Pixel Fish Digital Marketing Blog

How to Measure the ROI of your Website

Posted by Kevin Fouche on Apr 19, 2017
Kevin Fouche

Without a doubt, a new business website is an investment. Especially when you first build it, you need to make sure that its cost will be justified by its future value on your business sales and growth. But for many businesses, estimating that return on investment can be difficult.

Fortunately, it doesn't have to be that way. With just a few tips, you can get a better idea of whether your website's cost will be justified by a positive return. Keep reading to learn how to measure the ROI of your website, including a sample calculation at the end of the post.

How to Measure the ROI of your Website

1. Know Your Website Cost

Of course, you need to know how much your business is paying for your website. That will include not just the initial set up cost, but also annual maintenance costs such as upkeep and the cost of your domain. Work with your web developer for a reasonably accurate estimate on this variable.

2. Track Your Visitors

Any calculation of ROI will have to begin with tracking your web visitors. If you don't have an effective way of analyzing your website traffic, you will find it difficult to measure exactly how much revenue your website is generating. A solution like Google Analytics can help you accomplish this step.

3. Understand Your Sales Funnel

Once you understand how many visitors your website brings in each month, it makes sense to understand how they move through your sales funnel. In other words, how many of your visitors follow up to become enquiries, either via a form on your website or by contacting you directly?

Of course, the sales funnel doesn't end with enquiry conversions. You also have to understand your close rate, or the percentage of leads who end up as customers. For most industries, the visitor-to-lead conversion rate is around 3 per cent, and the close rate hovers around 20 per cent. But your rates may differ, which is what makes understanding your own, unique sales funnel so important.

4. Calculate Your Customer Lifetime Value

Finally, any calculation of website ROI has to include an understanding of how much revenue you can expect from a new customer. There are many ways to calculate your average customer lifetime value (CLV), and much of the accuracy will come down to whether your business is based on subscriptions or one-time sales. This infographic can get you started.

 

How to Measure the ROI of Your Website

Keeping the above tips in mind, let's walk through a quick calculation that helps you better measure your website's ROI.

Say, for example, that your website costs $6,000 to develop. With an estimation that it will last 3 years before a redesign is needed, that means your yearly cost of web development will be $2,000.

To justify this investment, it has to result in at least $2,000 (and preferably more) every year that it's live. If you know that your average customer brings in $1,000 in revenue, that means your website should be directly responsible for 2 new customers per year.

Now, it's time to estimate the impact your website is having in terms of generating customers. Based on the tips above, you may know that the website brings in 500 visits per month, or 6,000 per year. If on average, 3% of these visitors become enquiries, your website will generate 180 new leads per year. And again, if 20% of these leads become customers, that means 36 new customers annually.

Once you know the average value of your customers, the rest of your website ROI calculation is easy. Simply multiply it by the above 36; if your average customer is worth $500, that means your website generates $18,000 in revenue each year. Contrast that with the $2,000 annual cost, and your annual website ROI is 900 per cent. The formula:

(average customer value x annual customers generated) / annual website cost = website ROI.

Of course, to accomplish that goal, you need a website that build specifically to attract visitors, generate enquiries, and convert customers. For help in building that online presence, contact us.

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Topics: Website Design