Category : SEO Blog

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!

Sales

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.

Profits

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.

Traffic

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.

Conversions

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.

Analysis

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

Shawn Campbell is the co-founder and Chief Search Engine Optimizer at Red Carpet Web Promotion, Inc.
www.redcarpetweb.com

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Affiliate marketing

The Merchant’s guide to affiliate marketing

Affiliate marketing is the invisible sales force behind e-commerce. It is the wires that we do not always see, but that we know are carrying a current. Setting up and running a successful affiliate campaign is not as easy as connecting a few loose wires. An affiliate campaign requires experience and planning. Fortunately affiliate marketing has been around for about six years, so you can learn from the experience of others. As for planning, we have assembled some guidelines to facilitate the task.

Affiliate marketing is used by a long list of companies of all sizes. Some examples of popular companies with affiliate programs are Amazon, Gap, IBM and Xerox. These merchants, for example, pay commissions to anyone who generates sales by placing links to the merchant’s products on their website.

Chris Diggins is a programmer who works from his cosy apartment in Montreal. Three years ago he created an online guide for Montreal students that consisted of useful resources and links to other websites that would be interesting to international students in Montreal. (See www.studentsguide.com). The idea was to generate traffic and then to find a way to make money with that traffic (Sound familiar?). However, rather than selling advertising space on his site, Diggins chose to become an affiliate. In other words, he found merchants who would give him commissions on goods that he sold from his site. Soon after, the student’s guide had a poster gallery where visitors could browse through popular posters and order posters from a merchant’s site. For each poster that Diggins sold from his Montreal student’s guide he received 25% of the sale price. He has built other sites since and currently generates sales in excess of $25,000 per month (He receives about 25% of that amount in commissions).

How do you attract people like Diggins to sell your products? First you need to figure out how to set up a program to track your sales from affiliates. You can track your sales with a third party affiliate manager or you may decide to create and manage your own affiliate program in-house.

Third party

Third party affiliate managing companies take care of many of the tasks involved in running an affiliate program.
They provide:

  • Quick exposure
  • Experience dealing with affiliates
  • Infrastructure for tracking and reporting
  • Access to a large number of potential affiliates who would be interested in marketing your products on their website or creating websites to market your products.

The most popular third party affiliate managers are Commission Junction, Be Free, Linkshare and Reporting.net. Depending on which company you choose, you will be required to pay a start up fee, an additional percentage of the commissions that you are offering your affiliates or a hefty fixed annual fee.

Chris Diggins’ advice about using a third party is that it is a good idea, especially if you are just starting your affiliate program, or if you do not have much experience in affiliate marketing. Even with a third party there is still a lot of in-house work, including managing, verifying, responding and recruiting affiliates. After several months, if you realize that your affiliate campaign is successful enough to support an in-house affiliate program and that doing so will save you money in the long run, then it may be time to switch to an in-house system.

In-house

To bypass the third party affiliate manager, you really have to know what you are doing! Technical knowledge and experience dealing with an affiliate program are necessary. You will probably need a team of developers and an experienced affiliate program manager in order to run your affiliate campaign. Your team will require the following skills:

  1. Technical skills to update and improve the automated affiliate management system
  2. Marketing skills for strategies to make your affiliate program successful
  3. People-relation skills to keep all of your affiliates happy

Top affiliates

With either a third party or an in-house system, you will soon learn that a few of your affiliates are generating most of your affiliate sales. The 5/95 rule applies in which approximately 5% of your affiliates will be generating approximately 95% of your sales. Many merchants have wondered how to attract “top affiliates.” Top affiliates are hard to find and hard to attract.

Once you have signed up affiliates and they have set up links to your site, it is important that they remain satisfied. Treat your best affiliates with special care to make sure that they continue to work for you.

  • Remember that affiliates can quickly grab one of your competitors instead of you, so it is important that they remain satisfied with your affiliate program.
  • Remember that affiliates talk amongst themselves. If you upset them, if you are not paying them on time or if you lower their commissions it will really hurt your affiliate program.
  • Remember that you cannot take money away from affiliates once you have already paid them. So take returned items into account when choosing your commission structure and schedule.

Learn from your competitors

Affiliate marketing is more flexible than just paying commissions to your affiliates “per sale.” There are various models of commissions. The most popular commission models are: “per sale”, “per lead”, and “per hit.” In order to choose a commission structure, first consider what type of commission your competitors offer. Each industry has its own standard.
Click here for more details.

To be set up you must 1) have the tracking program in place, 2) have determined your commission structure 3) have attracted a team of affiliates. Once you are set up the next task is to help your affiliates to do well. Encourage affiliates by offering extra incentives. Provide tools such as banners and searches for them to link to your site. Think of them as a sales team that requires your support. Diggins’ says that an affiliate is:

“like a travelling sales man, like a franchiser, like many things but no exact parallel exists in traditional business. You have to treat it just as seriously as if you were franchising things out. You can’t go in half-cocked. The biggest drawback is poor planning. If you have to go back and fix an error such as lowering commission rates for instance, it will cause a major setback to your affiliate program.”

If you have been planning to launch your affiliate program I hope that I have provided new points for you consider. The best advice that I have heard so far is to become an affiliate for another merchant before launching your own program.

Good luck!
Jason Campbell

Jason interviewed Chris Diggins on July 30th 2001 on the subject of setting up an affiliate campaign.
If you have any comments on this article, please respond to news@redcarpetweb.com

Jason Campbell is the co-founder and President at Red Carpet Web Promotion, Inc.

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