Vol 4: Turning Traffic into Dollars

In the previous articles addressing Search Engine Optimization and Web Advertising Campaigns (CPC Campaigns), we discussed overall strategies for bringing traffic to your website and a step-by-step list on how to get your site ready for search engines. In this article, we look at something just as important: understanding if your site is ready for paid advertising and CPC campaigns.

A common tactic to address slow web sales is to pay for advertising on various web networks (Google or Overture being the most pervasive). This, however, may not be the right “first thing” to actually do. To understand why, let’s look at a simple formula that describes web sales:

Traffic to the Site * Visitor Conversion To Customer * Average Order = Web Revenue

What does each part of the formula mean?

“Traffic to the Site” is just what it sounds like: if you have 1000 unique visitors (in web reporting this is known as Unique IP Addresses) coming to your site each month, then you can plug “1000” into that part of the formula. This number is not equitable with “Hits” or “Page Views” as these are not representative of actual people coming to your site, only how many pages are being viewed.

“Visitor Conversion To Customer” means the percentage at which your site converts a new, random, unique visitor into an actual, buying customer. If you have 100 people coming to your site in a month, and only one places an order, your conversion percentage is 1%. Conversion percentages for web sites vary dramatically, with most sites shooting for 2-5%.

“Average Order” is simply the averaged total (or subtotal) of web orders placed. If a site is selling widgets for $19.95, and the average order is for 2 widgets, then the average order subtotal would be $39.85.

So, what does all of this mean? We all learned in math that anything that is multiplied by zero is still zero. Applying this to the above formula shows that increasing web traffic to your site could still lead to a ZERO. If your conversion percentage is 0% (or something lower than 1%), paying for traffic into your site is a bad investment.

When does paying for traffic become worthwhile? This is dependent on your profit margins (or cost of goods), conversion percentage, and average web orders. To illustrate this, let’s start with the above example of selling widgets, with two widgets being sold for each order and assume the profit margin is 50%. That means for every order, $19.95 is profit. We also need a conversion percentage, let’s say 5%. This would mean for every 1000 visitors, 50 people actually buy something from you, for a total profit of $997.00. If the key words and phrases you want to advertise with cost you more than $997 per 1000 visitors, then you need to get the order average OR the conversion percentage up, in order to justify the advertising cost. If the cost of those 1000 visitors is lower than $997, then the potential exists for this to be a lucrative opportunity. Clearly, this is a simple analysis, and each business will have to modify the formula to match their business.

What do you do if your conversion percentage is lower than 1%, or you need to get your conversion percentage higher? The short answer is: find out why visitors are not buying. We understand, this is easier said than done. Your best bet in getting started is with customers you already have. Ask them what they liked and disliked about your site. Do not fall into the trap of jumping on the obvious answers or the first answer to come to you. Often times, there are multiple reasons why your conversion percentage is lower than it could be. The web reports your site generates automatically can also give you insight into why visitors are not buying, but analysis of these reports usually requires an experienced person who knows how to interpret the numbers.

Here is a short list of common issues we see, that once fixed, led to higher conversion percentages:

1. Hard-to-use or unintuitive web site navigation
2. Low quality product pictures
3. Product descriptions meaningless or too short
4. Splash page for the front page
5. Heavy use of graphics makes pages download too slow
6. Shopping experience confusing or too many distractions

All of these can be summarized as: your website does not meet visitor’s expectations. Figure out what their expectations are, change the site to meet their expectations, and watch your website grow!