Knowing the Numbers Key to Web Advertising
Experience has shown that when Web site managers take the time to implement this one strategy they see a dramatic increase in the effectiveness of their advertising. And the interesting thing is, it really isn't all that complicated.
If you know your numbers, you'll know how to make money with your online advertising. By knowing what your numbers (metrics) are, you will be able to make your online marketing efforts more predictable.
It takes the guesswork out of how much to spend and what is a normal response for your product.
Here are the most important metrics for you to know:
• Response rate — This is the number of responses you received from an advertisement. For example, if you advertised to 1,000 people and 100 clicked on your ad, your response rate would be 10 percent.
• Sales conversion — This is the average percentage of people who buy from your Web page. For example, if three out of 100 people who visit your site end up purchasing your product, your sales conversion is 3 percent.
• Visitor value — This is the amount of money an average visitor spends on your site. For example, if three out of 100 people purchase your product, and your product sells for $100, each visitor is worth $3 because 100 visitors equal $300 in sales. This is a critical number when you are buying traffic by the click.
• Per lead cost — This is the amount of money it costs to generate a lead. If you spent $100 on an ad and you generated 100 subscribers/leads to your mailing list, then your lead cost was $1 per lead, or $100 divided by the number of leads generated.
• Per sale cost — This is the amount of money it costs to generate a sale. You figure this number by taking the total dollar amount spent on the promotion and dividing it by the number of sales generated. For example, if you spent $100 and had 20 sales, you would divide $100 by 20 to find out that you were experiencing a $5 per sale cost.
Knowing these numbers will give you a benchmark to use against other advertising campaigns. If you see something going wrong you can stop the promotion before it gets out of hand. This is what most people who are running online businesses fail to do.
They keep running ads and have no idea what they can afford to pay. If you know your typical response rate is 6 percent in an ad and your conversion is 2 percent, you will know exactly what to expect from your advertising and how to create new ad campaigns that will reach the same type of audience.
If there is a Web marketing topic you would like me to cover, submit your
idea at www.AskDionJones.com, I
will focus future columns on the topics you suggest.
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Dion Jones is a Web marketing specialist and is affiliated with the BYU
Center for Entrepreneurship.