What is your ROI (Return on investment)?
What is the value of a website visitor in your online business? 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 another piece of the pie. How else will you know if you’re getting your moneys worth? If you do 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 easy.
What is a “Conversion”?
Whatever your goal is for defining a web visitor as a success, then that’s the “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”.
How do you determine the “Conversion Rate”?
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 know the following facts about your website to be true…
? 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)
Likewise, 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.