Test Everything, And Assume Nothing
One thing all successful businesses have in common is that they test everything, and assume nothing. But in order to test, you have to be able to measure results.
After all, if you don't know your site's vital statistics -- also called metrics -- you won't see the danger signs until it's too late. Plus, if you're not measuring the numbers that matter most to your business, you could be missing huge opportunities to improve.
The good news is that, with e-businesses, tracking results is a snap. But there's a lot of conflicting and confusing information out there about web site statistics, so in this issue, I'm going to give you a primer on keeping a finger on the pulse of your venture.
To really know where your business is and track its health, you need three sets of information:
- Your sales figures,
- Your subscriber and customer statistics, and
- Usage details from your web site.
I'll assume you already have your sales, customer, and subscriber info handy, so that leaves us with web site usage details.
Every time someone requests one of your web pages and the files associated with it (i.e. graphics, audio, banner ads, buttons, etc.) from the server that hosts your web site, these details
are recorded in a file called a server log.
You should be able to access these files from your web host, either through their own reporting system or as raw data that you can then analyze using your own software.
Here are just a few of the things your web logs can tell you:
But the truth is, some of these numbers are meaningless on their own. After all, there are plenty of dot-coms out there who get loads of traffic but still don't see many sales!
- Which search engines bring your site the most visitors.
- What keywords visitors are using in the search engines to find
- Which linking partners and ads are bringing you the most
- How long your visitors are staying on your site and on individual pages.
- Which pages your visitors are most interested in.
- Where visitors are entering -- and exiting -- your
Frankly, it's combining your site stats with your existing
sales and subscriber information that makes these metrics powerful.
Critical Stats You Should Be Tracking
In general, the most important statistics are called "conversion rates." These are ways of measuring how successfully you are achieving the goals
of your site, such as converting curious browsers into buyers or
converting first-time buyers into repeat customers.
You'll likely have several conversion rates to focus on as you guide your
customers through the sales cycle, but here are some key formulas:
How Many Visitors Are You Converting Into Customers?
Your Visitor-to-Customer Conversion Rate is one of the easiest
stats to gather, but also one of the most powerful. It's a quick
indication of how effectively you're convincing visitors to buy
# of sales
# of visitors x 100 = Visitor-to-Customer Conversion Rate
So if you get 10,000 visitors a month and 472 of them become customers, then your conversion rate is 4.7%.
10,000 x 100 = 4.7%
How Many Visitors Are Signing Up For Your Newsletter?
Known as the Visitor-to-Subscriber Conversion Rate, this metric tells you how attractive your subscription offer is. Keep an eye on this
figure as you test different positions and copy for your sign-up
# of subscribers
# of visitors x 100 = Visitor-to-Subscriber
If you get 10,000 new visitors to your site in a week and 2,730 of them subscribe to your free newsletter, then your conversion rate is 27%.
10,000 x 100 = 27%
How Many Of Your Newsletter Subscribers Are Becoming Customers?
Your Subscriber-to-Customer Conversion Rate is a good test of how
effective a sales tool your newsletter is. This is especially
important if your main product is a paid newsletter.
# of customers
# of subscribers x 100 = Subscriber-to-Customer Conversion Rate
If 120 of your 2,730 subscribers end up buying something from you, then your subscriber-to-customer conversion rate is 4.4%.
2,730 x 100 = 4.4%
How Much Revenue Are You Making From Each Visitor?
Very simply, this Revenue per Visitor stat shows how much you're earning from your average visitor. This is particularly valuable since this number helps determine how much you can spend to acquire a new
visitor while still earning a profit.
# of visitors = Revenue per Visitor
If you sold $6,000 worth of inventory this month and had 39,000 visitors to your site, you would know your revenue per visitor is $0.15.
39,000 = $0.15
How Many People Are Clicking Where You Want Them To Click?
Your Click-through Rate shows the percentage of people who "click
through" from your salesletter to your order form (or any other link you want to measure).
clicks on link x
# of visitors to page with link x 100 = Click-through Rate
For example, if you get 10,000 visitors to your salesletter, and 650 click on the link to your order form, then your salesletter has a click-through rate of 6.5%.
10,000 x 100 = 6.5%
Advanced Stats You Should Be Tracking
Beyond the basic metrics I've covered above, there are some more advanced
measurements you should be aware of. This powerful information will
give you even more insight into your business and ways you can bring it to the next level.
How Are Your Customers Moving Through Your Site?
For any site that has more than a page or two, this is a crucial -- but often ignored -- set of metrics, referred to as Clickstream. It
basically involves tracking how visitors move through your site,
including where they enter, where they exit, and what pages they
view along the way.
Included in this category are stats like your homepage "bounce" rate: How many visitors to your homepage leave (or "bounce") without going any deeper into the site. If 75% of your visitors don't click a single link off of your main entry page, you need to find out why, or you are wasting
The clickstream will also show which pages people are leaving your site
from. For example, if more people leave the site from your order form than any other page, you might need to assess how "user friendly" this form is. This can be a crucial way of seeing how effectively your navigation system is guiding your visitors toward your products.
How Much Is It Costing You To Attract New Visitors To Your Site?
The Cost per Visitor (CPV) stat tells you how much it costs, on average, to get a visitor to your site. If you're using paid advertising,
this can be a particularly valuable figure. Just compare your cost
per visitor to your revenue per visitor, and you'll know whether or
not your advertising is profitable.
# of visitors x 100 = Cost per Visitor
If you spent $1,200 on a campaign and it brought 2,700 new visitors, then your cost per visitor is $0.44.
2,700 x 100 = $0.44
How Much Are You Paying To Gain Each New Customer?
This Cost per Customer (CPC) is a key number to track to make sure you aren't paying more to attract each customer than you make in profit
from each sale.
# of customers x 100 = Cost per Customer
If you spent $1,200 on a campaign and it brought 327 new customers, then your cost per customer is $3.67.
327 x 100 = $3.67
Unless you have a custom-built system, you won't be able to view all of your stats in one place, so I recommend setting up a spreadsheet
in Microsoft Excel, where you can plug key sales numbers and stats into one "dashboard" to track all of your key metrics over time. Once you figure out all of the formulas, you can just type in your new details each week to track your progress.
Tools To Analyze Your Site Traffic
There are a few basic tools to help automate how you measure your site's performance:
Obtaining your server logs is a good first step in getting a hold of some of the key information you need to measure your success. Some web hosts already have log analysis software, which makes things really easy. They will import your server logs into their database, and automatically turn
all of the numbers into easy-to-read reports, graphs, and charts.
If your web host doesn't offer this service, you need to ask them for your server logs, which you can download via FTP. In many cases, what
you are going to get is raw log data -- piles of numbers and symbols that are almost impossible to interpret! But there are dozens of log analyzing programs out there that will make sense of this information.
Here are a few of the programs that I'm familiar with. Many are either free or have free versions. This isn't an exhaustive list, so you may also want to do some research of your own to match your site's unique needs.
While server logs are rich with information, they have their limits. They can tell you how many visitors you get in a day, for instance, but not
how many are coming to your site for the very first time. That's where ASP (application solution provider) tracking solutions are great.
pages. When a visitor comes to your site for the first time, they
may be assigned a "cookie," which is a small text file that records
Here are a few ASPs that offer tracking services. ASPs generally charge based on the number of page views. Some offer free versions, but require
you to display a banner or small button on each page, something you
should obviously try to avoid if you can.
If you are using software to track your affiliate sales, then you may also use it to track the metrics behind banner ads, text links, buttons, or any type of advertising you pay for, including all aspects of PPC campaigns.
This can be a powerful way to track such vital metrics
as sales per visitor and your conversion rates on paid advertising much more accurately than otherwise possible. You'll be able to track these statistics for every link into your site by assigning each a distinct tracking number.
Tracking your results is one of the most important things you can do to ensure that you are always increasing your profits. After all, if you don't know what the problem is, how on earth can you expect to fix it?
But make sure the key metrics you're focusing on apply to your site's specific needs, and continue tracking them as you test various solutions to the problems you've identified. Of course, numbers won't always
tell you the whole story, so you may want to consider combining these results with other sources, such as usability studies, customer satisfaction surveys, and focus groups.
If you have a custom-built ordering or database system on your site, it may well produce data of its own, so make sure you can capture that as well. If you've got technical resources available to you, a simple
customized solution might also capture the specific metrics that
you need to track.
Those businesses that do take the time to carefully track their results are going to be the most successful, and it's for the simple reason that
they are able to fix problems as soon as they discover them. If they find that their revenue per customer is lower than the cost of acquiring
those customers, they can search for less expensive ways of attracting new customers while trying to boost the amount each existing customer spends. If they're getting lots of visits to their salesletter but not converting sales, they can make changes to the copy right away.
This is why marketing over the Internet is so exciting and so lucrative. It is the only medium where you can measure your success in real time, and then make changes based on what you've learned -- all within just hours or days!