Friday, July 27, 2007

Website Conversion - What is it costing you?

In converting Website visitors to leads/sales, etc. let’s first look at what an increase in conversion could mean to your bottom line.

This information is on our Website under Website Conversion, but we feel it is so important to understand we are going to address it here.

Below is the site production numbers for Sample Site A & B :

Average monthly unique site visitors: 1,500
Average monthly marketing cost for site: $500.00
Average monthly number of customers: 30
Average total purchase per customer: $50.00
Average gross profit margin 50%

Monthly revenue is calculated by:

# of customers x dollar amount of average total purchase per customer
= Monthly revenue in dollars

Gross Profit is calculated by:
(Monthly revenue minus gross margin) minus marketing expenses
= monthly gross profit (profit before fixed overhead)

Sample Site A has a 2% conversion ratio which yields
$250.00 gross profit

30 x $50.00 = $1,500.00 monthly revenue
( $1,500 - 50% profit margin)-500 = $250.00 gross profit

Sample Site B has a 3% conversion ratio which yields
$650.00 a month of gross profit:
1500 site visitors x 3% conversion ratio = 45 customers
45 x $50.00 (average purchase)= $2,250.00 monthly revenue

Profit ($2,250 - 50% profit margin) - $500 = ($1125) - $500 = $650.00 gross profit

That is a 160% increase in profit by increasing your conversion by only 1%

You can plug your own numbers if you know what they are. For many people the first place they need to start is finding out what their traffic is on their site.

Next we’ll talk about looking at some of your site statistics and what they mean in relationship to your conversion and marketing.

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