Would you believe us if we told you three little letters could be the difference between your firm barely getting by and dominating the market?
We’re talking about ROI. Understanding your return on investment is imperative for any business. You want to make sure the money you’re putting into your firm is bringing in clients, cases, and revenue.
Specific to this post, we want to make sure the money you’re putting into your website doesn’t go to waste. We can’t stress enough how vital it is to have a well-functioning, engaging web presence, especially in today’s digitally dominated society.
Measuring marketing ROI is something that’s often chalked up to the impossible. But we don’t believe it has to – or should – be that way. Website analytics give us the ability to understand a lot about the effectiveness of our marketing efforts, so long as we know what we’re looking for.
We can’t promise you’ll find yourself behind the wheel of a big automobile, in a beautiful house, with a beautiful wife. But when it comes to successfully increasing your website’s ROI, this post will not only help you establish a baseline, but also provide some practical tips for how to increase your return.
So without further ado, or anymore Talking Heads references, let’s get to it.
The Secret Formula
To get a good sense of your ROI, there a few numbers and formulas that you need to know. If you’re using Google Analytics or something similar, it’s likely that a lot of this data is already tracked for you, and calculating your ROI is a relatively simple process.
The first step is knowing what data you need, and that comes down to five categories:
- Number of visitors. This should be pretty self explanatory. Track the amount of visitors to your website within a given time period. Make sure the period of time you’re tracking is big enough. The longer the time period, the more accurate your results.
- Conversion rate. We’ve explained conversion rates in previous blog posts before. Conversions occur when a client or customer performs a desired action, such as buying a product or service. You can calculate your conversion rate by dividing the number of conversions you get (typically someone contacting you via your website) divided by your total number of site visits.
- Closing rate. Just because you got 100 phone calls doesn’t mean they all turned into cases. To find your closing rate, take the number of people who buy your services over the number of people who contact you.
- Lifetime value. The best way to think of lifetime value is to think of how much money a customer will bring you over the course of a lifetime. A client who wants you on retainer will generally provide a much greater lifetime value than a client who rarely needs legal services at all.
- Delivery cost. This is the amount of money necessary to provide your services. To get a better estimate of your ROI, it’s best to take each and every aspect of your expenses into account, including payroll, administrative overhead, and operating costs (e.g. office space, utility bills, etc.).
Once you know your statistics for each of these categories, you can begin to start your journey to ROI success. First you need to…
Follow Your Leads
Getting a correct number for your ROI is impossible without knowing how many leads you’re generating on a regular basis. There are analytics tools in place that can help you do this, but understanding the formula to manually find your number of leads can be beneficial.
To find your number of leads use the following formula:
VISITORS • CONVERSION RATE = LEADS
Understanding how many leads you’re getting and where they’re coming from is an excellent way to determine whether what you’re doing is effective or not. Once you’ve found your number of leads, you’ll want to…
Find Your Potential Profit
Potential profit is the amount of money you’re estimated to make after you’ve taken your expenses, or delivery costs, into account. As with any of these calculations, most of the numbers you use will be averages, but having the most exact numbers in the equation will ultimately get you to a more exact ROI.
To determine your potential profit, use the following formula.
(Leads x Closing Rate)(Lifetime Client Value – Delivery Cost) = Profit
Once you’ve found your potential profit, you can move on to what we’ve all been waiting for.
Calculate Your ROI
At this point, you can determine (with a certain degree of certainness) if and how much money your website is actually making you when all is said and done.
Also, once you have a baseline, you can calculate how changes you’ve made to your site have impacted your bottom line. You can now know for sure if adding that contact form at the bottom of every page of your website has been a success, or that creating the multiple city pages for each geographical area you serve has led to more and better clients.
The profit you found in the second equation divided by your website costs all multiplied by 100 percent will get you the number for your ROI.
(Profit/Website Costs) • 100 = ROI%
It’s important to understand that any positive percentage indicates that your investment has been completely recuperated, and you made money along the way. (0% ROI would be breaking even.)
So don’t get disappointed about an ROI you think might be a low number (like 1-10 percent), because your decisions still ended up making you money, and you don’t need an incredibly high percentage to justify your efforts. (That being said, we have worked with many clients who have consistently seen ROIs in the thousands.)
But, we know that all these formulas can be a little exhausting and confusing without any practical application, so we’re going to provide an example using some relatively realistic numbers for each formula we discussed above.
A Practical Example
First we’ll start with our…
For this example, let’s say we have 4,722 visitors per month and a conversion rate of .0152. This means that the conversion rate is about 1.5 percent, which is right around the 1-3 percent ballpark that’s considered acceptable (above 3 percent is excellent, and below 1 percent needs improvement).
If we put these numbers into the equation (4,722 x .0152) then we get a number of 71.77 leads. Knowing each and every way that clients might contact you is imperative to making sure this number is accurate. A great way to determine where your clients are finding you is to use a certain phone number exclusively on your website that you do not use elsewhere, as well as making sure you’re paying attention to how many people are filling out your online contact form.
Once we know we are generating 72 leads, it’s time to determine our…
This equation has the most moving parts. Let’s use a closing rate of .2, a lifetime value of $3,500, and a delivery cost of $2,000.
When we put these numbers all together ((72 x .2)(3,500-2,000)) we find that we make $21,600 in potential profit per month! Make sure to consider the following when determining what numbers to use for this equation:
Now that we know we have a potential profit of $21,600, let’s calculate our…
The moment we’ve all been waiting for! For this particular case, we’re going to use our profit of $21,600 against the costs of our website, which we’ll say are $10,000. When we divide the $21,600 profit by the $10,000 cost, and then multiply that by 100, we get an ROI of 216 percent. Keep in mind that that number is for a single month’s worth of profits!
If you hadn’t built a website yet and are tracking the ROI of making a webpage for your firm, you’re likely going to see huge results very quickly. In the case that you make small changes to content or design, it’s possible that changes in ROI will take longer to see.
So how do you increase your ROI? Here are a few tips.
Tips for Increasing Your ROI
Perhaps the most comforting aspect of trying to increase your ROI is that small changes can yield big results. A small increase here or there means you’re getting that much more out of the money you invest into your business. Below are the following factors for increasing your ROI. They may seem obvious, but that just means you’re catching on.
Increase Visitors. This can be done a number of ways, from investing in SEO to developing a content strategy that engages people.
Increase Conversion Rate. One of our recent blog posts will be especially helpful here.
Disclaimer: The following increases are more on the shoulders of you as the business owner than a digital marketing agency.
Increase Close Rate. Knowing why people are saying no to your business is a great way to help increase your close rate. People skills are incredibly important as well.
Increase Lifetime Value. Make sure you are connecting with the clients you bring on so that they continue to use your services in the future.
Decrease Delivery Cost. This should be pretty self-explanatory. Anywhere you can reduce costs without reducing the quality of your service, make those changes!
Unsure of How To Get Started? We Can Help!
As a digital marketing firm, we’re quite aware how important it is for you to see results from the money you invest in marketing. We don’t believe in the notion that you can’t understanding your marketing ROI; in fact, we believe it’s not only possible but incredibly important, and encourage all of our clients and partners to track and measure as much as they can. Not only because it gives you a simple Yes/No about whether or not your efforts are a success, but because it’s the only way to make sound improvements and increase results.
If you’re unsure of where to start on tracking your ROI and making sure you’re getting the right bang for your buck, get in touch. Feel free to contact us today, we’re here to help!
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