Measuring Your Website’s ROI – Part 1

Quinlan
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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.

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