What are your visitors worth?
Whether you are sitting pretty at the top of Google and still looking for more
customers, or buried somewhere on page 50 of the results and wondering how customers
will ever find you, there comes a point when we all have to consider the option
of paying for traffic.
Paying for traffic, for instance through a PPC campaign, removes the vagaries
of relying on search engine positioning for results and can bring a welcome
boost to sales. It can however be a very efficient way of wasting money if you
don’t stick to the one golden rule of buying traffic:
Never pay more for your visitors than they are
worth to you.
Written down in front of you this probably looks like the worlds most obvious
statement, but it is frightening how many people ignore this basic principal
every day.
Working out what a visitor is worth
There have been books written describing various complex methods for determining
the value of visitors , but let’s keep this simply enough that we don’t
even need to reach for a calculator:
Average Visitor Value = Gross Profit / Unique Visitors
If you have your sales figures and website stats to hand then this is a calculation
that you can do in seconds. Dividing the gross profit for a month by the total
unique visitors over the same period gives us a simplistic, but sufficiently
accurate figure for what every visitor that month was worth to the company.
For instance, if we made £4,000 and had 7400 visitors then the average
value per visitor is 54p.
Applying this to your marketing
Now that we know what a visitor is worth to us we know that it is not worth
paying anything over this amount. In the above example, we would instantly know
that any marketing effort costing up 54p or more per visitor is not even worth
considering.
The easiest campaigns to make this comparison on are those that charge on a
cost per click, or CPC basis. These are priced based on the cost of sending
a customer to your site, and so allow a direct comparison with our customer
value. Other campaign types can be compared in a similar way, but let’s
continue with the simple theme for now.
Now that we know that advertising with a cost per visitor of (in our example)
54p or more will not make us any money, it is tempting to assume that the opposite
is true and that we can pay 53p a visitor and make a penny on each one all day
(If you really only wanting to me making a penny each time). This however ignores
an important factor:
Different marketing attracts different visitors
As you experiment with different marketing methods and continue to monitor
the average customer value, it is quite likely that the figures will fluctuate
as different campaigns run. Different advertising sources attract different
buyers, who in turn shop differently. This may at first seem to devalue the
figure completely.
In truth, these fluctuations become a vital tool in themselves, highlighting
the marketing methods that attract the best customers. Monitoring the average
worth figure in relation to particular campaigns will help you to maximise the
revenue earned from future campaigns. The overall figure will also provide you
with a realistic baseline as to what you can afford to pay on new marketing
strategies.
Making up the numbers
Now that you know what your average visitor is worth you are probably wondering
what you can do to increase that figure. Getting more value from each visitor
is a powerful way of increasing the impact of your existing marketing, but is
a topic that will have to wait until my next article.
- 02nd September 2004
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