There are no secrets to success. It is the result of preparation, hard work, and learning from failure.
From the Leadership Secrets of Colin Powell (2003) by Oren Harari
How Most Of Us Work On Our Sites
Most serious website owners are pretty good at the preparation of content, we certainly work hard, but we're not very good at learning from our failures.
While we may occasionally rework a site design, improve our calls to action or write longer blog posts, do we really know if the changes we make translate into increased revenue or conversions?
The Big Question
Does your site actually have any obvious goal? I know many people who start a site with the idea of becoming a blogger in some niche topic, but without any idea of how to turn that into income.
Unless your site is a hobby, it will need specific goals in place on each page that can be measured. If you do not have any goals set up, then the site is not a business it is a hobby. Not measuring your goals is bad. Not having any is a disaster.
Continuous Optimization
How can we do better? We could learn faster what works and what does not, and make site improvements much more frequently.
But how do we start this optimization process? How do we tweak our sites to make them better? When I say better, I mean how do we
get more visitors and persuade those visitors to take the action we want them to.
The action we want - the conversion - could be to complete a form, make an appointment, sign up for a free trial, or purchase a product.
Why Does Optimization Matter?
A highly optimized site can be 10 times as effective as a non-optimized or poorly optimized one. That means an optimized site has the potential to deliver 10 times as much revenue.
Potential like that is too significant to ignore. Who wouldn't want to earn 10 times as much from a site? So surely we should strive to achieve a highly optimized site as quickly as possible.
The conclusion I draw from is this is that I need at least daily feedback on the website. I make a change, send some traffic to the site, and see how it affects the conversion rate.
Having mentioned conversion rate, this is a good time for some definitions of terminology.
What Are The Measures Of Success?
Below are few metrics to track how a site is doing and how well it is engaging the audience. We'll start with the most important, the conversion rate.
- Conversion Rate
- The conversion rate is the total number of conversions divided by the number of visitors to your site.
A conversion is defined as a visitor that took the action you wanted. This could be a form completion, a purchase, a sign-up to an email list, a re-targeting cookie laid down, or a click-through to a third party offer.
- Call to Action (CTA)
- The call to action is the form, button or link that asks the user to take an action that leads to a conversion.
A page should have a single call to action and it should be extremely obvious and in a color that stands out.
- Click-Through Rate (CTR)
- For online ads the click-through rate is the number of times a click is made on the advertisement divided by the total impressions (the number of times an ad was served).
An average click-through rate is around 0.2% (1 in 500 impressions).
For emails the click-through rate is the number of recipients who clicked the links in your email divided by the total number of emails sent out.
There is no meaningful average figure as it depends on the audience, their relationship with the sender of the email, and the relevance of the subject matter of the email.
In the case of a reasonably well-targeted and interested audience then a CTR of around 4-6% would be anticipated. It is possible of course to double or triple this figure with better targeting, better copy and/or a better offer.
- Cost Per Click (CPC)
- The cost-per-click is the amount that you pay each time a visitor clicks on your ad in a pay-per-click advertising campaign. Cost per click is easy to measure if you are directly paying for traffic.
Bear in mind that free, organic traffic also has a cost, but it is much harder to measure.
- Cost Per Impression (CPI)
- The cost per impression is the total advertising cost divided by the number of impressions.
Note that this type of ad costs money whether or not it is clicked as the pricing is based on the number of impressions delivered regardless of actual clicks.
Cost per impression is often expressed as Cost per Thousand Impressions (CPM) to make the numbers easier to manage
- Average Time On Page
- This is a measure of how engaging the content is.
A short average time on the site is not necessarily a bad thing if the visitor clicks through the call to action. However it is a problem if there is a low conversion rate.
- Bounce Rate
- The Bounce Rate is the percentage of people who leave the site after viewing a single page.
A high bounce rate combined to a low average time on site is an indicator that the site does not fulfill the needs of the visitor.
- Average Page Views
- Average Page Views is a measure of engagement that indicates how many pages the average visitor views before leaving.
A large number page views can mean engagement but also can mean navigation issues in your conversion funnel, if there is ultimately no conversion.
- A/B or Split Testing
- The testing of the conversion rate of one version of a page against another version.
For example, a red button measured in effectiveness to a yellow button, or one headline against a different headline. In A/B testing only one thing is tested at a time.
- Multivariate Testing
- This is similar to split testing except that multiple elements may be varied and more than two test scenarios may be tested simultaneously.
Since multiple changes are made together it is not possible to isolate which element was responsible for the improved conversion rate. All you will know if that a set of elements together beat another set of elements.
- Return On Investment (ROI)
- The return on an investment is the profit (revenues minus costs) divided by the costs.
This performance measure used to evaluate the efficiency of an investment so it can be compared to other investments.
For example, you may have a campaign that sends 10,000 clicks at a cost of $0.20 per click to your landing page.
This results in 100 sales, each yielding $30 sales commission.
You have outsourced the set-up of the website at a cost of $250. Your revenue would be $3000, your variable cost is $2000 and your fixed cost is $250 and hence the profit is $750.
So What's The Return On Investment? (ROI)
The return on the project is $750 / $2250 which is 33%.
This is a pretty good return given the current state of interest rates . Maybe you'll want to consider sending 50,000 clicks on the next campaign.
The variable cost would be $10,000 with a projected revenue of $15,000 and hence a profit of $5,000 and a ROI of 50%. Yes, the ROI is larger as there are no fixed costs second time around and hence more profits on a lower cost base.
But how can you gain the confidence to scale up your operation by a factor of five? Only by measuring and understanding the costs and the revenues. That is the point of click-tracking.
Next Post: What To Measure And How To Measure It
The next post in this series will cover how to set up tracking software so you can measure your costs, revenues and profits and start down the path to optimize your site.
