Web statistics, performance metrics or whatever you'd like to call them are important numbers that tell you where your business is heading and where it's been. Most people talk about product conversion rates. However, conversion rates depend upon the quality of the traffic that is visiting your site.
If you are selling an information product about dog training but people looking for breeds find your site then your conversion rate will be in the toilet, if even on the radar. On the other hand if your list contains people interested in dog behavior and your product is about dog behavior your conversion rate might be as high as 25-30%. Again, the conversion rate depends on the quality of the leads.
So what numbers are important?
1. Cost per visitor (CPV) - This number tells you the amount of money you spend to get one unique visitor. If you spend $50.00 to drive 500 unique visitors it would have cost $00.10 for each visitor. $50.00/500=$00.10.
2. Cost per lead (CPL) - This is the amount of money it costs you to generate an opt-in lead. In the same example above 20% of the 500 opted in which means you now have 100 new subscribers. If you have 100 new subscribers for the same $50.00 it took to send 500 visitors to your site your CPL is $00.50. $50.00/100 = $00.50.
3. Cost per sale (CPS) - This is your cost to make a sale. If you spent $100.00 on an ezine ad, which drove 1000 visitors to your site, and you had 20 sales (2% conversion) your cost per sale would be $5.00. $100.00/20 = $5.00. This number MUST be less than the price of your product or your net profits are a negative number.
4. Customer lifetime value (CLV) - This number gives you the value of a customer over their lifetime on your list. You'll have to do some digging for your numbers but for convenience sake let's assume that you have 1500 people who have purchased $150,000.00 of product from you in the past year. The math is $150,000.00/ 1500 people = $100.00 CLV. Each buying customer is worth about $100.00 to you.
This number should be considered when you do your ad campaigns. If you have a campaign that barely breaks even you may not run the ad again. However, if you know that your lifetime value of those customers you acquired is $100.00 this would significantly impact your decision.
5. Visitor Value (VV) - This is the value of your visitors which is individualized for each type of advertising channel you use.
Let's say you spend $1500.00 on ezine advertising in 2 months. This advertising brings you $5000.00 in sales. Subtracting your costs for the product your profit margin is 70%.
$5,000 X .70 = $3500.00 - $1500.00(ad cost) = $2000.00 net profit
Your $1500.00 ad generated 8,500 visitors and $2,000.00 net profit. For this particular ad campaign you visitor value is:
$2,000 (profit) / 8,500 (visitors) = $00.23 Visitor Value
Each type of advertising channel (PPC, banner, ezine) will have it's own visitor value. You must know what the average is for each channel. When you decide to advertise using that channel you then can make a rational decision about how much you can spend. Otherwise you are just making uneducated guesses.
Using the calculations you've just done you can evaluate the cost of your current marketing plan. With the appropriate numbers your plan will net you a tidy profit. With the wrong plan your numbers should show you the direction you should now take.