For many, their website is not only the foundation of their marketing but also their first major business expense. Your website is an investment, not just an expense – the hub through which you can generate leads and convert them into successful sales. Your website should bring a positive return on investment (ROI) and contribute to the financial success of your business.
ROI – your Return on Investment – can be used as a metric to measure the success of your SEO and marketing efforts based on the response you get. ROI, in short, is a comparison between the amount you invest into the site and how much you can get in return to make your investment worthwhile.
Your website is a business asset that should ideally maintain your existing customers while helping you to gain new ones.
However, when you invest in a brand new website or in scaling your current one, finding out what your ROI is can be a little more complicated – you’ll need to find out if you are getting the results that are worth the money you spent?
Actually calculating this ROI can be challenging. Ecommerce sites have an easier go of it because their ROI is more easily based on sales, but not everyone has an eCommerce site. Luckily there are some goals that are common across all websites, such as increasing brand awareness, growing engagement, building more leads, and increasing revenue. Your website design and messaging will play a big part in achieving these goals and increasing your ROI.
There are many factors that play into measuring the ROI of your website, which we’ll be breaking down in more detail in this article. Once you know where to look, there is no shortage of metrics that can help you determine the value of your site. These metrics will help you not only to better understand how many conversions you need to break even on your costs but also to refine your strategies and maximize the ones that bring in the highest returns.
Read on to understand how to calculate the true ROI of your website in just a few steps.
The Basics Of Website ROI
Your website benefits your ROI more than you may realize. A properly designed and marketed site brings an increase in site visitors, leading to higher conversions and improved brand awareness – all of which have an impact on your ROI.
Because websites can have very different purposes and goals, there is no exact ROI formula that can be applied to them all. There are several factors that have an impact on your website ROI, like how leads are generated, your CTA, site goals, and more.
Key Measurements for Calculating ROI of a website
The key measurements used when calculating ROI, regardless of the industry, are your website traffic, conversions, and closing ratio. In the simplest form, ROI can be calculated as follows:
How to calculate ROIMany of the numbers used in this calculation can be sourced from Google Analytics, but others you may need to calculate based on data you gather yourself. This is especially true if you want to track the ROI of more complex lead generation strategies like sales calls.
Calculate ROI of a website – extended
There are also further versions of this calculation, which are adapted to include future income earned (also known as lifetime customer value). The difficult part of doing this is that calculating your income from the website is not always as easy. You need to keep your original investment or biggest expenses in mind, and how it will detract from the total income you make through your site.
One of the most important factors in establishing the true ROI of your website is the overall amount that you’ve spent on the website from the get-go. This amount should include the initial cost of the domain plus site design and development, as well as the costs of ongoing support and maintenance. This cost depends entirely on the site design – the bigger and more intricate the site and design is, the higher the associated cost will be. On the other hand, the more you spend on your site, the higher your sales will have to be in order to have positive returns on your investment.
If you spend too little on your site, you risk being stuck with an end-product that is lower in quality and less effective at bringing in site visitors and conversions.
For reference, the average cost of a site in 2020 ranges between $12,000 and $150,000, while maintenance on these sites can go between $35 and $5000 a month. The expense part of the ROI calculation is easily accessible if you keep detailed financial records out of the gate.
The bigger challenge is quantifying the income that is gained from your website.
The next factor that should be considered when calculating your income from the website is your overall website traffic per month. Your ROI calculation will be highly dependent on the number of site visitors you get and your ability to track them.
You can calculate how many site visitors you get per month easily using Google Analytics. The calculation you want to use here is Total Visitors / Total Months = Monthly Traffic. The key is that once you understand how many site visitors you get per month, you can more accurately track your sales funnel and conversions.
The next step is to pay careful attention to your conversion rates. How many of these monthly site visitors act on your call to action or other marketing efforts and successfully convert into leads or sales?
Conversion rates don’t have to refer to sales only – as not all sites are eCommerce based, conversions can refer to people signing up to be users, downloading a whitepaper, upgrading from one level to another or any other goal you have set for site visitors.
The average web conversion rate ranges between 2 and 5%. For the sake of tracking your efforts over time, the conversion rate can arguably be more important than the conversion count. After all, you want consistency in your website numbers, and that’s why you should track the percentage of site visitors that turn into leads, landing page conversions, and more.
Finally, you’ll want to pay close attention to your closing ratio. Your closing ratio is the number of sales inquiries you have that convert into real sales. This ratio lets you know how efficient your site and marketing strategies have been. The higher the close rate, the higher the ROI.
Depending on the industry, sales closing ratios can range between 20 and 30%. The easiest way to calculate this ratio is by using the formula below:
For example, if you were to close 10 out of 40 potential deals, your closing ratio would be 25%. For most industries, the visitor-to-lead conversion rate is around 3-5%, although these rates can differ depending on the industry type.
The goal is to gain a deeper understanding of your sales funnel, which doesn’t necessarily end with conversions alone. If site visitors have become successful conversions, you can assume that your ROI on your website is going to be good and that your marketing efforts are working. If there are site visitors but no conversions, you’ll need to take a closer look at your sales funnel and see what’s not working.
What to Avoid
There are a few factors that are bad for a website’s ROI that you should both be aware of. You want to prioritize the elements of your site that give you the best ROI. While great web design can seem more appealing to site visitors, functionality needs to be put above all else.
Another factor that can negatively impact on ROI is selling too hard. Too many pop-up windows can make even a legitimate site feel spammy and stop visitors from becoming conversions. The same note applies in turn to third-party ads on your website – while this can be a source of additional income, it’s not a good practice for website design and can negatively affect conversions.
Lastly, while you may think that getting your site to the top of search results is the ultimate goal, being first on the list can be bad for your ROI. Reaching this point is expensive and resource-intensive with a high difficulty threshold, and few people are likely to interact with it.
The reason for this is that the first section of search results often brings up pay-per-click ads. If your site ranks at the top of results, people may skip over it due to the sheer amount of PPC ads they are exposed to on search engines.
It’s better to focus on your leads, conversion and closing rates which are palpable and have a positive effect on ROI. Rankings and traffic can come and go, especially with search engines changing ranking factors often. It’s all about that bottom line!
When calculating the ROI of your website, there will be many factors that you will need to take into careful consideration. Beyond measuring just the cost of your site, the site activity, and your closing ratio, there are other factors like labor costs, hosting and domain fees, that need to be taken into account.
ROI results will also differ greatly from business to business, and not all industries will have the same level of ROI on their websites. You’ll want to answer the question of how many conversions you need to obtain as a whole in order to balance the initial cost of building the website.
At the end of the day, this article should give you a clearer idea of how to calculate your website ROI. Your preliminary ROI can be gathered quickly using the calculations laid out above, but in essence, it comes down to your conversion rates, your website cost and activity, and the rate at which you can successfully close. Using these metrics, you’ll be able to calculate the averages for your specific website and business.