ROI and Web Analytics

Return on investment (known as ROI) is the ratio of the cost of advertising relative to the profit generated from conversions such as sales or leads. Your website ROI indicates the value to your business gained in return for the cost of your ad campaigns and Web Analytics can help you calculate your ROI it and  then optimize it.  ROI is calculated as:

(Return – Investment)

ROI is typically expressed as a percentage, so you should multiple your result by 100.

John Wanamaker, an entrepreneur from Philadelphia who built a department store empire in the late 19th and early 20th century once remarked, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”  Today this quote embodies the core of whats changed in online marketing as a result of Web Analytics.  Now you no longer need to wonder which half of your marketing is working and which isn’t.  Today both big and small business can measure the ROI of their websites using web analytics, and their off line marketing activities more effectively with simple and free website tools.

Today as more sales or lead generation activities happen online, small businesses have the ability and opportunity to gather more quantitative information about customer behavior.  Every click, pageview and interaction can become feedback for a small business that measures it online activity.   This quantitative data taken from clickstream data, online surveys and conversations, as well as emerging forms of competitive data gives businesses access to a staggering wealth of information about their customers, their total opportunity and begin to understand what they can do to improve their conversions.  For instance, what if you knew that 90% of your customers came to your website or landed on a Pay Per Click landing page and then left, never to return, or 65% of your visitors who added an item to a shopping cart abandonment the cart?  Wouldn’t you want to know this and take action to decrease the bounce rate and increase purchases?  With web analytics, you can begin testing changes made to your website that affect your ROI and increase or decrease sales.  With web analytics you know where to start.  Without web anlaytics everything you do is a guess.
Free web analytic tools like Google Analytics simply allows small business owners and marketers to learn about and analyze their website traffic and how customers interact with their website can help them focus on their  primary goals and not the ancillary goals that may “clutter up” their website or messages.   While, setting up Google Analytics and then analyzing the data is not not easy,  its not rocket science either and can be achieved by every company no matter how small or large.  If you think about it, every day the web is evolving and expanding and with it are the tools that small business have access to that allows them to track tiny and not so tiny changes to their website that can have positive or negative affects on the ROI of every online marketing campaign they run and every change they make to their website.  Google offers a free version of Google Anlytics that gives small businesses the ability to begin tracking the ROI of online and offline marketing activities and gain further insight into the behavior of visitors at their websites.  Companies that are using these tools and paying attention to Who their customers are, What they are doing and Why they make a purchase or leave a website will be able to thrive in tough and good economy’s while those who spend money on online or offline advertising, with no ability to quantify their ROI, will not be able to keep up and will become less profitable while those that are ahead of the curve will thrive.

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