My secret sauce – How to work out your websites return on investment

My secret sauce – How to work out your websites return on investment

In 2012, more than ever, knowing what your return on investment will be on your digital marketing strategy is crucial. Gone are the days when the finance director would sign off on an online marketing budget year on year without being able to measure success. Why? Because many companies didn’t see a return and no-one quite knew why.

Many aspects of digital marketing are still looked upon as a dark art shrouded in mystery. Geeks are the new ‘cool’ because they’re able to demystify what’s happening online and make sense of it – commercially (great news for me – ha!)

Well, this sunny Friday afternoon I have decided to hand over my own formula. I’ve been using it for about 4 years and provides me with very good estimates.

Use it wisely. As Spiderman’s Uncle Ben says “With great power comes great responsibility”. So pull up a comfy chair, and take your time to digest…

…MY SECRECT SAUCE

  1. Using the Google external keyword tool punch in the keywords you think people will use when they want to buy your product or service. We want keywords that will make your companies bank balance sing.
  2. The tool will tell you how many people are actually searching for those keywords. More importantly it will list related keywords you’ve probably not thought of. This tool is great for squashing opinions and internal debates about what keywords to use. (*Let’s say you end up with 500k searches each month)
  3. Choose about 5 of those keywords (because in the short term that’s probably a good number of keywords to start going for) which have healthy search volumes and then total that monthly figure. You’ll now know how many people each month search for your product or service. (*Let’s say 50k searches each month for those 5 chosen keywords) 
  4. If you have someone who does your search engine optimisation or Google marketing in-house or otherwise ask them to guess-timate how long it might take to rank for those keywords (If they’re experienced they’ll know). Take an outside view, so if they say 3 months, use 6 months. (*Let’s say it costs you £2,000 in time, money or resources)
  5. Now 6 months later, once you’re top 5 or 6 in Google for those chosen keywords you can reasonably estimate that 10% of those total searches will hit your website (*So 10% of 50k searches is 5k visitors each month to your website)
  6. The most important number to know now if you don’t already is your websites conversion rate. That is the rate at which people visit your website against those who actually convert into a customer or client. If you have no idea, the industry average is still single digits so use 1-5%. (*So 1% of 5k visitors a month is 50 conversions / customers each month)
  7. Work out what the average customer is worth to you (*Let’s say £100)
  8. Multiply the average value of your customer by the monthly customers / conversions (*So 50 x £100 = £5k)
  9. Minus the costs from the conversions (*So £5k – £2k = £3k profit) and you have your return on investment (yippeee!). You can add 20% either way to accommodate for the estimates used.

Now all you need to do is replace the above with the numbers specific to your business.

That’s it! Simple right? Ok I know it might take a little more than a Friday afternoon to get your head around..BUT…It’s worth it

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