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Monday, August 6, 2007

How to measure ROI on your website

In a previous post I asked "Is your website ever finished?" and discussed how your site should be constantly evolving. Following on from this I'll explain how to measure the return on investment for each change you make to your site. It is imperative that you measure the return you get from each marketing campaign or change you make to your website otherwise how will you know what works and what doesn't? If you can measure exactly how much of an impact or money your marketing campaign has made then you pretty much have the key to a successful - isn't that what we are all after?

Key items you should record

There are several ways to break down the ROI of your activities, not just how much money you made. The key areas you should measure are as follows:

1. How many visitors come to your site
2. How many sales do you make (or goal conversions)
3. What were the total value of these sales
4. What keyword phrases generate your sales
5. How much did your campaign cost to setup and run (remember this should also include man-hours and all other associated costs)

The calculations

Technically the calculation for the ROI is simply how much money you spent against how much money you made, a worthwhile figure to know, however here are some other calculations you may find useful:

Conversion ratio - This is the measure of how many of your visitors actually completed the task you asked them to. Divide the number of completed sales by the unique visitors to arrive at your site. The higher this ratio, the better

Cost per visitor - This measures the effectiveness of your marketing and your conversion processes. Simply divide your expenses by the number of unique visitors. The objective is to minimise cost per visitor and increase sales per visitor.

Keyword effectiveness - If possible, try to find out what keyword referrals are converting into sales. This way you can see what keywords are being the most effective, allowing you to drop the worst performing and concentrate on the better keywords

Customer acquisition cost - Probably the most important figure you can measure, this is the cost for converting each customer. This is an important value to know for your overall profitability. If you only make £5 per sale and it costs you £10 per sale then obviously you are missing out somewhere. To calculate this, divide the total cost of your campaign by the number of sales you make)

Of course, to measure most of these items you will need access to a good statistics package which I will tell you all about next post

posted by David Rhodes

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