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Make Digital Profitable by Measuring the ROI of Your Website

Your website is a business asset. In many cases, it is the first impression your customers will have of you. It is the place where you generate leads and convert them into sales. It must nurture your existing customers while helping you gain new ones. Above all, it is an investment. Like any solid investment, the money spent should yield tangible results. Simply put, you want a positive Return on Investment (ROI). A useful tool that will certainly show the state of your investment and how to maintain it further is based on measuring website ROI.

Some websites measuring their ROI in billions of dollars. Take Amazon for example – an online marketplace for books that developed into the largest internet company revenue wise in the world. It is the world’s largest online marketplace. It is an AI assistant provider, a live-streaming platform, and a cloud computing platform. But, it all had to start somewhere, right? It started as an idea and showed us that anything is possible if we are armed with a plan and surrounded by dedicated people. This is exactly what we are going to talk about today. A little guidance can go a long way, so gather your friends and associates, and let’s see how we can make you the Amazon of your industry.

Make Digital Profitable by Measuring the ROI of Your Website

Though measuring ROI may seem like a challenging task, once you know where to look, you will find numerous metrics to assist in determining the value of your website. With more than 70% of people researching a company before taking the plunge and becoming a client, it is clear that your website needs to shine in every aspect.

If the money isn’t generated through a shopping cart, close estimates that are gathered in a timely fashion can lead to the right decisions made at the right time. This swift action will bring more profit than a perfect choice that happens after the window of opportunity has closed.

They say time is money

Before we delve into all the technology, let’s talk about what may be the most overlooked aspect of the website – it saves time. Just think about all the information collected in online forms. Think of all the questions your future customers may have that would need to be answered. Think about the ways you would promote your brand or services if there were no websites. Your site does a ton of work for you. It saves you and your staff hours, freeing up valuable time that can be spent on improving sales. It is a reflection of your business, a lead generating machine, your loudest spokesperson, and one of your hardest-working employees.

Marketing Automation saves time & it starts with your website

Marketing research done by our digital marketing experts team shows that 74% of business owners consider time savings as the biggest benefit of marketing automation. Marketing automation adds layers of value, turning leads into customers, and existing customers into a loyal client base. As efficiency gains reflect on customer perception, a company with streamlined procedures will in turn be more attractive and valuable to customers.

Automation can significantly improve the quality of your customer relationships as the software is designed to nurture relationships with both potential and existing customers. Creating a personalized experience is a powerful way of developing strong bonds with your clients.

It can also produce highly targeted and relevant communications. Marketing automation software uses plenty of data to deliver the right message to the right customer. Your marketing budget is safe, as you will only cross-sell or upsell when it is relevant and most likely to lead to a sale.

Lead nurturing is shown to improve your conversion rate. A tight schedule often prevents marketers from nurturing every lead, making them focus on those ready-to-buy customers. Marketing automation makes sure that no lead gets left behind.

Marketing automation often leads to better decision making. The software can track the source of every lead and new contact, providing you with the data-driven ways of measuring your marketing channels, activities, and campaigns. You can gain valuable info on how many leads were created, how many were qualified, how many became opportunities, how many converted, and what revenue is generated. All these pieces of information actually help you in measuring ROI. 

The value of a new client

To make valid calculations about your business, you must take into consideration the average value of a new client. Knowing what your customers are worth will allow you to make data-driven decisions instead of guessing when the opportunity strikes. The calculation is relatively simple:

Client Income / Number of Clients = Average Client Value

The lifetime value of a client (CLV) is also essential. This number shows the frequency at which a client makes a purchase. To make things simple, but still get the valuable info, you can calculate the value of a client over five years, instead of the lifetime of the client relationship.

Why do affordable websites cost your organization more?

The overall amount that you have spent on the website from scratch to launch is one of the most critical factors in determining the real ROI. This includes the cost of the domain, site design and development, as well as the cost of ongoing support and maintenance. There are two sides to this coin. The bigger and more intricate the site is, the higher the costs will be. The more you spend, the higher your sales will have to be to provide positive ROI. On the other hand, spending too little carries with it the risk of ending up with a low-quality product that is less effective at drawing visitors and generating conversions.

As website costs vary widely, finding the right balance between what you pay and what you get is critical. Looking at the bigger picture – the average cost of a website ranges between $10,000 and $150,000 while maintaining them can cost between $100 and $5000 per month. After three to five years of going live, your website will probably need a fresh design.

Historically speaking, so-called affordable websites tend to fall into the category of poor investments. Typically, these websites are running on builders that are code-heavy, and poorly optimized for user experience. These templates and builders are usually complex and don’t allow developers to have full access to their best tools, thus dramatically increasing the time it takes to load pages. In particular, on mobile devices, inexpensive builder type websites will only generate harmful expenses measured in lost opportunities. By choosing cleanly written websites that have semantic markup and SEO architecture, you are attracting visitors who ultimately become paying customers and clients.

Increasing Website’s income

Your ROI depends on the number of website visitors per month, as well as your ability to accurately track them. Without the use of proper tools, you may find it challenging to measure the revenue your website is generating. This is where Google Analytics comes in handy. Simply divide the number of visitors by the number of months that your site has been going live, and you get your monthly traffic. This is key to tracking your sales funnel and conversions.

Know your sales funnel

Once you know how many people visit your website monthly, you need to understand how they move through your sales funnel. You need to know how many of them become leads, either by filling out a form, or contacting you directly, and what percentage of those leads end up being your customers. The average conversion rate across industries is around 3%, and the close rate is approximately 20%.

How increased conversion decreases your marketing spend

Knowing where your ad spend is being wasted can give you great insights on how to improve your campaign performance. Keep in mind though, no matter how optimized your account is, you can never have zero waste. You simply cannot please all your visitors.

Increasing conversion rates can significantly decrease your marketing spend, ultimately resulting in higher ROI. You will need to clean up your website and eliminate all the UX errors that result in website abandonment. The icing on the cake is the exponential improvement of your entire operation. You are pulling in more revenue with the same advertising expense.

Closing ratio

Finally, it all comes down to your closing ratio. Measuring ROI and its results are is the best representation of how successful your website and advertising strategies are. It represents the number of sales inquiries that are converted into sales. As we have already mentioned, the industry wide average is 20%. The higher this ratio is, the higher the ROI. You can calculate your closing ratio by using this formula:

Total Successful Conversions / Total Pitches = Closing Ratio

For a website to have a high ROI, it needs to bring conversions at a relatively constant rate.

Measuring ROI

Now it is time to put into practice everything we have talked about. Let’s calculate the Return on Investment of our imaginary website.

We have done online research and found a development team for our website. The price is $12,000. It will go live for three years before a redesign. This means that our yearly cost of development is $4,000. For our website to justify the investment, it has to bring $4,000 every year that it goes live (and that’s just to break even).

We have talked about the value of a new client. Let’s say we have calculated that our average customer brings $1,000 in revenue. It is easy to conclude that our website needs to bring four new customers each year.

Now, let’s see how our imaginary website is performing when it comes to generating leads. Using Google Analytics, we have come to a number of 500 visits monthly. That’s 6,000 visits each year. Since we have not approximated what industry we are in, let’s use the average conversion rate of 3%. Let’s say that our website will generate 180 leads every year. 20% of these leads become customers. That makes for 36 new customers annually.

That’s all the info we need that will help us in measuring ROI. Now we use the following formula:

Average Customer Value x Annual Customers Generated / Annual Website Cost = Website ROI

In our case, it goes like this:

1000 x 36 / 4000 = 9

This means that our imaginary website brings 900% ROI per year. Bravo for us! We are sitting on a beach, and our business is going swimmingly.

Stumbling blocks

There are some things to keep in mind if you want the best possible ROI. While alluring website design can catch the eye of your visitors, functionality must come first. People have an itchy finger when it comes to hitting that back button. No matter how pretty your website looks, if they can’t find what they are looking for in a matter of seconds, they will bounce and go to your competitors.

Another stumbling block is selling too hard. People may feel disturbed with too many pop-ups and third-party ads. This kind of unpleasantness can make even the best websites feel spammy. Your visitors are there to look at your offers while considering whether or not to become customers. You need to provide a safe and peaceful environment for them, and not interrupt their train of thought.

Always focus on your leads, conversions, and closing rates. The rules of the online marketing game are continually changing. Rankings may come and go, but your brand’s reputation and satisfied customers speak the loudest. In addition to remaining loyal customers, they are also likely to sing your praises and opt to invite their friends to visit your site as well.

Final thoughts

ROI differs significantly from one business to another. Still, the main points stand – conversion rates, website cost and activity, and the rate at which you can successfully close deals. Beyond this, there are other factors, such as labor cost, hosting, and domain fees. Keep in mind that your website’s ROI should not be measured only in the number of dollars through the door. There are many ways to determine whether or not your investment is proving its value. Carefully consider the different ways your website contributes to your organization. Only then will you be able to quantify its actual contribution.

Brian Djordjevic
About The Author

Brian Dordevic

Bojan is Marketing Strategic Planner with a passion for all things digital. Feel free to follow him on Twitter or schedule a consultation call with him.

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