3 mistakes to avoid when managing a web development project
Calculate The Value of a Website
Remember, Remember…To Calculate the Value Per User of Your Website.
The whole purpose of having a website is to gain value from your visitors, right? Sometimes that value is obvious in the form of immediate online sales. Other times the value is in a sales lead through a contact form, or a newsletter sign up, or even less obvious like brand recognition and social media sharing. It’s very important information to be able to calculate ROI and establish online marketing and web development budgets. Now is the time to learn how to determine the value of a website and visitors.
The basic principal of calculating the value of a website visitor is generally the same as calculating the value of any other type of customer. At the end of the day, the only thing that has true value is a conversion, so we’ll start at the end and work our way backwards.
Before we get started, tracking the value of a visitor requires tracking visitors and visitor behavior on your site. Overwhelmingly, Google Analytics is the most common and most thorough method available for tracking behavior on any website. Learn the basics here.
Let’s use a simple example for the rest of the calculations in this article:
You own a website that sells e-books for $5 (all profit) and hard copies for $10 profit. This month, you had 1,000 visitors to your site and sold 10 of each type of book for $150.00 in total profit through the website. Note: returns, discounts, etc will affect your profit and should be factored into all calculations
Calculating the Basic Value per Visitor
Calculating the value per visitor in this form is very simple. You divide the total online profit by the total number of visitors.
profit ($)/visitors = Visitor Value
$150/1,000 = $0.15 per visitor
In this example, each visitor is worth 15 cents.
Calculating the Value of Specific Types of Visitors
Knowing the average value of a visitor is nice, but isn’t having more specific information better? Segmenting your visitor valuations will help you determine what efforts to allocate your online marketing funds. You can use Google Analytics to view only visitors from a specific source such as organic search, PPC advertising, social media, email campaigns, referral traffic from individual sources, and much more. See Google’s guide to viewing traffic from specific sources or campaigns. Each source can have wildly different values per visitor. Here is a nice guide about conversion rates by source. Social media has notoriously low conversion rates, while traffic from email is usually very valuable.
Building on our earlier example, here are value per visitor calculations broken up by source. There are other possible sources for traffic that I will exclude for simplicity’s sake.
Organic Search – 6 e-books ($30), 5 hard copies ($50), and 650 visitors – $80/650 = $0.123/visitor
Social Media – 2 e-books ($10), 1 hard copies ($10), and 200 visitors – $20/200 = $0.10/visitor
Email Campaign – 2 e-books ($10), 4 hard copies ($40), and 150 visitors – $50/150 = $0.333/visitor
In this example, it’s very clear that while organic search drove by far the most sales and traffic to the site, an organic search visitor is worth barely a third of what an email visitor is worth. Your unique website will certainly vary, but it is important to segment your visitors by type to determine where the value really lies. For some sites, social media will lead to more conversions and higher value per visitor. Perhaps you ran a coupon code campaign on social media or you aren’t positioning well in search results yet. Whatever the reason, knowing which visitors are the most and least valuable is useful information. This will help you allocate marketing funds and effort to the places that will have the most impact on your bottom line.
What If Your Website Doesn’t Actually Sell Anything?
The previous calculations for visitor value assumed that you sell something through your website. Most websites don’t actually sell anything directly through the website, which is where many people struggle to find the value of an individual visitor. If you can’t track sales, you need to find something else to track on your website. This is where goals in Google Analytics come in. Here’s the Google guide to setting up goals. Goals to track might include contact form submissions, email sign ups, RFP/RFQs, surveys completed, webinar sign-ups, and any other combination of actions on your website that you are trying to get visitors to perform. Calculating the value of each of these actions can involve a few assumptions and a little guesswork, but having a good approximation can be invaluable.
Before you can do anything below this point, you must set up goals on your website. You should set up goals for everything of value that a visitor on your website can do. In addition to online goal tracking, you will have to establish offline goal tracking. When you make an offline sale, it is important to know what led to that sale. Phone sales and brick and mortar sales very well may have originated online through email and other sources. The most reliable way to track this is to simply ask your customer what led them to a sale. We have all seen the “How did you hear about us?” question in countless surveys and checkout processes.
Let’s take a look at some of these types of goals and visitors.
Value of an Email Subscriber
This is commonly referred to as Revenue Per Subscriber (RPS), which is usually calculated over a given time period such as annual or monthly RPS. Continuing with our examples from above, let’s say you have 2,500 people on your email marketing list. Those 2,500 email recipients led to $50 in sales this month. The basic equation for RPS is the same as the the above equations for visitor value.
$50/2,500 = $0.02 monthly RPS or $0.24 annual RPS
Let’s make it a little more complicated. For our example, your website also offers FREE training webinars that teach some of the information in your books as sales leads. You send out an email to your subscribers touting both your book and your free webinars. In addition to the sales directly attributable to email marketing, 100 people signed up for your webinar through the email link! But what is the value of a webinar registration? Finding the answer to that question might take some practice and experimentation.
In a normal week, you make $1,000. The week following your webinar you make $1,250, and the week following that you make $1,100. By the third week, your revenue has fallen back to normal at $1,000. While we can’t guarantee that all $350 ($250+$100) of that extra income came from webinars, an approximation is better than nothing at all. Let’s assume you do this webinar once a month with similar success each time.
$350/2,500 = $0.14 monthly RPS or $1.68 annual RPS
But wait! Don’t forget you also made some sales directly from the email campaign. You should add up all of the valuable actions performed by email recipients to calculate the real RPS. This makes the annual RPS $1.92 based on the two goals above. This value will increase further when you factor in social media interaction, requests for quotes/proposals, etc. The more data you can include in your calculations, the more accurate the final value will be.
Value of a Contact, RFP, RFQ, etc
Again adding complexity to the previous examples, Your webinar and other marketing efforts were an even bigger success than you had hoped. Four people have contacted you about giving private instruction! You offer private lessons for $500 each, and two of these leads actually book lessons earning you $1,000. In addition to these contact form submissions, there were 16 other contact submissions this month that you are unable to tell if they led to sales or not. Out of 20 contact submissions, you made a whopping $1,000, which equates to $50 per contact.
Remember you had 1,000 visitors this month, with an approximate value of $0.15 each. To factor in income from contact form submissions you can do another simple calculation: $1,000/1,000 = $1.00 per visitor. Now your total visitor value is $1.15 each, a big jump from the original value. Don’t forget to track and include any value adding action that a website visitor can complete.
Non-Monetary Value of a Visitor
Now let’s add one final level to our example; you are seeking volunteers to help at a charity event that your company is hosting. Unlike direct sales, indirect sales, and future sales, you don’t expect these volunteers to bring any monetary value to your website. Instead of dollars per visitor, you can also measure the number of volunteers you get per visitor. After sending out a message to your whole email list and placing a “sign up to volunteer” banner on your website, 10 people volunteer for your event. Because you used tracking codes on the banner and the email links, you can tell exactly how many volunteers came from each source. Six volunteers signed up through the link in the email and four signed up directly through the website.
Using our email list size (2,500 subscribers) and monthly traffic (1,000 visitors) we can estimate the value of a visitor or email recipient in terms of volunteers.
6 volunteers /2,500 subscribers = 0.0024 volunteers/subscriber
4 volunteers / 1,000 visitors = 0.004 volunteers/visitor
In this example, you are nearly twice as likely to get volunteers from site visitors as from email subscriber. Next time you are looking for volunteers, you can use this information to try to maximize the number of volunteer you get by driving people to your site instead of trying to get them to sign up through the email. In this case, a small, geographically targeted Pay-Per-Click campaign going to a volunteer landing page on your website might be the perfect solution to get the volunteers you need.
Wrapping It Up
While evaluating visitors and other types of digital customers is not an exact science, the information you gain can be invaluable to helping your business grow in the most efficient way possible. While the math involved is not very complex, there can be a lot of variables and steps in the customer acquisition process that need to be accounted for. Make sure that you explore all customer acquisition sources when you are calculating visitor and subscriber values. Generally, the more specific the calculations, the more useful the data will be. Use this data to plan your marketing budgets and use those budgets more effectively and efficiently. Google Analytics makes goal tracking and visitor valuation easy enough to set up that there’s no excuse not to know exactly what each visitor is worth to your company.
- E-book: $5
- Organic Search Visitors: $0.123
- Email Visitors: $0.333
- Social Visitors: $0.10
- Working with Ironistic to increase the value of your visitors: Priceless.
This article does not take into account the Long Term Value (LTV) of a website visitor. Please stay tuned for another post about calculating LTV of return customers.
There are currenty 6 responses.