Increasing Website ROI

The last couple of posts have been regarding ROI and how to measure it. Once you know how to measure ROI how do you increase it? The simple answering is testing. Testing means different things to different people. Ask a programmer and their definition of testing involves clicking on links and testing the functional aspects of a site. Others, mostly non-marketing professionals, will assume testing is having the client view the Website or page and approve it. However, testing to a marketing professional involves much more than the functional aspect of the site.

Testing involves usability test, A/B split and multivariate testing. For best results you should be using a combination of all three. One of the most common misconceptions about testing is that is expensive. Our answer, is how expensive is it to NOT to test? If you want to put some numbers with this answer find out what your conversation ratio is and determine how much profits will increase by increasing your conversion rate.

We’re going to look at usability testing. First, let’s explain what it is. Usability testing means that you observer how a test subject uses your site. This can be as scientific and high tech as some of the labs we’ve used with two-way mirrors, several observers, multiple cameras and software recording every mouse move and keystroke. Or the test can be extremely low tech by simply observing the testing.

If you’ve been in marketing for sometime, I’m sure you’ve been involved with focus groups. This is somewhat similar. In focus groups you gather in a sample of your target audience and they use and discuss the product. In usability testing you gather a sample of your target audience and ask them to complete several timed tasks on your Website.

Each task it timed and recorded. Since the site owner should not be present at the test it is best to record the session. Designers and programmers also benefit greatly from viewing the testing as well. Many times sites are developed and designed based on our own preferences. You many notice that designers get stuck in “template” mode. The designs are appealing but they all begin to all look very similar. Participating in usability test is one way to stretch the designer’s creativity and sharpen their skills.

Each usability test we’ve done have always uncovered at least one “gold nugget” that made the testing worth doing. Usually there are several areas on a Web project that can be improved as a result of usability testing. The reason is simply. If your target audience can easily use your site the likely hood of them taking action increases.

One of the misconceptions about usability testing is that it uncovers problems with navigation or ease of site use. However, much more than those areas should be tested. One of the first questions we ask the subject is “what is this site about” or “what service/product does this company offer”. Then note how long it takes the subject to answer the question. These questions have nothing to do with design or navigation but rather content. If the subject is unable to quickly say what the site is about how can the site be successful?

A common mistake in usability testing is that the tester fails to test the test. Never conduct a test without first testing the test yourself. The test developer and tester should BOTH take the test.

I’ve often been asked from new clients how do they know if their current site has been given a usability test. Since I know this important phase of development is skipped by most developers (many are totally unaware of the process) I know can safely say their site was not tested. My response is that if the developer never mentioned it then it safe to say that it was not tested. There is cost involved in testing and no one is going to do extra work and not get paid for it.

How important is usability testing? Well the answer goes back to the earlier topic about how expensive is testing. If you know that a 1% increase in your conversion ratio will yield 300% in gross profits – then you can easily how important testing can be

ROI for Lead Generation Websites

On the last post we discussed return on investment (ROI) in general, for marketing projects. We’ve been asked how to measure ROI for lead generation (lead gen) Websites. The thinking here is the ecommerce Websites can easily be measured because someone is purchasing something and the cost and profit are clear. With lead gen sites it can’t be done because someone is not purchasing something online.

Lead gen sites and projects can be measured but you need extra information. First, you need to know the number of leads that Website (or all Internet activities) produces. Many people jus look at the leads from “Contact Us” forms but that’s not looking at the entire picture.

So, what else can you look at regarding leads from the Internet? Any other activity on the Internet can produce a lead. If you have PPC campaigns going on you can trace leads to landing pages which should have a form on it. In addition, you can have a service that offers a variety of phone numbers that all go into your main phone line but are traced back to the PPC campaign ad (we offer such a program). Leads from article marketing, videos, Web conferences, BLOGs, etc can all produce leads. How to trace it back is a topic for another post or White paper.

If you want to measure just one project such as your PPC campaign then you just count the leads from that activity. If you want to know overall how your entire Internet marketing strategy is working you need to track all of your activity.

Now that you are tracing all you leads, the next thing you need to know is how many on average, are qualified leads? Of course this number is going to go up and down each month. With each campaign you should test and monitor it for targeted leads. After a few months you should have an average number for qualified leads.

Now that you know how many qualified leads your project is producing, you need to know your average close ratio. As a sales manager or marketing director you should know the sales ratio for each sales rep and overall for the company or division. In some cases Internet leads are only distributed to a select group of sales reps so you just want to know that group’s close ratio and not the entire company’s sales ratio.

Now that you have these numbers you can determine your ROI.

Here’s an example. Let’s say all your Internet marketing projects cost $110,000.00. Your average sales price is $50,000.00. Your Internet activities produce on average, 200 leads per month. Of those 200 leads let’s be very conservative and say only 20% of them are really qualified leads (Someone ready, willing and able to purchase is going to be our standard or definition of qualified lead. You definition may be different.) That means the site is producing on average per month 40 qualified prospects.

Now, let’s say these qualified prospects are funneled to the sales reps and their close ratio is 20%. That means that 8 of the 40 prospects will convert into a sale each month. That means the Internet is producing $400,000.00 in sales per month ($50,000.00 avg. sales price X 8 avg. sales per month). Now take the $400,000.00 per month and multiple by 12 to get your yearly revenue which will be $4,800,000.00 in revenue.

However $4,800,000.00 is only revenue and you want ROI. As a business owner I want to know my gross net profit. So let’s subtract out your expenses and the expenses of the Internet project and you’ll have your ROI. Also, keep in mind that ROI is not just for one year so you need to look at the cost compared to the return over a given time frame.

Increasing your Internet ROI

Last Thursday I was asked to be on a panel discussion at the BMA luncheon meeting talking about how to increase ROI from your Website. It was a great presentation and I had a lot of fun doing it. Members from the association said that it was one of the best events that they had in some time. I’m still getting emails and calls from the luncheon asking for additional information, so I thought we would address some topics on our BLOG.

First, let’s talk about what ROI actually means. It seems like lately it’s a term that a lot of people are tossing around lately without knowing the definition. Many people just use the term to mean a generally that their projects or Website is successful. But measuring success is critical.

This is an area that separates a lot of marketing professionals, especially those involved with Internet marketing. We discuss this issue with our clients and they’re well aware of ROI and what it means. Also, keep in mind if you’re talking to a financial person the term and calculation is a bit different compared to marketers.

ROI is Return on Investment. It is the return over time that you will receive on your initial investment.

We tell our clients that they should expect a 3:1 ROI ratio with our projects. What does that mean? It means that for every dollar they spend with us that they receive three dollars in return in profit. Most receive a return much higher than that. However, that means AFTER they get their initial investment back. You also have to keep in mind that the investment should yield profit over time.

For what ever project you undertake you need to look at the return to see if it’s worth doing or if you would be better off investing the money is another way.

Some of the discussion talked about ROI on an ecommerce site VS a lead generation sites. You can and should measure ROI for both types of Web projects. Our next post will discuss how to measure ROI for a lead generation Website.

Invited to Speak at St. Louis BMA Luncheon

I've just been invited to speak at the BMA luncheon meeting this Thursday. It's a panel discussion on ROI (return on investment). Ellen Sherberg, Publisher of the St. Louis Business Journal is moderator of the discussion. The group will discuss ways to improve your marketing ROI.

I constantly tell my clients we are NOT a Web company. We're a marketing company here to get you results. If you want a Web company there are plenty in town and I give them a list.

What's the difference? Well if you're focusing on design you're going to get great design. If you're focusing on results you're going to get results. Why not focus on both you say? Well, you do want great design but if from the bottom up you don't start with understanding a return on investment how do you expect to get a return.

First thing to consider is the organization that is in charge of your projects. Look at their background and accomplishments. Case in point I have a BSBA-Marketing and MBA. Plus, our clients see a minimum of 3:1. For every dollar they spend with us they get three in return.

Our best example is how we took a Website from $8,0000.00 in gross profits a month to $900,000.00 in gross profits a month. Yes, that blows out of the water the 3:1 but return but not everyone is going to achieve the same results.

After Thursday we'll be posting more on ROI and how to increase it.

To read more about the event go to our news story on the BMA and increasing ROI panel discussion.

If you're in town, I hope to see you there!