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Value Per Visitor Performance Metric
Author: Kevin Gold
Published: Monday, November 08, 2004
The Importance of the "Value Per Visitor" Performance Metrics
Continuing on the list of performance metrics, the most important one is the "Value per Visitor" metric. It 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
The “value per visitor” indicates what you are able to spend per visitor (i.e. cost per visitor) in order to breakeven on your traffic or strategic marketing investment. If your website receives visitors at an average “cost per visitor” of $0.10 and your average “value per visitor” s $0.20 then for each new visitor you will gain $0.10 in gross profit.
Note: the “value per visitor” metric becomes more powerful for this type of analysis when you calculate it using all associated traffic costs including labor and material and net sales versus gross.
In addition to an internal, strategic decision-making tool, the “value per visitor” metric can also be used to evaluate external business opportunities.
For instance, if you were approached by a potential business partner and presented with an opportunity to receive 1,000 targeted visitors at a $150 investment, you could quickly do the math and use your average “value per visitor” metric as a baseline.
For example, 1,000 visitors for a $150 investment equates to a “cost per visitor” of $0.15. Using your average “value per visitor” of $0.20 you should earn roughly $25 per sale or $0.05 per visitor times 1,000, a total of $50.
However, depending on the size of the investment, you may suggest to your potential business partner a one-month test instead of a longer term partnering deal. Through performing a “test”, you could gather data and calculate a “value per visitor” specifically for the deal before jumping head-on into a long-term and potentially damaging engagement. By gaining measurable results you have negotiating leverage to work out an economical partnering deal or to pull the plug immediately with minimal loss.
Performance Metrics take the Risk Out of Your Decisions.
As Robert Kiyosaki stated in one of his best-selling books, “being uneducated is risky.” Adapting his advice to your online business, consider this:
“There are people who most often say, “new traffic channels, strategies, web designs, etc. are risky. For them that statement is true – but not because new traffic channels, strategies, web designs, etc. are risky. It is their lack of knowledge gained from tracking, testing and calculating their performance metrics that is risky.”
Knowing your performance metrics is advice you “need to know”.
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Five Performance Metrics