Leveraging Website Stats to Increase Profitability
In this article, we will address three main points:
1. What are website statistics?
2. How do I interpret these statistics?
3. How can I use my findings to improve my site's effectiveness in achieving specific goals (i.e., increasing sales, reducing complaints, etc.)
What are website statistics?
Hidden in the depths of your website log files lie a plethora of useful information about your customers and prospects. Website statistics are often overlooked by marketing managers simply because many companies still do not have a methodology in place to interpret this data and apply the findings to improving the site. The importance of this data can be expressed through a simple analogy of the human body to a website. Human vital signs (pulse rate, blood pressure, body temperature, etc.) are to website statistics (hits, conversion, session duration, etc.), as physicians are to web marketers. Physicians determine relative health by examining vital signs and then comparing those values to a set of norms obtained through centuries of historical data. If, for example, your throat is sore, and you have the chills, your physician may hypothesize that you have contracted the flu and conduct further testing to prove or disprove his theory. Web marketers, by the same token, can monitor website statistics and benchmark these values against a set of industry specific ratios, to determine a site's health. For instance, if an Online bookstore has a 70% shopping cart abandonment rate (industry standard is 30%), the web marketer might hypothesize that the shopping cart has usability issues, and run tests to prove her theory. Further testing may uncover that shipping costs were not communicated early enough in the shopping cycle and that customers were turned off by the perceived high shipping costs. The key point here is to recognize the importance of these statistics as they pertain specifically to your industry and business, and what to do when the figures are outside of the norm.
To address this issue, we have put together a reference sheet that explains what these stats mean, how to interpret them, and most importantly, how to leverage these stats in making decisions that affect your website's profitability. This reference sheet will come in handy, especially for those operating E-commerce sites, or sites that measure success through sign-ups, inquiries, etc.
Web Statistics - Key Definitions:
- Impressions: advertising term used to indicate how many times an advertisement is served to a visitor. It does not necessarily guarantee that the visitor will actually see your banner/advertisement, simply that the ad is served.
- Hits: number of actions on a Web Server. In other words, if a visitor views a page with 3 images and 5 buttons, it will be counted as 9 hits (including the page itself). Hits are often confused with Page Views and Visits, which are defined below.
- Unique Visitors: Individuals who visited your site during the report period. If someone visits more than once, they are counted only the first time they visit.
- Page Views: Hits to files designated as pages. Supporting graphics and other non-page files are not counted.
- Visits: Number of times a visitor came to your site. If a visitor is idle longer than the idle-time limit, WebTrends assumes the visit was voluntarily terminated. If the visitor continues to browse your site after they reach the idle-time limit, a new visit is counted. The default idle-time limit is thirty minutes.
- Conversion Rate (first time vs. repeat visitor): The percentage of total visitors that place an order on your site. Conversion rates can also be expressed by the percentage of sign ups, inquiries or other goals you are trying to attain. avg. 2-4%
- CTR (Click through rate): The percentage of visitors that actually click on your banner advertisement, or link to get to the target page.
- CPC (Cost per click): What you spend to get a click to your site.
- CPA (Cost per acquisition): what you spend to acquire a name or other information required by your form. Generally refers to sign ups for newsletters, credit card application forms, etc.
- CPM (Cost per thousand impressions):
- CPL (Cost per lead):
- Bounce Rate: below 15% should be your target, although it depends on your industry and how targeted your overall advertising campaign is.
- Session Duration: how long a visitor stays on your site. This can be a measure of stickiness. The higher the number, the "stickier" your site.
- CPC Search Engine: these include programs such as Google's Adword Select, Overture (formerly GoTo.com), Looksmart (recently switched to a CPC model), FindWhat, and Sprinks. With CPC search engines, you can buy traffic to your site by bidding on certain terms (keywords).
- Cost/Revenue: This shows how much you are spending to acquire your revenues. The lower the percentage, the more profitable your business will be.
- Entry Page: The page where visitors enter your site. Most visitors will enter your site through the homepage; however, this will change once your pages get indexed in the search engines and/or you start promoting individual pages.
- Exit Page: the page where visitors exit your site. You should examine pages where the exit rate is particularly high - there could be something wrong with them.
- Click Trail: this is the path that visitors take while browsing your site. By taking a look at some of these common paths, you can improve the efficiency of the site by adjusting the navigation and the sequence of certain pages.
How do I interpret these statistics and how do I apply them to improve my site?
Ok, now you know what these terms mean, but now what? Most companies already have some sort of web statistics software that generates daily, weekly and monthly reports. Software such as Webtrends and Urchin do a great job in converting data from log files into colorful charts and concise tables; however, these figures need to be combined with stats that are not generally available from access logs, such as who bought how much of what, for what amount and when. The information below shows how to calculate important ratios, their respective industry averages, and what to do when your numbers fall outside of the acceptable ranges.
Bounce Rate (%)
How to calculate: # Visitors that use the homepage as the exit page / # of homepage visits
Industry Average: This figure is highly dependent on how targeted the traffic is that you are sending to the site.
Recommendations: There is ALWAYS a way to reduce bounce rate on your splash page. You should take an initial measurement of your bounce rate now and strive to improve this. If you are running an online store, consider promoting your most popular product on the splash page or running enticing promotions - anything to get visitors to interested enough to click deeper into the site.
Repeat Customer Sales (%)
How to calculate: Existing customer sales/total customer sales
Industry Average: There is no industry average per se for this metric. It depends on how long you have been in business. As a general rule of thumb, the longer you've been around, the higher the number of repeat customers.
Recommendations: If you notice that the percentage of repeat customers is not growing over time, this is a red flag. You need to institute some sort customer appreciation/loyalty program that ensures that keeps you connected to your new customers. This can be achieved through a e-newsletter that offers genuinely useful information sent out to customers on a monthly basis.
Shopping Cart Abandonment Rate (%)
How to calculate: # of orders / # of visitors that hit your shopping cart page
Industry Average: E-marketer reports that the industry average is 32%. However, some sources indicate that it is as high as 75% (BizRate.com). Regardless of these benchmarks, it is important to take a snapshot of what your current abandonment rate is, improve your shopping cart, and monitor your abandonment rate after the improvements have been implemented. Typical shopping cart issues include:
1. Asking for too much information. Allow users to checkout as guests instead of forcing them to register. Giving visitors options is always a good idea.
2. Unexpected "handling" charges, taxes or shipping costs. Always communicate these costs before visitors get to the last page of the cart.
3. Inability to edit cart contents. Always allow customers to edit the quantity or options of each item.
Average Order Size ($)
How to calculate: Total revenues / Total # of orders
Industry Average: Depends on your particular industry. Please contact us for industry specific research.
Recommendations: You can increase average order size by up-selling and/or cross-selling on your site. This can be accomplished by displaying related items after a specific product has been selected.
Conversion Rate
How to calculate: # of Orders / visitors
Industry average: 2 - 4%
Recommendations: If you have conversion rates that are lower than 2%, there are a number of factors that you must consider. The conversion rate is a "macro" indicator, meaning that there are other, more specific areas that you need to evaluate before jumping to conclusions. Look at the formulas above to see if your low conversion ratio is a direct result of other areas of inadequacy on your site. Here are a few other aspects to consider:
1. Make sure that the traffic you are sending to the site is as targeted as can be. If you are running campaigns that are sending bad prospects to the site, your conversion rate will suffer; furthermore, if you are servicing the wrong type of customer, you will spend more time dealing with customer service issues rather than bringing in new business.
2. Is your product/business credible? Put yourself in the shoes of your visitors and think of ways that will improve the credibility of your business. Consider adding testimonials from satisfied customers, making your contact information easily available on the site and using professional & clear photographs of your products.
3. Is your site user-friendly and does it appeal to the target audience? Perhaps the most important factor in improving conversion rate is having a site that is easy to navigate and that offers products that are relevant to the visitor.
Taking this a step further, one can actually create a web page that calculates these figures on the fly - even notifying you when figures fall or rise outside of a specified range. If you need assistance in implementing such a solution, please contact us at 415.999.3460 or at info@nr10.com.
This article explores just a fraction of the improvements one can implement on a website. We will be publishing articles in the coming months on the following topics:
- Quick Reference Guide to Online Marketing
- Doing Business Globally - What does it take to prepare your website?
- Upselling/Cross-selling on the web
- Pay Per Click Search Engine Sponsorships
- Marketing your site during the Holidays
About #10 LLC
#10 is a Marketing and Technology Agency providing design and development solutions for mid to large size companies. Services include Website Usability & Performance Analyses, Customer Perception Management, Corporate Identity Development, Website Design/Development and Custom Application Development. #10's current clients include Sharp Electronics, Bank of Japan, American Stationery, and Global IP Sound AB.
