The Magic Money Making Formula in Online Marketing

You have a great website. You spent a lot of money on it. The designer put in all the latest bells and whistles to make your site as attractive as possible for your potential customers. After all is said and done, however, you find your site is not generating the revenue you think it should. You have great products, great customer service, but no one is buying.

So you talk to your web designer. She says you need more traffic to your site that by increasing traffic you increase sales potential. You invest in an SEO plan that optimizes your site, hoping that better search engine rankings mean more sales. You even gamble with a pay-per-click campaign to see if that will generate more traffic. After months of trying, you find you’re getting more traffic to your site, but customers are still not buying, at least not enough to justify your investment.

I have seen this flawed process repeated over and over by small businesses. This process assumes that traffic is the main factor in generating Internet revenue when it fact it’s not. Making money online is a simple formula:

V * CR * ATV = REVENUE

V is the number of visitors that visit your website. CR is the conversion rate. This is the percentage of website visitors that become customers and actually respond to your call to action, whether that is purchasing something, signing up for a newsletter, or requesting more information. The ATV or Average Transaction Value is the amount of revenue each conversion represents.

Example: Let’s say you have 1000 visitors coming to your site each month converting at a rate of 2% with an average transaction value of $50. The formula looks like this:

1000 * 2% * $50 = $1,000

Conversion Rate (CR) is the most important factor in the equation. The Internet does not lack for traffic; neither will your website if it is designed with SEO and marketing in mind. Where most businesses drop the ball is conversions. Unclear or missing calls-to-action mean people won’t buy, sign up, or contact you. Increasing traffic doesn’t fix this; it just means more people are leaving your site with neutral or negative feelings about your company. Furthermore, increasing traffic takes more money.

What happens if we double the conversion rate? We double revenue without having to invest in schemes to increase traffic:

1000 * 4% * $50 = $2,000

So what is the key to improving conversions on your website? Planning – thinking through the entire user’s experience on your site and intentionally moving them towards a specific course of action. More on that next time.

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