Do you understand the numbers
that your website generates? Do you know how many sales
your site actually generates? Do you know how you can
apply that knowledge to your business and cause it to
grow?
I will answer all of
the above, and also discuss how to use statistics to
enhance your web business through the use of sales,
traffic flow, uniques, hits, click-through rates, and
many other important business factors. Part 1 focuses
on sales and traffic, while part 2 is all about where
your traffic is coming from (and how to get more of
it!). Part 2 will be discussed in the next issue of
our newsletter - so be sure to stay tuned!
Sales
The most obvious statistic
for many businesses is sales.
Here are 2 of the most pertinent questions every business
needs the answers to:
- How many sales do you
make per day/month/year?
- How much profit do you
make per sale?
Not hard figures to find,
but how many sales actually came from your Internet
business? Often it is easy to gather this figure simply
by looking directly at either online sales, or by asking
your customers ("How did you find us?"). But sometimes
the Internet is just one part of a very complicated
sales process. You may make all your sales in person,
but how many of your clients go home and research your
products/services using information found on your website?
These are the questions you
need to find answers to in order to estimate how many
sales were completed due to your Internet presence
but not necessarily completed online. If you make sales
online, the answers are easy. If you sell real estate
or other "in person" products or services, then you
have to ask your customers individually. Either way,
it will come down to a concrete number that can provide
insight into how you can grow your business.
Profits
From the number of sales
made per month, you can easily figure out your gross
sales amount. Then you have to take your expenses per
sale into account and figure out your profits. Only
cost of sale expenses should be deducted and NOT one-time
expenses such as overhead. On the Internet, this would
normally be the cost per click of pay-per-click campaigns
(such as Google AdWords or Yahoo Marketing Solutions),
or the CPM (cost per thousand) for banner ads, and of
course, your direct costs for the item or service being
sold. Once you have these figures in hand, you can then
calculate your profit per sale.
Traffic
So now that we know how many
sales we make per month, and how much profit we're actually
making off of those sales, let us take a look at how
many potential customers walk through our virtual store.
There are many different statistics for website traffic:
page views, hits, daily uniques, monthly uniques, etc…
Which one should you be using? From my own experience,
I recommend using daily uniques.
Daily uniques
measures how many unique visitors come to your site
in a single day. By that we mean that no single user
is counted twice in the same day even if they visit
the store several times within a twenty-four hour period.
Thus, if someone comes to your site four times on Monday,
and six times on Tuesday, he/she would only count as
two daily uniques.
Page Views
measures how many times your page is viewed (usually
including reloads). Page views are also counted for
each page. Thus, if someone comes to your site four
times on Monday and views eight pages each time, and
six times on Tuesday (viewing two pages each time),
you would measure (4 x 8) + (6 x 2), or 44 page views.
These statistics are usually
available through your server's statistics program.
Alternatively, you could also use one of a myriad of
other statistics programs available on the Internet.
For most of our clients we set up http://www.hitbox.com/ on their sites. With
our daily uniques per month figure in-hand, we suddenly
have some very powerful numbers to work with.
Conversions
Conversion is the measure
of how many people who visited your site were subsequently
converted into clients of some sort.
Measuring how many uniques turn into buying customers
is one method of conversion, but you could also measure
how many visitors your site gets vs. how many visitors
sign up to your newsletter, or how many of them go to
a specific page, or how many send you an email, etc…
These are all measures of conversions, and simply use
the ratio of sales (or sign ups, emails, etc…) to visitors
(or uniques).
Let us assume our site has
the following statistics:
- Sales: 100/month
- Gross: $250/sale
- Average Profit: $150/sale
- Daily uniques: 12 000/month
In the above example, we
have 100 sales per month, and 12000 daily uniques per
month, thus our conversion ratio is 1:120 or 0.83%.
Not such a bad ratio, especially for items that cost
$250 each. Most markets would want a ratio of 1% or
2%, but of course each industry is different.
Analysis
Using our imaginary numbers
(profit of $150/sale, gross $250/sale) we can then figure
out how healthy the online business really is. At 100
sales a month, we are grossing $25 000 per month, and
profiting $15 000 per month. At this point in our analysis,
we can now see that there are three ways in which to
improve the site:
- Increase profit margin
- Increase conversions
- Increase traffic
1. Increasing profit margins
involves lowering costs or raising prices, both of which
fall out of the context of this article.
2. Increasing conversions
involves optimizing the usability of your website;
usability is a quality attribute that assesses how easy
user interfaces are to use. For more information on
usability and how it can help your Internet business,
go to http://www.useit.com/.
3. Increasing traffic involves
improving your link network, your PPC campaign, or your
search engine optimization. We will look at the latter
in detail in Part Two of this article (exclusively available
by signing up to our FREE Monthly Newsletter at http://www.redcarpetweb.com/). Part
Two will also discuss referrers, search engine keyphrases,
search engine positions, and how to use these statistics
to increase your sales. Don't miss out! Sign up for
the Newsletter today and learn how you can make the
most of all your web statistics and improve your Internet
business.
Shawn
Campbell is the co-founder and Chief Search Engine
Optimizer at Red Carpet Web Promotion, Inc.
http://www.redcarpetweb.com/ |
