Web Statistics for Dummies (part 1: Sales)
Do you understand the numbers that your website generates? Do you know how many sales your site actually generates? Do you know how you can apply that knowledge to your business and cause it to grow?
I will answer all of the above, and also discuss how to use statistics to enhance your web business through the use of sales, traffic flow, uniques, hits, click-through rates, and many other important business factors. Part 1 focuses on sales and traffic, while part 2 is all about where your traffic is coming from (and how to get more of it!). Part 2 will be discussed in the next issue of our newsletter - so be sure to stay tuned!
The most obvious statistic for many businesses is sales.
Here are 2 of the most pertinent questions every business needs the answers to:
- How many sales do you make per day/month/year?
- How much profit do you make per sale?
Not hard figures to find, but how many sales actually came from your Internet business? Often it is easy to gather this figure simply by looking directly at either online sales, or by asking your customers ("How did you find us?"). But sometimes the Internet is just one part of a very complicated sales process. You may make all your sales in person, but how many of your clients go home and research your products/services using information found on your website?
These are the questions you need to find answers to in order to estimate how many sales were completed due to your Internet presence but not necessarily completed online. If you make sales online, the answers are easy. If you sell real estate or other "in person" products or services, then you have to ask your customers individually. Either way, it will come down to a concrete number that can provide insight into how you can grow your business.
From the number of sales made per month, you can easily figure out your gross sales amount. Then you have to take your expenses per sale into account and figure out your profits. Only cost of sale expenses should be deducted and NOT one-time expenses such as overhead. On the Internet, this would normally be the cost per click of pay-per-click campaigns (such as Google AdWords or Yahoo Marketing Solutions), or the CPM (cost per thousand) for banner ads, and of course, your direct costs for the item or service being sold. Once you have these figures in hand, you can then calculate your profit per sale.
So now that we know how many sales we make per month, and how much profit we're actually making off of those sales, let us take a look at how many potential customers walk through our virtual store. There are many different statistics for website traffic: page views, hits, daily uniques, monthly uniques, etc… Which one should you be using? From my own experience, I recommend using daily uniques.
Daily uniques measures how many unique visitors come to your site in a single day. By that we mean that no single user is counted twice in the same day even if they visit the store several times within a twenty-four hour period. Thus, if someone comes to your site four times on Monday, and six times on Tuesday, he/she would only count as two daily uniques.
Page Views measures how many times your page is viewed (usually including reloads). Page views are also counted for each page. Thus, if someone comes to your site four times on Monday and views eight pages each time, and six times on Tuesday (viewing two pages each time), you would measure (4 x 8) + (6 x 2), or 44 page views.
These statistics are usually available through your server's statistics program. Alternatively, you could also use one of a myriad of other statistics programs available on the Internet. For most of our clients we set up www.hitbox.com on their sites. With our daily uniques per month figure in-hand, we suddenly have some very powerful numbers to work with.
Conversion is the measure of how many people who visited your site were subsequently converted into clients of some sort. Measuring how many uniques turn into buying customers is one method of conversion, but you could also measure how many visitors your site gets vs. how many visitors sign up to your newsletter, or how many of them go to a specific page, or how many send you an email, etc… These are all measures of conversions, and simply use the ratio of sales (or sign ups, emails, etc…) to visitors (or uniques).
Let us assume our site has the following statistics:
- Sales: 100/month
- Gross: $250/sale
- Average Profit: $150/sale
- Daily uniques: 12 000/month
In the above example, we have 100 sales per month, and 12000 daily uniques per month, thus our conversion ratio is 1:120 or 0.83%. Not such a bad ratio, especially for items that cost $250 each. Most markets would want a ratio of 1% or 2%, but of course each industry is different.
Using our imaginary numbers (profit of $150/sale, gross $250/sale) we can then figure out how healthy the online business really is. At 100 sales a month, we are grossing $25 000 per month, and profiting $15 000 per month. At this point in our analysis, we can now see that there are three ways in which to improve the site:
- Increase profit margin
- Increase conversions
- Increase traffic
1. Increasing profit margins involves lowering costs or raising prices, both of which fall out of the context of this article.
2. Increasing conversions involves optimizing the usability of your website; usability is a quality attribute that assesses how easy user interfaces are to use. For more information on usability and how it can help your Internet business, go to www.useit.com.
3. Increasing traffic involves improving your link network, your PPC campaign, or your search engine optimization. We will look at the latter in detail in Part Two of this article (exclusively available by signing up to our FREE Monthly Newsletter at www.RedCarpetWeb.com). Part Two will also discuss referrers, search engine keyphrases, search engine positions, and how to use these statistics to increase your sales. Don't miss out! Sign up for the Newsletter today and learn how you can make the most of all your web statistics and improve your Internet business.
Shawn Campbell is the co-founder and Chief Search Engine Optimizer at Red Carpet Web Promotion, Inc.