Estimating your website ROI may seem pretty daunting—especially if you run a non-ecommerce website. So, we’ve prepared this ultimate guide to website ROI to help you understand the return on investment (ROI) of your website, why it’s important for your business, and how to calculate it.
As a business owner, keeping a close eye on your website’s performance should be an essential part of your marketing strategy. This will give you a clue on whether to invest in a website redesign or focus on improving other aspects of your online marketing. Let’s dive in!
What is Website ROI?
In a nutshell, a website ROI is a metric used to evaluate the productivity of a website. It measures the investment yields of a website in relation to its cost. A website’s value should not be mistaken for its profit.
The ROI generated by your website largely depends on the effectiveness of your marketing strategy. While your website’s value is its overall worth which is based on various factors, including its generated profit (ROI).
Generally, a website’s ROI can be estimated with the simple formula below:
ROI = (Profit generated from the site – Cost of investment)/ Cost of investment
Cost of investment here refers to the total amount spent on creating, redesigning, and managing the website over a particular period. The profit is the net gain from your investment.
Website ROI can be calculated in percentage to better illustrated the amount and track progress. It can also be demonstrated using graphical or pictorial illustrations.
However, determining ROI is not as easy as it seems. Although determining the cost of investment is relatively straightforward, the investment value or profit may be difficult to determine. This is due to various factors like hidden costs, productivity, and so on. It is important to put all possible factors into consideration to know the true value of your website’s ROI.
A positive ROI over time shows that your website is productive and adds value to your business. While a negative ROI indicates that there is a need for more improvement. The result you get should guide you in your future business decisions concerning your website.
Why is Website ROI an Important Metric?
ROI is the ideal key performance indicator (KPI) used to measure the success of an investment. This is no different from your website since it is an essential asset designed to generate income.
Estimating your ROI is even more crucial if your website goals are to increase brand awareness, generate leads or grow engagement, as in a blog. You would need to closely track your website’s ROI to increase profit while achieving your website goals.
Calculating the ROI of your website gives valuable insight that can benefit your business in the long run. Some of them include:
1. Helps to improve your marketing strategy
Determining your website ROI will help you notice areas in your strategy to adjust and optimize for better results. This largely depends on the type of website you own and your business goals. Whether you target sales or brand awareness, your ROI can easily tell you if your website is a profitable marketing channel.
2. Specific areas to spend money on
To increase the productivity of your website, you need to be aware of where you need to invest more or less. Evaluating your website ROI will tell you what aspect of your website to improve, so you can hire the required professionals for the job. For instance, if you notice a progressive decrease in your ROI over time, this may be due to your website interface, content, or design. So, you may need to hire a web designer or content manager.
3. Important to sustain your marketing budget
As a business owner, sticking to your budget is essential to managing your overall finances. This is why calculating your website’s ROI is critical. The cost required to create, redesign, and manage a website is pretty high. So, your website’s ROI needs to be tracked to ensure its productivity.
4. Better utilization of marketing tools
When managing a website, you learn to explore various tools that are designed to help monitor and review your ROI. There are many tools available, and they range from simple to complex depending on your business and budget.
How Do you Track Website ROI?
To get started on tracking your website, you need to know which analytic tools to use. The most popular is Google Analytics. Most website owners use it because it is free, easy to navigate, and allows you to link your website to specific goals and evaluate its performance.
Tracking your website with Google Analytics can be relatively easy, especially if it runs on WordPress. You’d need to subscribe to a WordPress.com Pro plan that allows you to integrate Google Analytics and also enjoy other features.
To start tracking your website’s ROI, consider these metrics below:
1. Calculate the Overall Costs
Professional websites have several components that are maintained such as:
- A user-friendly interface with an to improve customer experience.
- An automated chat customer service that aims to convert site visitors to leads and subsequent customers.
- A SaaS and mobile app section that can generate leads.
- Quality content that educates visitors on the company’s products.
The cost for the maintenance of all these website components varies between $40 to $6,000. While a full redesign project may vary from $10,000 to $200,000 depending on the kind of website.
It is important to determine your overall cost before you calculate your website ROI. This is a crucial factor that can not be overlooked. Your actual ROI can be obtained when you include the initial costs of the website such as domain, site design, site development, maintenance, and support. Ensure to identify and estimate all your expenses.
You’re likely to spend more if your website design is highly detailed or if you require more sales to get a positive ROI. On the other hand, a less intricate site may require less cost to design and maintain but may not attract prospects or convert leads like a great website.
Some other cost factors to consider include project management, client communication, content management, and a content management system.
2. Define Your Website Goals
Your website goals are what give your tracking process a direction. It guides you to achieve what you want for your website.
The common goals that most websites aim for include:
- Increased sales
- Improved engagement and interaction with the brand
- Increase in lead and conversions
- Boost brand awareness
While some websites focus on increasing sales, others may be designed to create brand awareness and advocacy. So, ROI may not always be in monetary form.
3. Monitor Website Functions
The most common tool used to monitor website functions is Google Analytics. It tracks specific metrics called Key Performance Indicators (KPI). Website KPIs help you determine how to meet your goals with available time and resources. They help to define, evaluate and optimize the strategies you have to meet your goals. These include:
Website Traffic/Visitor Tracking
Measuring your website traffic is an important metric. It determines the number of visitors you get and how many of them you track within a month. This metric gives you insight into how you can use your number of site visitors to monitor or track your sales funnel and lead conversions.
Google Analytics is excellent for measuring website traffic. It compiles goals data according to your specific goals. It also allows you to set up advanced traffic sections if you want to identify, separate, and track different traffic channels that direct traffic to your website. Other analytic tools include Hubspot, Hotjar, and Woopra.
The formula to estimate this metric is:
Total Vistors/Total Months = Monthly Traffic
Your website conversion rate is the number of site visitors that successfully convert into leads or sales. It is one of the most vital metrics you should take note of.
Conversion rates depend on your type of website. If you run an e-commerce site, conversion rates are seen as the number of sales. However, if you own a non-eCommerce site with different goals, you may measure emails, content downloads, or signups as conversions.
Below is the formula you can use for this metric:
Conversion Rate = Monthly Conversions / Monthly Visitors
Conversion rates are measured in percentage and evaluated after a month. The value of the previous month is compared with that of the next month to measure progress.
Bounce rate measures the number of visitors that leave a website after viewing the first page. If you measure a low bounce rate, then it indicates that your website is capable of attracting visitors and generating leads.
But a high bounce rate may suggest the opposite. Reasons for a high bounce rate include device incompatibility, slow loading time, complicated interface, or outdated and inferior content.
Bounce rates help you to ascertain the areas in your website that needs funding and optimization.
The formula used is:
Bounce Rate = Number of single-page visits / Total number of site visits
4. Keep Track of Search Ranking
Search engine optimization (SEO) is one essential factor that can boost your website’s ROI. The higher the ranking of your website, the more traffic and leads you’re likely to get.
Tracking your website’s search engine ranking will help you know its visibility and how easy your target audience can find your site. It will also guide you on what strategies to implement to achieve your website goals.
Once you create or redesign your website, make sure to consistently optimize and update your posts to boost search engine ranking. A well-ranked website will improve user experience, attract the right audience and increase conversions.
5. Make Sure to Keep Records
One advantage of owning a website is that it serves as a means to collect valuable information to increase productivity. This helps you monitor and keep a record of the progress of your business. Information such as customer data, email subscribers, business records, and so on helps to define your marketing strategy and identify which prospects to follow up with.
Also, record keeping improves customer experience as you can relate with your prospects better and focus on meeting their needs.
Once you have your data, you can use a spreadsheet or any other tool to organize it into an accessible database.
6. Define and Monitor Your Sales Funnel
A sales funnel is simply the stages that your customers go through when making a purchase. One of the goals of your website should be to nurture your clients through these stages until they buy your product.
Defining your sales funnel is essential after you’ve evaluated your monthly traffic. This will help you know how efficient is your sales funnel by converting visitors to leads. A sales funnel progress from customer awareness, developing an interest, to creating a desire which then leads to action (making the purchase).
Your desired goal for your website should include your sales funnel. This way, you can monitor it through your website to determine your website ROI. If you have a high number of visitors but no conversions then you should redesign your sales funnel
7. Determine Your Closing Ratio
Your closing ratio is an essential metric that measures the number of sales you convert from generated leads. It evaluates how many sales are realized in relation to the number of propositions made. Basically, an increasing closing ratio leads to increasing income.
Closing ratio helps to determine the performance of your website and the rate of progress of its ROI. A low closing ratio indicates that your website needs redesigning and improvement, while a high closing rate shows that your website is efficient.
The formula for closing ratio is:
Closing Ratio = (Closed Deals) / (Total Sales Leads) X 100
8. Evaluate Your Customer Lifetime Value
Customer Lifetime Value (CLV) is a metric that evaluates the total expected profit your business website can earn from a particular customer during their period as a customer. You can use CLV as a metric to measure website ROI depending on whether your business centers on one-time sales or subscriptions.
Monitoring Your CLV helps you employ tactics to optimize your marketing, pricing, sales, and subsequently, customer retention. It also gives you insight on how to improve your website to satisfy existing customers.
A well-estimated CLV also enhances your forecasting skills. As a result, you know how to streamline your budget according to the demands of your clients and avoid overspending or underspending.
9. Your Website Lifespan
A website cannot last forever, but a great website can last for as long as 5 years or more. The average life span of a website is 2-3 years, but if well-maintained, it could serve for a longer period.
Your website lifespan is a valuable metric to consider because it can help you estimate the cost of maintenance which can affect your overall ROI. Website redesign helps to prolong the life of your website and improve its functions.
It is important to keep track of the lifespan of your website in relation to your competitors and search engines. This will help you keep you informed of due dates for redesigning.
Summing It Up: What is Your Website ROI?
Now that we’ve pointed out the necessary metrics required to measure website ROI, let us go into the calculation aspect to give you a practical example of how it is estimated.
For instance, if you spent $10,000 to create a website with a rough lifespan of 2 years, you’d spend $5,000 annually for a redesign after the 2-year period. The minimum return to expect from your website will be an amount higher than $5,000.
Assuming you earn $3,000 from a customer, then with all factors considered, your website should attract at least 3 new customers per year to maximize profit. This will lead to a progressive ROI in subsequent years.
To calculate the productivity of your website in attracting customers, estimate the website traffic. Let’s assume that your website brings 300 visits monthly, or 3600 yearly. If 5% of the average number of visitors turn to leads, then your website generates 180 leads annually. The primary goal is to convert these leads to new customers using the conversion rate. So, if 10% of the generated leads are converted to customers, then you have 18 new customers per year.
To sum up the final calculation of your website ROI, you need to know your average customer’s lifetime value (CLV). If a typical customer value is $1,000, then multiplying it by 18 will mean that your website generates revenue of $18,000 annually.
Considering your initial $5,000 annual cost of designing your website, you have an annual website ROI of 260%.
In real-life scenarios, you’d have to consider other factors that will affect total cost and revenue. However, the ROI generated should cover all expenses, that is, if you have good marketing strategies. This proves that running a website for your business is a valuable asset to invest in.
Over the years, websites have tremendously evolved to serve as a helpful asset for many businesses. A well-designed website is a key to improving online marketing, customer satisfaction, and subsequently, an improved return on investment (ROI).
A website serves as an excellent business tool in online marketing to improve lead generation, sales and increase income. But tracking your website’s ROI may seem challenging, depending on your website’s goals.
In this guide, we described what website return on investment (ROI) entails and why it is important for your business. We also explained how you can track and measure your ROI using the required metrics and tools. Before getting started to measure your website’s ROI, it is best to define your goals and hone your strategies for optimum efficiency.
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