or see how you can improve landing page so they stick to your site rather then just opening and closing your site...

2) second option will tell you how many people are interested in information only, some times some niche got ton loads of traffic but very few clicks... It will also show you how good your landing page and then you will be able to optimize it, you may need better call of action or similar data... You may have good landing page but need better monetization....

3) Third option will tell you how many people are actually buying product... If this conversion is low then you have to test different affiliate product or may be different network... Same product is with different network and some converts better then others...