Saturday, September 20, 2008

Determine the value of a visitor to your website

Determine the value of a visitor to your website

Determining the value of each keyword, and in turn each visitor, is vital. The simple

formula goes like this: Divide the average number of new customers each month (a long

enough period to be statistically significant) by the average number of monthly visitors to

get the percentage of visitors who actually become customers. If you multiply this

percentage times your average profit margin on sales to new customers, you get a good

idea of how much a visitor is worth to you on the first visit.

For example: If I average 10,000 visitors per month to my website and sell 150 of them a

product with a $20 profit margin, then I can easily calculate the percentage (150/10,000)

to be 1.5%. Multiplying the 1.5% by $20 yields a $0.30 value for each visitor.

It’s interesting to look at the bigger picture of this example as well. While making $0.30

per visitor doesn’t seem like much, the dollars get big quickly when you multiply pennies

by thousands of visitors. My profits for the month with 150 sales would be $3,000 if I

had no advertising costs. If I can generate the visitors for a cost of $0.10 each for a total

cost of $1,000, then I have a profit of $2,000.