Jan 06 2014

How Much Money Is A Web Visitor Worth?

Category: conversion rate optimizationTom Shivers

 

buying-with-creditcardWhy calculate the value of a web visitor?
What if you knew every time you spent $1 to get traffic to your site, you made $1.50? I’ll bet you could find a few dollars for that. This is what the Amazons of the web know and it’s a very real factor in how they grew to where they are today.

When you know what a web visitor is worth to your business, then you know how much you should be spending to get that visitor to your website and what is too much to spend.

For example, let’s say your average sale brings in $500 profit, how many leads did it take to get that sale? Let’s say your average number of leads to get a sale is 5, so every five leads you get from your website, one of them becomes a sale. Now, how much traffic does it take to get a lead? Lets say your average amount of traffic to get a lead is 100 unique visitors, so for every 100 web visitors to your site, you get one lead.

Let’s review:

  • Average sale is worth $500 profit (not revenue)
  • Average leads to get a sale is 5
  • Average traffic to get a lead is 100

That means you need 500 web visitors to get enough leads to make one sale which represents on average a $500 profit. So the value of a web visitor in this case is $1.

In order to remain profitable, you need to spend on average less than $1 per web visitor. Let’s say you can spend 75 cents on average to get a web visitor to your site, you can do that all day long and make money. But as soon as your average cost to get a visitor to your site goes over $1, you lose money.

If you consistently spend less than $1 to make a dollar the more you spend the more you’ll make. This is why you must calculate the value of a web visitor for your business.

Here’s a simple value of a web visitor calculator, go ahead… insert some numbers in the top 3 spots:

One of the obvious benefits to knowing the value of a web visitor is in making decisions about traffic sources: PPC, SEO, retargeting, ad networks, big data, etc. It makes sense to analyze each traffic source for profitability, even down to specific keywords – something I do for clients every 90 days. And when you know that value, it can be a point of negotiation with some advertisers.

Optimizing your traffic sources is where most people start and end with this process and for some that alone is worth it, but there are other benefits too.

After you are making money every time you spend to get web visitors to your site (traffic source optimization), your next goal is to reduce the amount of traffic required to get a lead, also known by marketers as the leads conversion rate.

In the example above the leads conversion rate is 1%, but imagine if you could double the number of leads from the same amount of traffic with a leads conversion rate of 2%.

There are a number of strategies to double the leads conversion rate, but I often start by making it easy for web visitors to contact you from any device. When was the last time you got in the shoes of your ideal prospect and tried to make contact from a desktop, mobile or tablet device while browsing your site? Just a suggestion :)

In the example above let’s say you now have a leads conversion rate of 2%, in other words, instead of needing 100 visitors to get a lead, you now only need 50 unique visitors. What does that do to the value of a web visitor? It bumps it up to $2! And that might mean you can get into more desirable traffic sources and still remain profitable.

Now that you are getting more leads with the same amount of traffic due to a higher leads conversion rate, it’s time to reduce the number of leads to get a sale – also known as the sales conversion rate.

In the above example the sales conversion rate is 20%, but what if you could close your leads at a higher percentage, like maybe 25% or making one sale for every 4 leads that come in? That means the value of a web visitor is up to $2.50 >>> more gravy!

Here are more factors that impact the value of a web visitor:

  • Average number of sales per customer
  • Average dollar sale
  • Margin
  • Lifetime value of a customer

Yes there are strategies to improve each of these areas as well.

If you’d like to go to the next level with the value of a web visitor, you might try out one of these return on investment (ROI) calculators:

Want more strategies to increase your site’s productivity over the next 90 days? Give me a ring-a-ding-ding.

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7 Responses to “How Much Money Is A Web Visitor Worth?”

  1. Ryan Biddulph says:

    Hi Tom,

    Great breakdown here :) Pay attention to your metrics. Understand the numbers which lead up to your sale. Number crunching can make your job so much easier.

    Thanks for sharing!
    Ryan Biddulph recently posted..The Worst Kind of Ghostwriter I Have SeenMy Profile

  2. Sunday says:

    I guess I have learned new skill in visitor calculation. The point made in this post may not be all that relevant for those starting out but companies like Amazon and others that have been established would find the calculation of leads and traffic vital for their marketing campaign.

    Nevertheless, there is no harm in understanding what the worth of a site’s visitor is in terms of revenue generated. The real worth of a visitors lies in the difference between resources spend for generating leads and the return on investment.

    I have shared this comment in kingged.com where this post was found.

    Sunday – kingged.com contributor

  3. Sam Adeyinka says:

    Hey Tom, it’s good to be here on your blog today. :) Compliments of the season!

    Trust me you shared a very fantastic post and one that I truly resonated with and I’m glad that I could actually draw lesson from it.

    This would really help me I’m sure in growing my blog.

    Thanks for sharing with this great community! :D

    Sam
    Sam Adeyinka recently posted..101 Top Questions Everyone Should AskMy Profile

  4. Tom Shivers says:

    It may seem cumbersome to get accurate numbers to calculate your ROI and then the value of a web visitor, but it’s well worth it and then it’s easier to rinse and repeat every 90 days.
    Tom Shivers recently posted..Quality Content Part 2: How To Measure Content EngagementMy Profile

  5. Vernessa Taylor says:

    Hi Tom,

    David Leonhardt (@amabaie) shared this with us over on Kingged, so I’ve copied my comment over here.

    Many small (especially “micro”) business owners will balk at “doing the math.” In a small biz Skype group I participate in, there’s been discussion about understanding conversions. Clear explanations and easy to follow formulas like these make it easier to understand what to measure and how the numbers affect what we do (or don’t do).
    Vernessa Taylor recently posted..Take Charge of Your Stats: Piwik Analytics vs. Google AnalyticsMy Profile

  6. Tom Shivers says:

    Thanks Vernessa, great point, I’ll head over to kingged and check out the conversation.
    Tom Shivers recently posted..Quality Content: The Mark Of InfluenceMy Profile

  7. Enstine Muki says:

    Hey Tom,

    This is really an interesting breakdown.
    I think hitting more targeted campaigns will surely double the number of leads for the same amount of traffic and split testing landing pages will gradually lead to a better conversion.

    Another point to double sales is adding more value to the product or service by offering irresistible bonuses ;)

    Excellent thoughts bro
    Enstine Muki recently posted..5 Things You Shouldn’t Do As A Blogger In 2014!My Profile