Have you ever measured whether your website, internet marketing campaign, or search engine optimization campaign was successful? Are you spending money on a paid advertising campaign without knowing whether the dollars and cents are translating into sales? If the answer is yes, then it's a good time to learn how to measure Return-On-Investment for your project. Return-On-Investment is a powerful business decision making tool that will help you determine whether to invest more into a project, continue on the existing path, or to realign strategy. Before we begin, it's good to know that measuring ROI is possible for most projects but depends upon the availability of a medium for tracking conversions. For this example we'll make the assumption that we're selling either a product or service without the use of an ecommerce platform. Here are a few pieces of information that we'll need: Total project investment in dollars You should also factor any resources used in facilitating project development or support The total project lifespan (the time from project inception to today's date) The average value, in profit, transferred when a lead converts into a customer Ex: If we have multiple products or services selling for a weighted average of $1000 (cost-to-consumer) and after all other variables considered our take-home profit weighted average is $250 per sale, we're going to use $250 for our average conversion value. The average conversion ratio for our website as a percentage This can be calculated by dividing the number of measurable leads that our website converts during a given time period, by the number of those leads that convert to an actual sale. Ex: If during a period of one month our website sends us 500 measurable leads, and 20 of those leads convert to a sale, we then have 4% average conversion ratio. If you don't have access to any of the above accounting information, now is a good time to pull out the books and start calculating these essentials. Also, you'll have to have some type of event tracking in place on your website to be sure that your leads are in fact coming from your website. Event tracking will be addressed in a future article. Since we've gotten this far, we can now begin to measure the ROI for our site. We'll be using the following formula: (Total Leads During Lifespan x Average Conversion Ratio x Average Profit Per Sale) - Total Invested Dollars Ours might look like this: (1000 x .025 x $250) - $5000 Based upon this formula the ROI for our website right now is $1250 This formula can be very useful especially as it can be used in multiple applications. It pertains to web development projects but is also very valuable in measuring the monthly success of internet marketing and search engine optimization campaigns.
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When determining ROI for a project is there a specific goal for the average conversion rate?
6/22/2009 8:49:26 PM #
The average conversion ratio for a website will vary by industry. Engineering firms, commercial contractors, and others who sell projects for thousands or millions of dollars will have drastically lower conversion ratio that organizations that are selling products at very low prices. You might expect to see an engineering firm with a .05% conversion ratio when selling projects for a profit of $500,000 and a toy store with a 3.0% conversion ratio when selling products for a $10 profit. While every industry varies, a 2.5% conversion ratio is generally accepted as average across all industries. It can be very time consumptive in trying to determine whether your conversion ratio is above or below average. Don't worry about this. Only be concerned with increasing your conversion ratio! 100% is the theoretical maximum conversion ratio
6/24/2009 8:48:45 AM #
How to Measure the ROI of your Web Projects Kudos for a great SEO article - Trackback from SEOKudos
7/16/2009 10:07:17 PM #
Tsuvo Articles | How to Measure the ROI of your Web Projects Have you ever measured whether your website, internet marketing campaign, or search engine optimization campaign was successful? Are you spending money on a paid advertising campaign without knowing whether the dollars and cents are translating into sales? If the answer is yes, then it's a good time to learn how to measure Return-On-Investment for your project.
7/18/2009 1:04:29 AM #
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7/18/2009 1:55:06 AM #
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12/8/2009 12:58:31 PM #
Great post thanks for sharing.
2/21/2010 7:15:06 AM #
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