This article is about the most common mistakes people make when they are measuring their website. It also happens to be the worst mistake. In my view, it is probably the single leading cause of online business failure, yet almost everyone makes this mistake.
The mistake is to measure overall activity and ignore the bottom line. Overall activity, such as the number of people who are visiting your site, matters only so much as it influences online sales or inquiries. Measuring something like overall page views is almost completely irrelevant unless you happen to be the technician managing the server. This is not entirely people's fault because much of the software available can't measure what matters. When it can, measuring the technicalities are always more complicated.
Before we talk about web metrics, let's focus on business basics. Which is doing better, a business with a turnover of $1 million and a net profit of 5 percent, or a business with a turnover of $500,000 and a net profit of 20 percent? The answer is, of course, the business with the turnover of $500,000 because it has a net profit of $100,000, while the $1 million turnover business only has a profit of $50,000. If you met a business owner who didn't know or care what the profit was, but only thought about the turnover, you'd know they were heading for disaster. The reason for this is that profit is what makes a business successful, not turnover.
Everybody in business knows this, but few of them seem to have grasped the corresponding truth about the web.
It doesn't matter how many people visit your site!
What matters is how many of them do what you want them to. I had a client who ran an email campaign through a new agency. They were very impressed with the results-- thousands of new visitors streamed into the site from the email. However, my analysis revealed that not one of those visits ever resulted in a sale, or even an inquiry.
In other words, the email campaign generated a great deal of activity, but it didn't actually produce any business. By any standard you care to think of, it was a complete waste of money. I think email marketers are beginning to get this. At an Internet World show last October there was a consistent stream of people approaching me from email agencies. They all had the same story: their customers were no longer satisfied being told merely the number of people the campaign sent to the site. They wanted to know what those people did once they got there.
I had another client who had a very strong relationship with a major newspaper. They had banners and links and editorial all over the newspaper's site (for which they paid a substantial amount). The newspaper was sending them tens of thousands of visitors each month.
However, when we analyzed what these people did once they arrived, we discovered that very few of them converted into customers. A financial analysis revealed that the cost per sale from the newspaper traffic was around $150, compared with $20 for PPC advertising.
They terminated the newspaper deal, put the newspaper money into PPC, and transformed the company bottom-line.
What both these companies were doing was focusing on the number of visitors to the site, rather than the number of sales or inquiries. The current saying in web metrics circles is Key Performance Indicators are nice, but the secret to success is the key Key Performance Indicators (or KKPIs).
For a commercial website only two things matter...
Getting people to see the page that says "sale successful" or the one that says "contact details received, we'll be in touch."
These are the pages that can translate into money. That's what the business is there for -- to make more money than it spends.
In web metrics terms these are your "target actions." Assessing the total number of visitors to your site is only meaningful if you also know your conversion rate. The conversion rate is the percentage of visitors who engage in your target action. You should never be heard simply saying "we got x many visitors to the site" because that doesn't mean anything.
It should always be "we got x many visitors to the site with a conversion rate of y percent."
When it comes to measuring the effectiveness of a marketing campaign, you need to be able to do this for the people who came from this campaign as opposed to the rest of your visitors. This introduces the second-worst mistake people make...
This mistake is actually more common. The vast majority of people have no mechanism in place to separate the performance of different campaigns. This is one of the key reasons for Google's success. If most people knew what they were getting for their Google ad money, the bids would be much lower.
In the examples I gave above, I was only able to assess the effectiveness of these sources because I could separate out the conversion rate for them from the rest of the traffic.
Properly done, this can streamline the sales operation of the entire business.
Last year, I saw a telesales operation that had a system for displaying the incoming inquiries on the sales operative's monitors. The information displayed included the original source through which the prospect had entered the site. The telesales staff could then select which of the incoming inquiries they wanted to pick up. They were on commission and didn't have to handle inquiries in the order they arrived. They had very quickly worked out that people who had come from certain Google ads were much more likely to buy than any other source. Competition among them to grab those calls was fierce.
By the time I saw the operation, the average response time from incoming inquiry to outgoing call was down to 20 seconds. The company estimated that adding this information to the prospect data increased sales by 20 percent, yet it took only a day or two of a single programmer's time.
There used to be a time when websites were lucky to see success from one visitor in 50. In other words, the average conversion rate was 2 percent. These days, we have a much better understanding of how to build a site that can sell.
I am seeing sites with conversion rates of 20 percent or even 30 percent. What characterizes these sites is that they don't necessarily have huge amounts of traffic; what they have is a clear understanding of who their market is, how to reach it, and what the website has to do in order to get a sale from that market.
They know exactly what the performance of each Google ad or affiliate is and what return on investment each produces. They know in advance how much they can spend to acquire business, and they know what the conversion rate of a new opportunity needs to be in order to achieve success.
Where to focus
The more I analyze websites in an effort to try and improve sales and marketing, the less concerned I am with overall numbers.
Total visitors is a nice number to report to the board, but there's not much I can actually do with it. If I want to improve the site's traffic, then I have to work with one specific source at a time. If I want to improve the conversion rate, I have to look at individual sections (or pages) of the site one at a time, or the individual sources.
I've stopped even reporting Total Page Views any more, even to the board. It's a number with no information in it.
Count your sales or enquiries first, and then work back from there. Where did they come from? What was the conversion rate for each source? It really doesn't matter how many pages your server spat out. The total number of visits has no meaning unless it is sitting beside your conversion rate.
People who run shops don't count how many people looked in the window. They count how many stopped at the till. The web is no different.