An ROI, also known as a Return on Investment, is a ratio that determines the gain relative to the investment. In order to anticipate the profitability of a website before its creation, several things must be taken into account: its own objectives, performance indicators, and competitors. This will be detailed in the article below.
Golden section ratio
The return on investment of a website is an important element to be taken into account when dealing with the web marketing process. However, its calculation can be complex since the outcome is often required before the site is created! The ROI of a website is the ratio between the net profit and the costs it generates. The cost of the website is not simple. Site owners must take into account the additional maintenance costs (equipment, personnel, etc.). This can then be defined according to the following formula: (Turnover - Costs)/Costs.
For example, an e-commerce website with a cost of $500 for the first year and a maintenance cost of $50/month. Sales generated through the website amount to $7,000 a year. The ROI will thus be calculated as follows: ROI = (7000 - (500 + 600)) / (500 + 600) = 69.9%.
How to anticipate the profitability of a website before its creation
Before a person can calculate anything relating to a Denver Website ROI, they should determine the goals of their business, by setting numbers on said goals. The purpose of a website will first be determined in relation to the owner’s activity. According to the marketing strategy:
- For an e-commerce site, the objectives may be encrypted with the estimated number of sales with an average selling price.
- For a showcase site, the objectives may be determined by the number of contacts, the number of visits or the time spent on the various pages of its content.
Define performance indicators and the conversion rate
Once the objectives have been set, it is necessary to define the performance indicators that will allow the owner to determine a conversion rate and to put a figure on the estimated profitability of the website. To sum up, here are the steps to needed to estimate a Website ROI Denver:
- Definition of objectives and performance indicators;
- Estimated conversion rate and estimated turnover related to the website;
- Estimated website costs; and the
- ROI calculation.
If the owner of a website needs additional elements to make their estimates, the competitive analysis method is also possible and effective. Indeed, by targeting their competitors in the same sector, folks can access their turnover, as well as analyze their marketing strategies. Example: You are a home-based troubleshooting company without a website. During your market research, you find that your competitors achieve, on average, a turnover of $150000. It is then necessary to determine the following elements (estimated below):
- Paper support: 15%
- Web support: 11%
- Word of mouth: 40%
- Commercial: 25%
- Yellow Pages and other directories: 5%
- Other: 4%
Estimated budget allocated to this website:
- Conception/Realization: $1000
- Accommodation: $100
- Maintenance: $300
- Writing/Community Management: $9000
The turnover generated by the website is (150000 times 11%) = $16,500. The cost related to the website is (1000 + 100 + 300 + 9000) = $10,400. People can therefore estimate an ROI at ((16500 - 10400) / 10400) times 100 = 58.65.
Help from Google Analytics
Since September 2014, Google Analytics has deployed its new benchmark interface which reports different variables on each website’ competition, once the site is online. The results will allow website owners to compare their forecast against the existing actions and performance in their business sector, free of charge. Among the available data are the number of new and return visits, the time spent on the site, the bounce rate is also observed, the geolocation of the traffic and the connection terminal. This data refers to websites that have checked an "Anonymously share with Google and other services" box when registering on Google Analytics.