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Creating a website from scratch or redesigning a website is one that requires investment in terms of money and labor. Most consider its development to be the foundation of their marketing campaigns as well as identity, and ignore the costs as an investment that will eventually pay off. But the question is, how does one know if the return on investing in a website is good or not? Investing excessively in creating a website won’t always bring a business new leads and sales, which makes it important for a business to accurately ascertain its return and record it for comparison. Keeping track of a business’ ROI not only helps businesses understand the profit/loss of the endeavor, but also helps them better understand what works for their website and what doesn’t early on, fixing needed changes before the loss is too great. In this article, we explore the significance of ROIs for websites and how businesses can accurately determine its value.
Return on Investment – ROI
This is a metric that is generally used to calculate the overall success of an investment. For a website, this means the success of the SEO your website can generate, and the response received from the marketing present on the site in the form of leads and conversions. It is a comparison between the amount of money spent into the site versus how much the company receives in turn.
The metrics in calculating a brand’s ROI depends upon what exactly it’s being calculated on. Generally, for a sales-based approach, the ROI is determined by the quantifiable numbers associated with sales. However, for a website-based ROI, qualitative elements like design and effective messaging also need to be ascertained to determine its true value. This is considered difficult due to the fact that qualitative elements are difficult to determine, and they aren’t always 100% accurate. However, focusing on the site’s key aspects can help paint an accurate image of a brand’s ROI.
The standard measurements used to determine ROI regardless of the type of business a brand is under include cost, leads and conversions, and closing ratio. These 3 factors are the key elements that can help a business accurately determine its return effectively.
Average leads generated x annual conversions = ROI
Annual website cost
The cost aspect of the formula includes the initial setup cost of the website and regular maintenance costs that are accumulated over a period of time. It also includes recurring costs like domain payments, design services and more. The second aspect of the formula is the value of the brand’s leads and conversions. This includes determining how much a potential customer will be worth based on the offerings a business provides, and the overall estimated average lifetime value of the customer. It also includes ascertaining leads by calculating how much a business would pay to generate a lead from a different platform or medium.
In addition to the formula presented above, the brand’s estimated closing ratio is also considered to be one of the final pieces of the puzzle when it comes to the accuracy of an ROI. It adds as a reconfirmation of the values that the ROI generates, as both inherently show similar trends.
Closing ratio: A brand’s closing ratio is determined by the number of sales made versus the number of quotes given to prospective customers.
Total Sales (Yearly)
Number of quotes sent out
For a website, it is the ratio between the conversions made and the leads generated.
Calculating ROI often involves various factors that are solely dependent on the type of business a company conducts. This article provides a brief look into the core aspects of ROI and one of its most important sub factors (closing ratio). By using this metric, businesses can gain a better understanding of what’s good for the business and what isn’t, aiding the business in their aim for success.
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