Measuring website goals is for the most part a relatively straightforward thing to do. Smarter website owners should be doing this from the day their site launches. But even if you are hitting your goals, the more important issue is whether you are getting a return on the investment needed to achieve these goals.
Measuring website return on investment (ROI) is slightly more involved than simple goal measurement but it is the only way of knowing if your web properties are contributing to your bottom line.
Some aspects of measuring website ROI can appear daunting, but as you start out take the standpoint that any measurement is better than none at all. Also, be aware it can take a number of years to accumulate meaningful data on which to base your calculations. If you get stuck, remember that much of the setup involved with goal monitoring can be done by a web professional. They can also assist with providing reports and giving insights into what you are looking at.
Example of website ROI calculator helps explain the process
For an example of a calculator specifically for measuring website ROI, take a look at Smashing Magazine’s Website ROI Calculator. This Google Spreadsheet helps illustrate many of the concepts covered below.
A process for measuring website ROI
1. Setting goals for your web properties
The job of measuring goals assumes you have goals to measure. If not, then you need to do this first.
You will typically measure conversions (usually sales or quality enquiries) and levels of engagement (extent to which people are interacting with your content). Check out our series of posts on SMART goal setting.
In short, your goals need to be measurable.
2. Setting up methods for tracking goals
You can use either free or paid analytics packages that allow you to gather detailed information on your website performance. The most commonly used is Google Analytics. Social media channels and hosted website services also usually contain some form of analytics. A good analytics service will also allow you to track offline conversions that originate on your website.
You may need to get your web professional to help set up these tracking methods. If they haven’t then it is up to you to ask them to.
3. Gather info needed to measure ROI
In order to measure your ROI you need to assign dollar values to each of your goals. You are asking the question “What is a sale, lead, download (insert goal), worth to my business?” (And while you’re digging around in your accounts you may want to find out the cost of achieving a goal – you will need this data in Step 5 Measuring ROI.)
For e-commerce sites, finding this value information is straightforward – the value of a sale is generally the dollar value of your goal. But what if in your business the sale occurs offline, for example buying a house? The task is slightly more involved but still doable. You can track offline sales that originated online via enquiries originating on the website, URLs accessed, call tracking or email newsletter tracking.
Because not all customers are created equal, you should also aim to segment your customers (i.e ABC customers) and then assign a dollar value to the customer type. Your business will obviously focus its efforts on ‘A’ type customers. For businesses offering services over an extended timeframe you also need to determine the lifetime value of each of your customer categories. Historical data plays an important role here. If you don’t have this then go with best estimates. Remember any measurement is better than none at all.
Some goals can be trickier to measure but are worth considering. What about the value of actually having a website in the first place? Many customers take a negative view of businesses without a web presence. Or what if your website answers non-sales related questions that would otherwise eat up the time of your employees?
4. Monitor goal achievement
Now you have the foundations in place, you can sit back and start collecting your data. Don’t get too relaxed though – you will need to review your data regularly and tweak your goal settings.
Common web metrics you should know about
Web analytics is a field in its own right, but there are a number of metrics that you should be familiar with as a website owner:
- Conversion Rate – this is the primary goal measurement you are interested in. The others mentioned below simply support achievement of this end goal. Conversion rate is the rate at which visits convert to sales, firm enquiries or whatever the primary goal of your website is. For example a form is viewed 100 times and 5 enquiries are made. The conversion rate is 5%. And if you are wondering, a good conversion rate from an enquiry form is around 3%.
- Sessions – A ‘session’ represents a unique visit. The duration of a session is usually 30 minutes. One visitor can have multiple unique sessions. This metric gives you an idea of how popular your site is and is used as the foundation of many other metrics.
- Bounce Rate – This is the rate at which visitors view only one page and then leave your site. Usually, a high bounce rate is not good news – it means visitors aren’t sticking around on your site which means they are not going to convert.
- Time on Site – This is the flip side of a bounce. A high time on site usually indicates that people are interested and engaged. However it could be a negative also – your site might be very hard to navigate or takes too long to read.
- Entrance and Exit page – Your top entrance pages are where you should be directing your efforts at engaging better with your visitors. Make these pages enticing.
- Most popular pages – This is similar to your top entrance page – the difference being it is a popular page that is navigated to once the person is on your site. Either way, this is where you should be focussing your efforts and trying to extract more value for money.
5. Measure your ROI
Now to the business end of the process – how is your website contributing to the bottom line?
First, gather your cost data
Do you have information on the costs of achieving each goal? If not, you will need to gather it now as it is an essential part of the ROI equation.
Time to work out how much it costs the business to achieve each of its website goals. For instance, consider the cost per online sale on an e-commerce site. Costs will include the initial design and development of the site, the cost of the marketing that brought the customer to the site, fixed website costs such as hosting and internal costs such as staff time. Beware of the hidden costs such as time spent promoting your product and responding to queries. The ROI spreadsheet from Smashing Magazine contains examples of costs.
Now for the calculation
Return on Investment is expressed as a percentage, either positive or negative. An ROI of 0% is your breakeven point. A positive ROI, i.e. anything over 0%, is what a business aims for – at least in the long term.
The formula for calculating ROI is as follows:
In the early days of your website you may struggle to achieve a return on investment. But most investments are usually over the long term, so as your website begins to gain traction and you follow good advice, your ROI should steadily increase. If your ROI remains negative or marginal then you need to review your goals and strategy.
ROI is the only real way to tell if your web properties are making your business money. While measuring goals is an essential first step, measuring ROI is the the real success metric you need to factor into your planning. There are a number of steps that need to be completed before calculating ROI. If you have these foundations in place then the job of measuring your returns should be easier.