monaro
04-16-2004, 09:49 PM
Well that is what my website told me today when I logged into cpanel.
I can change all that by improving my conversion rate, but without understanding my key performance metrics first, using paid advertising can be treacherous. If I do know these metrics, then paid advertising on the Internet becomes not only viable, but extremely safe and effective.
So how do I understand key performance metrics?
I should absolutely understand the math behind how the numbers are calculated, even if i don't ever have to calculate them by hand.
This is critical, as it will help me weed out the sponsors, products and services whose margins and average sales makes them unattractive. It also allows me the option of using paid promotion strategies out of the gate to generate traffic to my website.
So determining key performance metrics!
Determining my Key Performance Metrics requires some basic rudimentary calculations based on knowledge I have about my business and basic statistics like number of unique visitors to my website. To do this I pick a period of time from which to gather the statistics. Perhaps I
want to analyze my performance metrics over the course of a week, or a month or a year. The key issue here is that the stats used for all calculations are derived from the same period of time.
How to determine my conversion rate is by using my Stats/Visitors to see how many UVs (Unique Visitors) came to my site during the period. Divide my total sales over the period by the number of Uvs over the period. This gives me the percentage of visitors who convert to sales. Expressed as a percentage (i.e. .02=2%) this is my conversion rate.
Okay, now calculate my Gross Profit Margin by subtracting the cost of goods from my total revenue. This is my gross profit. Then divide my gross profit, by total revenue. Expressed as a percentage, (i.e. .40=40%) this is my gross profit margin.
Once I have calculated these initial numbers i can calculate final and most important performance metric.
Eg, the Per-Click Budget. My Per-Click Budget is the amount of gross profit I generate per UV (not per sale!) to my websites. Once i have that number i now know how much money I can theoretically afford to spend to bring another UV to my websites, and still turn a profit.
The Point
By knoiwng my key performance metrics, which ultimately allow me to calculate my important metric, the Per-Click Budget, I can have an absolute metric that allows myself to safely purchase additional traffic to my sites, assuming I never break my budget!
Once I know how much I can afford to spend per UV, I will be ready to begin my advertising campaign.
Improving Key Performance Metrics
A critical thing to understand is that when my website first goes live, it's performance will probably be somewhere in the neighborhood of your very conservatively estimated metrics. Meaning that my average sales
will be low, my margins will not be optimized, and my conversion rate will be substantially lower than 2%.
But I don't panic. This is very typical. There are ways to optimize the performance of my website and improve the Key Performance Metrics.
I should absolutely be able to increase margins, grow average sales, and raise my conversion rate. Doing this is standard for all successful websites.
I must take steps to make these improvements.
So can someone help me learn a little more on how to do this? or will I be on the right track if I begin my advertising campaign?
Any or all advice welcome!
I can change all that by improving my conversion rate, but without understanding my key performance metrics first, using paid advertising can be treacherous. If I do know these metrics, then paid advertising on the Internet becomes not only viable, but extremely safe and effective.
So how do I understand key performance metrics?
I should absolutely understand the math behind how the numbers are calculated, even if i don't ever have to calculate them by hand.
This is critical, as it will help me weed out the sponsors, products and services whose margins and average sales makes them unattractive. It also allows me the option of using paid promotion strategies out of the gate to generate traffic to my website.
So determining key performance metrics!
Determining my Key Performance Metrics requires some basic rudimentary calculations based on knowledge I have about my business and basic statistics like number of unique visitors to my website. To do this I pick a period of time from which to gather the statistics. Perhaps I
want to analyze my performance metrics over the course of a week, or a month or a year. The key issue here is that the stats used for all calculations are derived from the same period of time.
How to determine my conversion rate is by using my Stats/Visitors to see how many UVs (Unique Visitors) came to my site during the period. Divide my total sales over the period by the number of Uvs over the period. This gives me the percentage of visitors who convert to sales. Expressed as a percentage (i.e. .02=2%) this is my conversion rate.
Okay, now calculate my Gross Profit Margin by subtracting the cost of goods from my total revenue. This is my gross profit. Then divide my gross profit, by total revenue. Expressed as a percentage, (i.e. .40=40%) this is my gross profit margin.
Once I have calculated these initial numbers i can calculate final and most important performance metric.
Eg, the Per-Click Budget. My Per-Click Budget is the amount of gross profit I generate per UV (not per sale!) to my websites. Once i have that number i now know how much money I can theoretically afford to spend to bring another UV to my websites, and still turn a profit.
The Point
By knoiwng my key performance metrics, which ultimately allow me to calculate my important metric, the Per-Click Budget, I can have an absolute metric that allows myself to safely purchase additional traffic to my sites, assuming I never break my budget!
Once I know how much I can afford to spend per UV, I will be ready to begin my advertising campaign.
Improving Key Performance Metrics
A critical thing to understand is that when my website first goes live, it's performance will probably be somewhere in the neighborhood of your very conservatively estimated metrics. Meaning that my average sales
will be low, my margins will not be optimized, and my conversion rate will be substantially lower than 2%.
But I don't panic. This is very typical. There are ways to optimize the performance of my website and improve the Key Performance Metrics.
I should absolutely be able to increase margins, grow average sales, and raise my conversion rate. Doing this is standard for all successful websites.
I must take steps to make these improvements.
So can someone help me learn a little more on how to do this? or will I be on the right track if I begin my advertising campaign?
Any or all advice welcome!