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.
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.
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