What is your ROI
(Return on Investment)?
Determining your ROI for all
your business expenses is critical. Whether you do business on or
offline, things like your labor, your advertising, and your utility
costs must be kept in line to remain profitable.
Determining the value of your website must also be scrutinized, and
figuring out the value of a site visitor is just another piece of the pie.
How else will you know if you're getting your moneys worth?
advertise in print, radio or TV, you likely have a method for tracking
where your business comes from, but for your website alone, it's fairly
What is a "Conversion"?
Whatever your goal
is for defining a web visitor as a "success", then that's a
"conversion". Define for yourself what the "conversion" is that you want
to track. How you define that is up to you. If you want to call it a
sale, great, that makes it easy. If a phone call or a completed email contact form is
your goal, then that's the "conversion". There are some sites who's only
goal may be to get traffic, so you're already done. Now you need to
determine the rate at which those visitors are "converting".
Define what you want to count as a
"conversion" and start keeping track.
online sales of product
How do you determine the "Conversion
Look at your website statistics program, (This assumes that all
web-hosts now supply even the most basic free statistics program with
your domain hosting) and get your UNIQUE visitors count for the month.
Forget your page count, "hits", or "page views" or any other stat. You
want the UNIQUE VISITOR COUNT for the month.
Then, you divide the number of conversions, by the UNIQUE VISITOR COUNT
to get the conversion rate.
Once you fill in the following facts with
your own numbers ...
1000 unique visitors
200 contact forms
100 phone calls
30 sales of product
Gross profit $1000
then each of these
statistics below can stand on it's own, and help you make profitable decisions.
If you have 30 people
that bought your product, and had 1,000 unique visitors, then your
"conversion rate" for visitors is 30 conversions, divided by 1,000 "unique
visitors" , or 3 percent.
To take this further, if you receive 200 emails leading to the sale of 30 products, then
your conversion rate for visitors to contact forms is 20% (200 emails,
divided by 1000 unique visitors) and your conversion rate for contact forms to
sales is 6.6% (200 contacts divided by 30 sales)
If you got 100 phone calls, then the phone call conversion rate for
visitors is 10%. (100 phone calls divided by 1000 unique visitors).
Therefore, if on those 100
phone calls you made 30 sales then the conversion rate for phone calls
to sale is 3% (100 phone calls divided by 30 sales) making each phone
call worth $10 ($1000 profit divided by 100 phone calls)
Now lets look at your month profit. If your gross profit was $9000, then you made $1000 profit. The end
result of those 1000 unique visitors was 200 emails, 100 phone calls,
and 30 sales. Therefore, you can make the following conclusions:
If you made $1000 profit from your website, with
1000 unique visitors, then each legitimate unique visitor you can get to
your site is worth $1 each.
If on those 30
products sold, you made 1000$ profit, then every single one of
the sales was worth $33 each.
On those 200 email
contacts generated, you made 30 sales, for a total of $1000 profit, so
the value of each email contact form you got was worth $5.
Therefore, with all of the above now in
evidence, you can participate in advertising program that generates
contact forms for less than $5, or a web visitor for less than $1, you
are getting a good ROI.
This is a bit over simplified, and any high
dollar campaign should be analyzed much more thoroughly, but the essence
of the formula doesn't change. Once you know these core numbers,
and you know
what a web visitor is worth to your company, you can begin to make smart
decisions about how you get them there.
Client & Web