Web Statistics for Dummies (part 1: Sales)
Do you understand the numbers that your web site generates? Do
you know how many sales your site actually generates? Do you
know how you can apply that knowledge to your business and cause
it to grow?
I will answer all of the above, and also discuss how to use
statistics to enhance your web business through the use of
sales, traffic flow, uniques, hits, click-through rates, and
many other important business factors. Part 1 focuses on sales
and traffic, while part 2 is all about where your traffic is
coming from (and how to get more of it!). Part 2 will be
discussed in the next issue of our newsletter - so be sure to
stay tuned!
Sales
The most obvious statistic for many businesses is sales. Here
are 2 of the most pertinent questions every business needs the
answers to:
- How many sales do you make per day/month/year?
- How much profit do you make per sale?
Not hard figures to find, but how many sales actually came from
your Internet business? Often it is easy to gather this figure
simply by looking directly at either online sales, or by asking
your customers ("How did you find us?"). But sometimes the
Internet is just one part of a very complicated sales process.
You may make all your sales in person, but how many of your
clients go home and research your products/services using
information found on your web site?
These are the questions you need to find answers to in order to
estimate how many sales were completed due to your Internet
presence but not necessarily completed online. If you make
sales online, the answers are easy. If you sell real estate or
other "in person" products or services, then you have to ask
your customers individually. Either way, it will come down to a
concrete number that can provide insight into how you can grow
your business.
Profits
>From the number of sales made per month, you can easily figure
out your gross sales amount. Then you have to take your expenses
per sale into account and figure out your profits. Only cost of
sale expenses should be deducted and NOT one-time expenses such
as overhead. On the Internet, this would normally be the cost
per click of pay-per-click campaigns (such as Google AdWords or
Yahoo Marketing Solutions), or the CPM (cost per thousand) for
banner ads, and of course, your direct costs for the item or
service being sold. Once you have these figures in hand, you can
then calculate your profit per sale.
Traffic
So now that we know how many sales we make per month, and how
much profit we're actually making off of those sales, let us
take a look at how many potential customers walk through our
virtual store. There are many different statistics for web site
traffic: page views, hits, daily uniques, monthly uniques,
etc... Which one should you be using? From my own experience, I
recommend using daily uniques.
Daily uniques measures how many unique visitors come to
your site in a single day. By that we mean that no single user
is counted twice in the same day even if they visit the store
several times within a twenty-four hour period. Thus, if someone
comes to your site four times on Monday, and six times on
Tuesday, he/she would only count as two daily uniques.
Page Views measures how many times your page is viewed
(usually including reloads). Page views are also counted for
each page. Thus, if someone comes to your site four times on
Monday and views eight pages each time, and six times on Tuesday
(viewing two pages each time), you would measure (4 x 8) + (6 x
2), or 44 page views.
These statistics are usually available through your server's
statistics program. Alternatively, you could also use one of a
myriad of other statistics programs available on the Internet.
For most of our clients we set up www.hitbox
.com on their sites. With our daily uniques per month figure
in-hand, we suddenly have some very powerful numbers to work
with.
Conversions
Conversion is the measure of how many people who visited your
site were subsequently converted into clients of some
sort. Measuring how many uniques turn into buying customers is
one method of conversion, but you could also measure how many
visitors your site gets vs. how many visitors sign up to your
newsletter, or how many of them go to a specific page, or how
many send you an email, etc... These are all measures of
conversions, and simply use the ratio of sales (or sign ups,
emails, etc...) to visitors (or uniques).
Let us assume our site has the following statistics:
- Sales: 100/month
- Gross: $250/sale
- Average Profit: $150/sale
- Daily uniques: 12 000/month
In the above example, we have 100 sales per month, and 12000
daily uniques per month, thus our conversion ratio is 1:120 or
0.83%. Not such a bad ratio, especially for items that cost $250
each. Most markets would want a ratio of 1% or 2%, but of course
each industry is different.
Analysis
Using our imaginary numbers (profit of $150/sale, gross
$250/sale) we can then figure out how healthy the online
business really is. At 100 sales a month, we are grossing $25
000 per month, and profiting $15 000 per month. At this point in
our analysis, we can now see that there are three ways in which
to improve the site:
1. Increase profit margin
2. Increase conversions
3. Increase traffic
1. Increasing profit margins involves lowering costs or raising
prices, both of which fall out of the context of this article.
2. Increasing conversions involves optimizing the usability of
your web site; usability is a quality attribute that assesses
how easy user interfaces are to use. For more information on
usability and how it can help your Internet business, go to www.useit.com.
3. Increasing traffic involves improving your link network, your
PPC campaign, or your search engine optimization. We will look
at the latter in detail in Part Two of this article (exclusively
available by signing up to our FREE Monthly Newsletter at www.RedCarpetWeb.com).
Part Two will also discuss referrers, search engine keyphrases,
search engine positions, and how to use these statistics to
increase your sales. Don't miss out! Sign up for the Newsletter
today and learn how you can make the most of all your web
statistics and improve your Internet business.