Five Performance Metrics
Author: Kevin Gold
Published: Monday, November 8, 2004
Five Performance Metrics of Successful Online Businesses
All websites present choices to their visitors. Whenever a choice is made by a visitor a “conversion point” exists that generates two metrics: (1) cost of conversion and (2) rate of conversion. The key is to identify your business’ significant conversion points which if chosen most often by visitors will lead to the achievement of your goals.
These are the five performance metrics you need to know.
- Conversion Rate : Google’s dictionary defines a conversion rate as “the number of visitors who took a desired action divided by the total number of visitors in a given time period (typically, per month).”
Conversion Rate = Desired Action / Total Number of Visitors
For example, if 1,000 unique visitors were driven to your website from a search engine and 10 elected to purchase a product then your “sales” conversion rate would be 1.0%.
Basically, a conversion rate is calculated whenever a desired action occurs by a visitor to your website. Examples include:
- A visitor types in their email address and clicks “submit” for your free report.
- A visitor clicks their browser’s “back” button to leave your website.
- A visitor buys your product.
The most crucial conversion rates are those directly associated with the achievement of your business’ goals.
- Cost per Visitor : The cost per visitor is the dollar amount spent to drive one unique visitor to your website. For example, if you spent $100 to drive 1,000 unique visitors to your website, then your cost per visitor is $0.10.
Cost per Visitor = Money Spent / Total Number of Visitors
Businesses usually have more than one “visitor source” or a way to drive visitors to their websites. Therefore depending on what result you are analyzing you may calculate “cost per visitor” using money spent on just a single visitor source or on multiple visitor sources.
- Cost per Prospect, Lead, or Referral : The cost per prospect, lead or referral is the “cost per visitor” times the number of unique visitors needed to produce one prospect, lead or referral.
For example, if you spent $100 to drive 1,000 unique visitors to your website and it produced 10 prospects; your “cost per prospect” is $10.
Cost per Visitor = Money Spent / Total Number of Leads Produced
- Cost per Customer : “Cost per customer” is the “cost per visitor” times the number of unique visitors needed to produce a sale.
For example, if you spent $100 to drive 1,000 unique visitors to your website and it produced 2 sales; your “cost per customer” is $50.
- Value per Visitor : The “Value per Visitor” metric is a composite figure that consists of multiple, performance metrics including conversion rate, average value per completed action, number of unique visitors and number of completed actions.
For example, if the 1,000 unique visitors generated 2 sales worth $100 per sale or $200 in gross revenue then your “value per visitor” is $0.20.
Value per Visitor = Sales / Total Number of Visitors