Determining your ROI for all your business
expenses is critical. Whether you do business on or offline,
things like your labour, your advertising, and your utility
costs must be kept in line to remain profitable.
If you advertise in print, radio or TV do
you have a system to track accurately where your business
comes from, and therefore know if the expense is justified?
If you have, I would bet that it is very complicated. Tracking
and evaluating your website is more accurate and relatively
Determining the value of your website is based
on figuring out the value of a site visitor. This is done
by using the statistics that are available from your web stats
package, and etablishing conversion rates.
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
Define what you want to count as a "conversion"
and start keeping track of:
- Unique visitors
- Contact forms
- Phone calls
- Online sales of product
- Gross profit
Unlike other forms of advertising, your website
should have a very accurate statistics program. 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.
For example you may have the following figures
for 1 month:
- 1,000 unique visitors
- 200 contact forms
- 100 phone calls
- 30 sales of product
- Gross profit £1,000.
Each of these statistics can stand on their
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 1,000 unique visitors) and your conversion rate for contact
forms to sales is 6.6% (200 contacts divided by 30 sales)
Likewise, If you got 100 phone calls, then
the phone call conversion rate for visitors is 10%. (100 phone
calls divided by 1,000 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 (£1,000 profit divided by
100 phone calls)
Now lets look at your month profit. If your
gross profit was £9,000, then you made £1,000
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 £1,000 profit from your
website, with 1,000 unique visitors, then each legitimate
unique visitor you can get to your site is worth £1
If on those 30 products sold, you made £1,000
profit, then every single one of the sales was worth £33
On those 200 email contacts generated, you made 30 sales,
for a total of £1,000 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, and be confident you are getting a good
This is a bit over simplified, and any high value 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 and profitable decisions about
how you get them there.
Key Phrase ROI
Now you have a conversion rate, you can even
predict future internet advertising campaigns before spending
a single penny.
Statistics are available for the amount of
searches made on any particular search phrase. Depending on
your ranking position on the top page, will depend on the
amount of unique visitors you will get.
For instance, if a keyphrase has 3,000 searches
per month on average, and you are in the top 5 of the search
engines, statistics show you will recieve approximately 15
- 20% of the total searches clicking on your website (450
- 600 unique visitors). Using your conversion rates above,and
accounting for the expense involved in the SEO(Search Engine
Optimisation) or SEM (Search Engine Marketing) you can quickly
establish wether or not the campaign will return a good ROI.