In a digital age all of society is depend on the web in some capacity. Generally, every business will embark on the journey of constructing their web presence which will be centered around their website. Such an investment should be analyzed to determine its effectiveness in driving sales.
This can be done by determining the gains or loss generated by said site in relation to its cost. The Return on Investment (ROI) is used to perform these calculations.
ROI is equal to the profit gained from generated leads over the cost of creating the website and the cost of maintenance the website. The result is expressed as a percentage or ratio.
The Cost of Creating the Website
As we mentioned, costs can vary wildly. The dollars and hours spent during design and development are the baseline for the ROI.
The Cost of Maintaining the Website
Post-launch, out of pocket expenses – such as hosting – are probably low. But there is the time involved in content marketing (blogging, email marketing, social media), and potential advertising costs may be high.
The sales funnel is the centerpiece of online marketing and facilitates the acquisition of customers and ultimately sales.
The number of visitors is the top line for measuring success. If the site was designed to be search engine friendly, the site is far more likely to perform well in search engines. Ultimately, it’s the marketing activity, not web design, that has the biggest impact on traffic.
The percentage of visitors who take action, becoming a lead or purchasing through e-commerce, determines the bottom line results. Unlike traffic, it’s the web design, not marketing activity, that has an impact on conversions. But together, traffic times the conversion rate equals results.
In simple terms, you can work out exactly how much a lead is worth to your business. Once you have made this calculation, you need to consider how much you are currently spending to promote your (current) website.
The percentage of leads that make a purchase, become sales. Thus, the total web-generated sales are the product of the leads at a given closing rate. The average closing rate across all industries is 19%. The average closing rate across all industries is 19%.
The profit is the price per unit of a given product or service minus the cost of goods sold or delivery cost. The delivery cost are the expenses necessary to provide your good or service including payroll, administrative overhead, and operating costs (e.g. office space, utility bills, etc.).
The net profit is the product of total number of sales and the profit margin.
Download the Free Template
Enter your name and email in the form below and download the free template now.
Free Return on Investment Calculator Workbook & Template
Download the free Excel template now to advance your finance knowledge!
If you consider how many more leads you think a new website will bring in (if your current marketing spend remains the same), a simple calculation can then be performed, and you can establish how long a new website will take to pay for itself.
Once you start viewing a website as an investment (it is a sound one at that), you can really start to crunch the numbers and decide what is best for your business.
Even though you can place an anticipated dollar value on a new website investment, there are other brand perception benefits. Once you take into account the effects, a potential customers perception of your brand can have, you will start the realise that a new website investment, goes far beyond any perceivable dollar value.
- Peacock, Amelia. "Small Business Websites in 2017: Survey" Clutch, 14 March 2017.
- Cupman, Julia. "Measuring & Maximising The Return On Investment Of Market Research" B2B International
- "Measuring & Maximising The Return On Investment Of Market Research."