Conversion Is The Key To Everything!
What is the “secret” to making it online? There is no secret, its knowing your Value per Visitor. Pay attention to these three things; Driving traffic, converting that traffic into sales and being able to sell to the same customer more then once and you’ll win.
If you can effectively drive traffic to your site (that’s the easy part) and then consistently convert that traffic into sales, then you can write pretty much write your own ticket regardless of the niche you are in.
As an online entrepreneur or ecommerce merchant the one metric you need to pay attention to more than any other – “VpV” aka Value per Visitor.
Don’t let your eyes glaze over just yet, stick with me for a second and it will all “click” for you very quickly.
** Value per Visitor is by definition, what each person who visits your website is worth to you in dollars – on average.
Knowing this number is the difference between successful sites and sites that fail.
To make money online, you must first determine out what each visitor to your site is worth to you, and then do whatever you can to increase that value as high as possible.
Once you’ve figured out the base number and then how to increase it, (I’ll give you some ideas in just a bit) then go to work on increasing your traffic as high as your budget or time allows.
Don’t put the cart before the horse here – people go broke that way. Get your VPV dialed in, and THEN work on increasing traffic.
I know that’s the opposite of what many other people say, but I’m telling you from my experience as the owner of a large shopping cart company and after working with thousands of online stores.
On a side note, when it comes to SEO I see way too many people just throwing money down the drain trying to over come the latest Google penguin penalty. But recovering from the penguin penalty is easier then you may have been told. You just have to know what to look for and how to correct it.
Calculating your sites value per visitor is SUPER easy using 2nd grade math
Now all you need to do is divide the # of visitors to your website by the total amount of money you generated during that same period of time.
Here’s an example:
Measure the number of visitors your site received between Monday at 12:00 AM and Tuesday at 12:00 AM.
– In this example we’ll use the visitor count of 100 visitors.
Next, add up the total amount of money your site earned from Monday at 12:00 AM and Tuesday at 12:00 AM
– In this example let’s say your site made $200.
Now divide the amount of money you made by the amount of traffic you received.
Ok, let’s see how it breaks down…
If you earned $200 darning the time period above, then each visitor is worth $2.00 to you. ($200 divided by 100 visitors is $2.00.)
What this simple metric tells you is that in theory, you could spend $2.00 per click on paid advertising through Adwords, Yahoo or MSN and break even on your front end sale.
If you spent less than $2.00 per click, then you should be in the black immediately.
If however you spend all $2.00 per click, you’ll break even to acquire that customer and from that point on any subsequent sales you make you to that customer on the back end is pure profit.
Now if you tweak your website to increase your conversions, even incrementally, then your profits increases instantly with the same amount of traffic.
Now in the formula and example above I’m not including your hard costs like merchant fees, cost of goods sold, etc. I’m just trying to give you the basic formula here on how you can increase your profits very simply.
Here’s how to grow the profits in your site very quickly
- Optimize your website’s value per visitor
- and THEN get a lot more traffic.
Ideally you’d want to do BOTH – on a consistent basis.
Take a look:
Say you pay $. 50 per click in pay per click advertising.
And you’re generating 100 clicks per day.
Total cost = $50.00
Your website or sales process is converting at 2%, meaning you are getting 2 sales per day.
And lets also say you’re selling a product priced at $47.00
So using the example numbers above, making two sales a day, your site would gross $94 per day.
As a result, each visitor is worth $0.94 cents to you – on the front end.
After backing out your advertising cost of $50.00, you would net$44.00 for 100 visitors ($94-$50), so the marginal net worth of each visitor is $0.44
(*Again, I’m ignoring merchant/clickbank/paypal fees and taxes for the sake of keeping the formula simple.)
Now, that you have the BASE VpV for your site, your focus is to boost those values by:
- Increasing your pricing,
- Increasing your conversion rate (lots of ways to do this)
- Convincing people who bought once to purchase from again (back end sales),
- Or a combination of all three.
Example 2: (Making one simple change to the previous example above)
- You’re still paying $.50 per click
- You’re still getting 100 clicks per day
- Total cost = $50.
But lets say that you made some changes to increase your conversions on the front end by 50%. Sell just one more item per day and you’re there.
(I know that seems like a lot, but it is doable and remember this is just an example to show you the power of how an increase in conversion can quickly increase your Visitor Value.)
Assume you’re selling that same product at $47.00 but now you’re now grossing $141 per day by selling 3 items per day instead of just two per day).
Each visitor is now worth $1.41!
In other words you still only spent $50.oo but now you made $141.00.
Your new Net = $91.00
Now each visitor is now worth $0.91 in NET profit to you.
Same traffic, more profits.
So the next question is – How do you increase visitor value?
There are several things you can do today:
- Test increasing your pricing,
- Creating more products (or finding more high-quality products to promote)
- Add upsells to the point of purchase – Would you like fries with that?
- Add a customer rewards program,
- Add a follow up email series to promote related products after the customer buys from you once,
- Add some sort of continuity program like a membership site or discount club,
- Work on ideas to get people to buy from you more then once,
- Split test everything – offers, prices, color – everything. You improve your front end conversions by split testing and consistently thinking of new testing ideas that could beat your control piece. Here’s how to split test.
Hopefully this helped explain the hows and whys of the importance of the Value per Visitor metric. If you have any questions, please let me know in the comments section below.
Till next time,