“If I said once, I’ve said twice, I’ve said one thousand times” was my mother’s remark when it appeared that I wasn’t hearing her advice. To my defense, I often was listening but the quantity of advice exceeded my ability to process it. It was like drinking water from the fire hose.
As Online business owners, we face an identical situation through the volumes of recommendation we receive on how to manage, market and grow our businesses. Weeding with the “need to know” versus the “nice to know” takes effort. Yet identifying the “need to know” is essential in defining and ultimately success.
For your internet business here is an essential “need to know”.
Consider this…
Your site received 5,600 visitors recently also it generated 26 sales.
Was recently successful?
You do not know, right?
Defining “Success” – the strength of Performance Metrics
Performance metrics are measurable results gathered and calculated out of your business’ online systems (traffic, website, and customer retention) and used to identify their aggregate and individual strengths, weaknesses and opportunities.
Known as “key performance indicators” or “benchmarks”; their importance carries exactly the same weight as traditional financial ratios like roi and days sales outstanding carry for assessing a conventional business’ performance. They form a dashboard for a business proprietor to gauge the potency of their current business strategies and sets a baseline for defining future success.
Further, performance metrics identify the “gap” between where you stand today and where your business goals require you to be tomorrow. Without one, you’re operating a spead boat without a rudder and wandering aimlessly in a big virtual ocean. As Business Executive, Thomas S. Monson stated,
“Where performance is measured, performance improves. Where performance is measured and reported, the speed of improvement accelerates.”
The main Performance Metrics
Performance metrics vary by each individual business; however, five specific metrics are most important among an online success businesses. Included in this are:
A. Conversions
B. Cost per visitor
C. Cost per lead, prospect or referral
D. Cost per customer
E. Value per visitor
If every Internet business focused on these five primary performance metrics, their internet sites would increase exponentially. Why? Because…
“You are only able to Manage what You can Measure.”
Five Performance Metrics of Successful Online Businesses
All websites present choices to their visitors. Each time a choice is made by visitors a “conversion point” exists that generates two metrics: (1) cost of conversion and (2) rate of conversion. The key is to recognize your business’ significant conversion points which if chosen most often by visitors will lead to the achievement of the goals.
Fundamental essentials five performance metrics you should know.
A. Conversion Rate
Google’s dictionary defines a conversion rate as “the quantity of visitors who took a desired action divided by the final amount of tourists in confirmed time period (typically, monthly).”
Formula: Desired Action / Total Number of Visitors = Conversion Rate
For instance, if 1,000 unique visitors were driven to your website from the search engine and 10 elected to buy an item then your “sales” conversion rate could be 1.0%.
Basically, a conversion minute rates are calculated whenever a desired action occurs with a visitor aimed at your website. Examples include:
o A visitor types within their email address and clicks “submit” for the free report.
o A visitor clicks their browser’s “back” button to leave your website.
o Visitors buys your products.
The most crucial conversion rates are the ones directly associated with the achievement of the business’ goals.
B. Cost per Visitor
The price per visitor is the amount of money spent they are driving one unique visitor to your website.
For instance, if you spent $100 to drive 1,000 unique people to your website, then your cost per visitor is $0.10.
Formula: Investment property / Final amount of Visitors = Cost per Visitor
Businesses usually have more than one “visitor source” or a way to drive visitors to their websites. Therefore based on what result you’re analyzing you might calculate “cost per visitor” using investment property on only a single visitor source or on multiple visitor sources.
C. Cost per Prospect, Lead, or Referral
The price per prospect, lead or referral may be the “cost per visitor” times the amount of unique visitors required to produce one prospect, lead or referral.
For instance, if you spent $100 they are driving 1,000 unique visitors to your site also it produced 10 prospects; your “cost per prospect” is $10.
Formula: Investment property / Final amount of Leads Produced = Cost per Visitor
D. Cost per Customer
“Cost per customer” is the “cost per visitor” times the number of unique visitors required to produce a sale.
For example, if you spent $100 they are driving 1,000 unique people to your site also it produced 2 sales; your “cost per customer” is $50.
E. Value per Visitor
The “Value per Visitor” metric is a composite figure that includes multiple, performance metrics including conversion rate, average value per completed action, number of unique visitors and quantity of completed actions.
For example, if the 1,000 unique visitors generated 2 sales worth $100 per sale or $200 in gross revenue then your “value per visitor” is $0.20.
Formula: Sales / Final amount of Visitors = Value per Visitor
O.K. – why does this matter?
The “value per visitor” indicates what you’re in a position to spend per visitor (i.e. cost per visitor) to be able to breakeven in your traffic or strategic marketing investment. If your your website receives visitors in an average “cost per visitor” of $0.10 and your average “value per visitor” s $0.20 then for every new visitor you will gain $0.10 in gross profit.
Note: the “value per visitor” metric gets to be more powerful with this kind of analysis whenever you calculate it using all associated traffic costs including labor and material and net sales versus gross.
Along with an internal, strategic decision-making tool, the “value per visitor” metric may also be used to evaluate external work at home opportunities.
For instance, should you be approached with a potential business partner and given an opportunity to receive 1,000 targeted prospects in a $150 investment, you could quickly do the math and employ your average “value per visitor” metric like a baseline.
For example, 1,000 visitors for any $150 investment equates to a “cost per visitor” of $0.15. Making use of your average “value per visitor” of $0.20 you need to earn roughly $25 per sale or $0.05 per visitor times 1,000, a total of $50.
However, depending on the size the investment, you may suggest for your potential business partner a one-month test instead of a long term partnering deal. Through conducting a “test”, you could gather data and calculate a “value per visitor” specifically for the deal before jumping head-on right into a long-term and potentially damaging engagement. By gaining measurable results you’ve negotiating leverage to work out a cost-effective partnering deal or to close the lid on immediately with minimal loss.
