Measuring Your Website’s ROI – Part 2

Quinlan

Micro Conversions and Segmentation

Last week, I discussed how to properly measure the ROI on your website. It starts with applying value to your goal conversions. But that’s only a basic start. This week, I’ll focus on in-site behaviors and how measuring more than simple goals augments ROI.

People spend too much time obsessing about the conversion rate. As a refresher, Conversion Rate is Visits with Conversion divided by Total Visits

Site Visits with Conversion
Total Site Visits

Many marketing folks live and die by this metric. But it’s fundamentally flawed in this form. The problem with using conversion rate as an end-all, be-all metric is that not every visitor comes to your site with the intent to buy. Measuring all your visitors and visitor actions as one, large group is not a true reflection of how well your site has performed. It may not be that obvious, but not everyone who visits your site is there to buy.

The Buyer Behavior Process

Maybe it’s a refresher for some of you, but people go through five phases when making a purchase. It starts with need recognition, but doesn’t end with the purchase. Many times, a consumer will second-guess the decision and continue to research to verify he or she bought got the perfect product or best deal.

Buyer Behavior Process

So, as such, only 20% of the people in the buying cycle should actually be counted. Think about it. Aside from perhaps groceries, do you walk into a store buy the first thing you see without investigating it or without having done some kind of research about it? Think about purchasing a new smartphone. You will likely visit manufacturer’s’ websites and look at various models. You might even look at various carriers and look at the different plan options each offer. This process will repeat several times until you actually purchase.

It is important to separate those visitors not interested in buying or becoming a lead (on this visit). Segmentation is the process of sorting visitors into meaningful groups. You can segment visitors into groups based on their behaviors, pages visited or even through which channel they came across your site.

Use the segmentation feature in your analytics software to discover those groups of users who perform certain actions. These actions can help you determine in which stage of the buying cycle your visitors may be.

Customer Support

Do you provide support through your website? Is it generally common for someone to come to your site, seek out help and answers in your support area, then leave without any other interaction? Do you offer the ability for clients to initiate a support ticket? These actions save the time it would normally take for your employees to provide phone or in-person support. If you offer support via a toll-free number, it saves long-distance costs, too.

Lastly, if a customer is looking for support, they likely have already purchased. Remove their from your “total visits” count when you calculate your conversion rate.

These actions are known as micro conversions. They are measurable feats that you can measure as part of your ROI. While they don’t generate revenue, they certainly save your company money. Assign a value to viewing various support pages.

There are other items you can also count as cost savings in your Website’s ROI:

Mailing Lists:

If you allow people to sign up for your email newsletter, you can count these warm leads as a dollar value. You can calculate the value of each person who signs up.

Low-end email lead lists cost about $100 for 1000 names of unqualified, unsorted leads.

$100 / 1000 = 15 cents each

How much did you pay for your last mailing list? Were every lead qualified? Assign a value to each warm, qualified lead that signs up for your mailing lists. Add it to your site’s ROI.

These visitors are often not quite ready to purchase. They’re still looking for more information or a better deal. It is typically a safe bet to remove them from your total visits count for the purposes of measuring ROI.

PDF Downloads

Most visitors that download files from your site are obtaining research and are likely interested in buying from you. These should be treated similarly to leads. However, there’s another cost savings in PDF downloads. Think about what those documents would cost your to print and mail.

Typically you mail brochures and other documents with some customized form letter. Someone has to write, stuff, meter and mail it. Then there’s the cost of postage. Standard letters are now 46 cents each; large envelopes are now 92 cents. That amount is on top of printing costs and the amount you paid your employees to data enter, print and stuff envelopes. Add it all up and add it to your site’s ROI for every PDF download.

Those seeking printable information in the form of PDFs are still gathering research before purchasing. Often, these documents will be shared with others who share the decision making process on purchases. For calculating your ROI, you can filter these visitors out of your conversion rate calculations.

Free Trials and Demos

What kind of lead is more qualified that someone who tries your product before they buy? Clearly these visitors are interested in buying your product. Apply the same average value that you would apply to a contact form lead.

Even more importantly, make sure you have a dashboard report in your analytics software for these visitors. Make sure your sales team follows up with them. Don’t waste your chance to convert a very interested buyer. People who sign up for trials commonly are ready to buy, but want that extra bit of the product you offer for free for as long as they can. Depending on your product and your typical sales cycle time, you decide whether or not to filter these visits from your conversion rate.

A Better Measurement

If a customer isn’t on your site to buy, they simply shouldn’t be part of your conversion equation. The true measure of how well your site performed is by measuring the purchasers. If your site works for all visitors and is deemed trustworthy to the visitors who come, your true conversion rate should be high.

Measuring Your Website’s ROI – Part 1

Quinlan

Measuring the return on your website’s investment is an elusive concept for many organizations. For many, measuring consists of visitors or page views. In my travels and at various conferences, I often hear similar questions. Where do you start? What else can you measure? But how does that translate to dollars and cents? With a little set up and a bit of follow-through, it can be easy to look at your website as a revenue center and not some red line on your accountant’s books.

What’s Your Goal?

Goals - Dilbert ComicFor years, mankind has been concerned with “the meaning of life.” Your website has the same concerns. Every website needs a goal. If you’re directly selling on your site, your goal is likely having a visitor complete a sale. That is a goal you should measure. Some common website goals are:

  • Direct Sales
  • Sales Leads
  • Requests for information
  • Whitepaper or other document downloads
  • Advertisements served and/or clicked

Ultimately goals are what generates revenue. Granted, a lead or a download are not guaranteed customers who will immediately generate revenue. But they start to build trust and establish a relationship with potential clients. how many of your sales team say to you, “if I get the initial meeting, I’ll close the deal”? Thought so.

Leads and sales have value. In your Web analytics software, you can set goals and a value to them. The value you assign is a quantitative measurement of the revenue you directly generated through sales or hope to generate through the new lead. Granted, it’s not as easy to apply a value to a lead as it is to direct sales that have a dollar amount associated with the transaction. Consider this:

Generally speaking, leads generated through web forms are warm leads. People have sought out your site, pursued it, entered data through your form and submitted it, entrusting your site with their personal email address. What is the long-term value of one of your customers? On average, what percentage of warm leads do you turn into long-term customers? Multiply those numbers out and that’s the average value of a website lead.

For example if:

  • over the lifetime of the relationship, the average revenue for a customer is $1000
  • your sales force can close 80% of their leads to long-term customers

The value of your lead is: $1000 x .8  or $800.

Stop thinking in terms of visits or page views. While these are very good metrics that can help set a baseline for other measurements, these are not the end-all, be-all. Some of you might also measure bounces – a visit where the visitor views one page and leaves your site immediately. Measuring bounces can be useful, but can also be misleading. Set goals within your analytics software and measure them. Goals are your best measure of ROI.

So What’s the ROI?

Conversion is the term we use for when a visitor completes a goal. Your site’s conversion rate can be measured by the number of visits where a conversion takes place divided by the total number of visits to your site.

Site Visits with Conversion
Total Site Visits 

But what is a “good” conversion rate? That answer is subjective to many companies and can depend largely on your sales cycle.

ROI Dilbert ComicSo it follows that your ROI would be the sum of all the values of the visits with conversion. You could also average that amount, but by what would you divide: the total visits to the site? Perhaps the total visits with conversion? Does an “average order size” matter to you? What about customer acquisition costs? Do you buy Pay-Per-Click (PPC) ads? Are you tracking the cost per visitor? Did all your visitors come from PPC?

All these questions factor into your costs and ultimately your ROI calculations. In Part Two, I’ll discuss grouping visitors by channel and behavior to better calculate your ROI. In the meantime, feel free to ask questions in the comments.