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Can I estimate cost vs. payout of my Advertising?
When measuring success of a web site, we tend to measure
our popularity in traffic hits. Each time someone
visits your website, you will class them as
one "visitor".
However, determining your traffic hits is futile
if you're unsure of the progress they're
gaining for you. Hits are not an accurate measure
of your success, only of your site's popularity.
If you're selling products or services on the 'net,
you need to go one step further and find out
how many of these site visitors are actually
generating money for you.
This is where calculating your 'Hits-to-Sales Ratio
comes in.
I'm now going to show you one of the most powerful
formulas you'll ever use.
There are certain
common assumptions that can be made based on several general formulas.
What your need to know:
- Number of daily unique visitors to your web site. (Our Example is 50 visitors per day) Some corporate web hosting companies provide visitor reports, that will give you this information. If you web hosting company does not provide you with this type of information, request that they do or consider switching providers. You can see our web hosting rates here. Regardless of which hosting package you choose, the visitor reports are always included.
- If your site is commerce enabled, how many orders are received each month? (In our example we will consider total 30 orders per month)
- Average Value and Gross Margin of Web Site Order. (In our example, average order is $45 with gross margin of $25)
From this information we can calculate the following:
50 visitors per day = 1500 visitors per month
divided by 30 orders, so we have 2% of our site visitors actually
ordering product.
Armed with this information, we can now proceed with some additional assumptions:
- We will advertise only on sites that charge $0.20 or less per click through.
- Our advertising budget is $10,000
Based on this information we can calculate the following:
for $10,000 of advertising money, we can bring at least 50,000 visitors to our site. (10,000/0.20=50,000)
Out of those 50,000 2% will order, e.g. we are to expect total 1,000 orders
of total average value
$45,000 dollars with a gross margin of $25,000
This powerfull formula lets our customer decide exactly how many sales can be generated by tightly controlled advertising campaign.
Now there you have a good visitor to sales ratio. Armed with this information you can safely determine that advertising expenditures that yield desired number of visitors are smart investment. Then you may proceed to source the right type of advertising that will fortify your bottom line!
These numbers are for illustration only. You may use this formula
to approximate your expectations based on actual figures from your web site.
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