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Have You Ever Calculated The Revenue And ROI That Your Website And Online Marketing Could Create To See If It’s Worth It?

If you have a website for commercial use there should be two questions at the forefront of your mind.  Answer these questions intelligently and you will understand the purpose of your website and how you should proceed with your business model and level of investment.

How can I calculate the potential size of my marketplace?

How can I use web metrics to calculate the potential size of my marketplace?

 

The first question is, ‘what is the size of your market?’ and the second is ‘what percentage of that market do you realistically have the potential of attaining in terms of sales?’ In truth, those two questions should be the starting point of any business plan and certainly the basis of your planning for online marketing strategy.

How To Estimate The Potential Of Your Website

Estimating the potential market or ROI of your website can be a bit of a ‘grey area’ for many businesses. Although it can be made easier by using different competitor research tools, researching search volumes and by using the statistics you have available to you to estimate what kind of revenue your website could, and should, be creating.

An example we will use will highlight the importance of Click-Through Rate (CTR) and the Conversion Rate and what impact this has on overall revenue and market potential. In the example below (Table 1), we looked at the keywords that had converted over a 6 month period within Google Analytics and found their monthly search volumes (141,230 each month).

From this, we used the monthly search volumes and multiplied it by the average Click-Through Rates of the top 5 positions on the first page of Google’s Organic Listings to get the Approx. Visits.

Table 1

Position

Specific Monthly Search Volume

CTR

(%)

Approx. Visits

Conv. Rate

Approx. Sales

Approx. Value

1

141,230

31.24

44,120

1.2%

529

£185,304

2

141,230

14.04

19,828

1.2%

238

£83,278

3

141,230

9.85

13,911

1.2%

167

£58,426

4

141,230

6.97

9,843

1.2%

118

£41,341

5

141,230

5.5

7,767

1.2%

93

£32,621

The Conversion Rate over the same period for this example was 1.2% and the Average Order Value was £350. Therefore, by multiplying the Approx. Visits with the Conversion Rate, we can then work out the Approx. Value of the market for each position. Position 1’s market value is £185,304 for example.  

From this we can look at the volume of other keywords that are relevant (Table 2), on top of the existing keywords that have converted and work out the potential revenue that your website could be making. Generally speaking, as the overall volume of traffic increases, the Conversion Rate is likely to fall slightly, especially with more generic keywords. But, as sales increase, even with the Average Order Value remaining the same, the Approx. Value of the market will increase dramatically – as can be seen below.

Table 2

Position

Mixed KW Monthly Search Volume

CTR

(%)

Approx. Visits

Conv. Rate

Approx. Sales

Approx. Value

1

490,000

31.24

153,076

0.7%

1072

£375,036

2

490,000

14.04

68,796

0.7%

482

£168,550

3

490,000

9.85

48,265

0.7%

338

£118,249

4

490,000

6.97

34,153

0.7%

239

£83,675

5

490,000

5.5

26,950

0.7%

189

£66,028

Conversion Rate Is Key

Conversion rate is what you are in business for. This is turning prospecting visitors into buyers/potential leads and will keep your business going. Optimising your conversion rate is therefore a priority to maximise your profits. Everything from A/B Split Testing to changing the offer of an Advert to see if it works better can be experimented with to get the best conversion rate.

If we refer back to the previous tables, we can see that Conversion Rate is important when creating value for your website. In fact, once the overall Monthly Search Volume is increased the Conversion Rate can sometimes go down, but if it were to be improved by just 0.1% each month, then the extra revenue generated could be quite a big jump – around £9,000 if we refer to Position 5 within Table 2.

You might be in a market that is huge and has fierce competition as well as large potential gains. Or perhaps you are in a niche industry that has very little competition but also a few specialist buyers. Different tactics are required dependent on your market, but by using this mathematical approach, you could work out what the approximate value of your market and the keywords you are targeting is.

If you want to know more about how you can reach your maximum potential online for your business, contact Varn.