Calculating website Return On Investment – what is your website doing for your business?

Having a website for your business is one thing, but is it working hard for the business, or just squatting in cyberspace?

The answer, surprisingly, is that many companies do not know. You could be seriously underestimating its value to the business. Or you might be failing to make the best use of your website, or worse still, actually damaging your company’s business and brand. It might look slick, but without measuring website performance, you’ll never know what is going on under the bonnet.

A majority of companies still do not carry out any web analytics at all. We’ve seen any number of companies over the years spend tens of thousands of pounds on a costly re-design because of a vague feeling their website doesn’t work – and then repeat the same mistakes because they don’t carry out analytics first to find out what the problems are. Some of the companies that do limited analytics do not fully understand what they are looking at. Many people still talk about the numbers of hits their website receives mistakenly believing that these are the same as either page impressions, or worse, website visitors. Sometimes a little knowledge is a dangerous thing.

Carrying out proper web analytics is vital to determining the true value of your website to your business. There are many aspects to analytics in assessing website performance, such as using Key Performance Indicators. The bottom line though is to try and calculate its value to the business as a whole – the website Return On Investment (ROI).

Calculating website return on investment

For an e-commerce website, this might look fairly straightforward. Determining revenue through direct sales and the lifetime value of repeat customers gives the income stream. Whilst your website might not generate income directly, tracking the conversion rate of enquiries made by email or telephone calls to sales (and the average sale value) will give you a cash value for those enquiries.

Similarly, whilst some websites are technically information-only, they play a part in the sales process by referring leads to partner websites that handle sales. Tracking those leads by using redirect pages and then working with your partners to determine leads to sales conversion rates and average sales value also provides a monetary value attributable to your website.

Revealing the hidden benefits of a website

Cost avoidance is another area where your website could be helping your business without you realising it. If your website can reduce the number of enquiries made to a call centre it could save you a fortune. IBM claim to save $2 billion a year in call centre costs with their online support website. Even for a small business, with limited human resources, key personnel could by using their time more profitably than answering questions that could be answered, for example, in a Frequently Asked Questions section of the website. Calculating average costs for a phone call, email and a help page request – which will vary from company to company – should enable you to calculate savings. A word of warning though – because a customer reads a help page, doesn’t mean an issue is resolved to their satisfaction. Making help resources available that are both effective and cheaper is an art form.

For e-commerce and information-only websites alike, there are also more imaginative ways of determining website ROI. Take, for example making white papers, annual reports or product catalogues available to download. The baseline cost of printing and posting an annual report might be £5. The cost of downloading the same document will be far less, say 25p to reformat the document and server costs. 500 downloads a month would equal an annual saving of £28,500.

So if you are still thinking in terms of the number of hits your website attracts, then you are missing out on the information that will help you calculate the true value of your website to the business. But it is never too late to start; your competitors probably don’t know the value of their website either, so you can still gain a competitive advantage by beginning a program of web analytics.

Better website ROI

Calculating Return on Investment is the starting point, not the final goal. Once you know what you have an initial figure, you want to look at ways to better website ROI.

Web analytics can help you to identify any weak points in your website offering that undermines your conversion rates. Are people abandoning shopping carts? Are visitors emailing you in appropriate numbers? Are visitors abandoning the website at specific pages? Once you have that information you can address the problems, and start to improve website ROI.

First published in 'Total Business' magazine, November 2005.

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