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12 Methods to Improve Website Return on Investment (ROI) Using SEO and Other Strategies

By Nashat Mostafa in Featured

Return On Investment (ROI) is the relationship between the total amount you spend and the total amount you earn from a certain internet marketing campaign.

If you are doing any online marketing campaign, then Return On Investment (ROI) is the most important measurement to estimate your success and the one metric that you must work hard on to improve over time.

Generally speaking, Return On Investment (ROI) is a performance measurement used to evaluate the efficiency of an investment and to compare the efficiency of one investment to the other or over a certain period of time.

Return on investment is a very popular metric due to its versatility and simplicity. That is, if an investment does not have a reasonable positive ROI, or if there are other opportunities with a higher ROI, then this investment should not be done. Return On Investment (ROI) is the final measurement of success for any advertising campaign.

Track And Measure Your Advertising, Customer Acquisition Costs, And The Lifetime Value Of A Customer

By Hunter Waterhouse in Featured

As business owners and managers, we need to look at a variety of numbers to gain a better understanding of our businesses. In this article, we are going to consider two very important metrics in business marketing – Cost Of Customer Acquisition and Advertising ROI (Return On Investment).

One of the most important numbers we need to always be mindful of is the “Cost of a New Customer” or “Cost of Customer Acquisition”.

Understanding Customer Acquisition Costs

If you are unfamiliar with this concept, let me give you a quick tutorial on this advertising metric.

Suppose you run an advertisement in your local newspaper for your furniture store. Suppose for the sake of this example that you paid $1000 for your display ad in the newspaper.

Now, suppose your advertising brought 4 new customers into your store, who bought from you. Suppose also that the average spend for each customer was $1500.

With the example I am drawing, your $1000 display advertisement in the newspaper brought in 4 customers who spent a total of $6000 in your store.

I am going to keep this example simple, so that more people can keep up with the numbers.

On the basic premise of our example, you generated 4 customers after an outlay of $1000 in advertising. So your basic Cost Of Customer Acquisition was $250 per customer.

If your business received fewer customers, from your outlay of $1000 in advertising, then your Cost Of Customer Acquisition is more expensive.

But, if your business earned more customers who spent money, then your Cost Of Customer Acquisition would be much smaller.

In its simplest form, the Cost Of Customer Acquisition is the money spent to get the customer to your store divided by the number of new customers acquired. We will look at this in more detail, later in this article.

The Best Way To Measure Sales And Marketing Performance

Entrepreneur Magazine in a 1999 article reflected on the Cost Of Customer Acquisition in the dot com world. The article suggested, “the cost of new customer acquisition is one of the best ways to measure sales and marketing performance.”

In 1999, the Cost Of Customer Acquisition for the following companies were:

• BarnesAndNoble.com – $42
• Amazon.com – $27.60
• Priceline – $32.30
• Beyond.com – $29.30

On the surface, these numbers may seem small. But, Amazon’s Average Sale is in the $17-range! This makes the challenge that Amazon and other major retailers face fairly transparent. If these retailers could only count on one purchase from the newly acquired customer, then these businesses would be losing money by the truckload.

Fortunately, Amazon continues to perform well in Repeat Business from a single customer. The following calculations reflect additional numbers that we business people should also factor into our Cost Of Acquisition metrics.

The Real Value Of A Customer

Amazon’s first-sale may only be $17, but in 1999, Amazon’s Average Sales Per Customer was $116, up $10 from the previous year. Unfortunately, Amazon isn’t very forthcoming with these numbers, so after two hours research, I was unable to come up with more up-to-date numbers for you to consider.

The point of mentioning this is that it is important for business owners and managers to recognize that the Value Of A Customer is not how much sales revenue is derived from the initial purchase, but more importantly, from the Lifetime Value Of A Customer.

If we looked at Amazon’s Cost Of Customer Acquisition only in terms of that first sale, then they will be losing money hand-over-fist. With a Cost Of Acquisition of $27.60 and the first sale of $17, Amazon could not stay in business long if they were continuously producing numbers at that level. However, once you factor in the Lifetime Value Of A Customer, then Amazon is spending $27.60 to acquire a customer that is worth $116 in sales for them. Therefore, by measuring the Lifetime Value of a Customer, Amazon is spending only 24% of their revenue in order to acquire one customer.

Few businesses invest 24% of their revenue in advertising, but Amazon hopes that the Lifetime Value of a Customer will eventually exceed the $116 value, known to have existed in FY2000.

As the Lifetime Value of a Customer increases, the overall Cost of Customer Acquisition will fall, as an overall percentage value of Cost Of Acquisition divided by the Lifetime Value of the customer.

The Compounding Lifetime Value Of A Customer

If you have a hair-cutting salon and your advertising budget for one month is $1000, and you get 30 new customers through the door, who will spend an average of $20 for a hair cut, then your basic Cost of Customer Acquisition is roughly $33.34 to gain $20 in new sales.

But if only half of your 30 new customers become regular clients, then you can anticipate 15 of those customers coming to your hair salon at least once a month for the remainder of the year. Therefore, the first 15 customers will be worth $20 each, and the next 15 customers will be worth $240 each over the course of one year ($20 x 12 months). All told, your first 15 customers will put $300 in your cash register, and the next 15 customers will put another $3600 in your cash register.

Thus, in the hair salon example, your $1000 in advertising could generate new customers that will generate $3900 in new sales. Once you start to consider the Lifetime Value of a Customer, within the Cost of Customer Acquisition, then you will realize that the Cost of Customer Acquisition – although it might be higher than the initial sale – holds out the possibility and promise reducing itself as the Lifetime Value of a Customer increases over time.

As the end of the year winds down, you will be able to see that a $1000 expenditure was turned into $3900 in new revenue. In essence, for every dollar you spent on advertising that month, your return value was $3.90 over the course of one year.

In the second year, if only half of the original 15 regular customers or roughly 8 people stay with you for the full course of the second year, then the $1920 in revenue (8 people X $20 each X 12 months) you can expect from those customers could almost be considered free money. Of course, you will still have service fulfillment costs, but that second year will give you nearly $2000 in revenue that you will not have to chase.

Even if half of the customers drop off during the following calendar years, then a 50% customer attrition rate will allow you to have customers that could stay with you up to five years. Calculated against a 50% decrease in customers over each calendar year, your $1000 investment in advertising may translate into $7500 in revenues over five years ($3900 + $1920 + $960 + $480 + $240 = $7500), from the initial investment of $1000 in advertising.

The interesting thing about this scenario is that it is based on an advertising budget of $1000 ONE TIME. But, most businesses will continue the advertising process every month in every year. Therefore, the above example could compound month-after-month. Every month should bring the same or similar results to your business for the month and year.

Advertising Is A Process, Not An Event

Many small business owners have a dire misunderstanding of the nature of advertising and the value to be received from the advertising.

When business owners or managers fail to track and measure the new business generated from the advertising, then the business owners and managers will fail to see that advertising is an expense that can return huge dividends to the business.

When businesses fail to track and measure advertising successes, people tend to only see the money leaving the business without every seeing the reward coming back into the business. As a result, many business managers will employ advertising for a short time, then cancel the advertising, under the false belief that the advertising was not returning value to the business.

When businesses fail to understand the Lifetime Value Of A Customer, it is hard to appreciate any advertising method that fails to pay for itself in its first cycle. If Amazon was to only look at the initial sale generated by a new customer, they would quickly cancel all of their advertising efforts. Fortunately for Amazon, its management understands that the initial $17 sale is not the measure to use to determine the value of Amazon’s advertising efforts. Amazon’s management understands that the true Cost of Customer Acquisition should not be measured by the initial sale, but by the Lifetime Value of a Customer. In doing so, Amazon has ensured that it will continue to be one of the largest and most successful retail outlets on the planet.

When business managers fail to understand the Lifetime Value of a Customer, it is hard for them to appreciate and understand the compounding nature of the revenue stream for a business. It is hard for them to understand that money invested into advertising today, can deliver huge rewards over the next several years.

A Wake Up Call For Small Business Owners

According to Scott Shane, author of “Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By“, only 29-in-100 businesses will remain in business after ten years. That means that a full 71% of businesses started in any calendar year will be out of business in only ten years.

It is sad to say, but the reason most businesses fail is that business owners and managers fail to understand the nature of advertising, the importance of tracking and measuring advertising results, the Lifetime Value of a Customer, and the compounding nature of the revenue stream.

I don’t want to see your business on the trash heap of yesteryear. So, it is my hope that you will take this article as a wake-up call, as to the importance of advertising and its potential to lift your business into profits.

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Hunter Waterhouse has been helping business owners advertise their businesses online for nearly a decade. He is ready, willing, and able to put his experience to work for Main Street Businesses that seek to generate walk-in traffic to their stores, from the online exposure of their business. To learn more about how Hunter can help advertise your local business, visit: http://onlinemarketinglocal.com/

Improved Website Sales Conversion Is The Best Answer

By Bret Plummer in Featured

When I first started learning how to make money online, I read that “content is king.” Well, I am here to tell you that “content is not king.” It is an illusion (a mirage) that traps many online business owners in the quick sand of failure.

“Content for the sake of content” is pointless.

Now, don’t get me wrong here. Content is a good thing, so long as it will help deliver a potential customer to your sales page or the sales page of your advertisers. Any content that does not deliver a potential customer to a sales page is content that has not lived up to its true purpose, plain and simple.

SMX Sydney: Conversion Rate Optimization

By Kalena Jordan in Featured

Coverage of the Conversion Rate Optimization session by Stephen Pavlovich of Conversion Rate Experts at SMX Sydney 2009.

Stephen calls his session “How to use the Internet to get to know your customers intimately”. He kicks off with a graphical description of a conversion and explains that your conversion goal can be different things including :

- Order placement

- Newsletter subscription

- Something else

Stephen talks about Conversion Domination as being a vicious circle in a good way, where Revenue = visitors x conversion rate x lifetime customer value. Increased volume leads to cost savings and efficiency.

The 9 Stages of Conversion Rate Optimization (CRO):

1) The rules of the game (and how to win at it)
2) Understanding (and tuning) existing traffic sources
3) Understanding your visitors (particularly the non-converting ones)
4) Advanced market intelligene
5) Spotting the hidden wealth in your business
6) Creating your experimental strategy
7) Designing your experimental web pages (your “challengers”)
8 ) Carrying out experiments on your website
9) Transferring your winning campaigns into other media

Stephen says that increasing conversions starts with improving usability and persuading people to take the action you want them to take. He says that the *Quick Guess, Best Practice* strategy (what he calls the *monkeys writing Shakespeare* approach) doesn’t work. This approach usually involves testing:

- Headline

- Call to action

- Buttons

- Images

- Offer

- Guarantee

- Testimonials

This is the “let’s throw stuff at a wall and see what sticks” strategy.  Stephen says it’s too time-consuming and has a low success rate, therefore it’s not recommended. He says a more sophisticated approach is needed.

Objection / Counter Objection (O/CO) Approach

The O/CO tactic involves determining the objections that non-converting visitors have to your site/service/product and making changes that address these objections:

• If they don’t trust your company –> Build trust elements
• If they don’t believe your product is better –> Show advantages over competitors
• If they don’t believe your product works –> Show proof it does
• If they don’t understand what you’re offering –> Use techniques to improve comprehension
• If you aren’t offering enough incentives –> Make more offers
• If they see any risk in the decision to buy –> Use risk reduction strategies

What You Should Be Measuring:

- What visitors want
- Why they’re abandoning your website

14 Tools That Help You Understand Web Site Abandonment

There are 14 tools Stephen recommends that can help you understand why people are abandoning your website and what you can do about it:

1) Google Analytics

2) Crazy Egg heat map data

3) ClickTale.com

4) Google Talk Chatback

5) SurveyMonkey

6) 4Q.iperceptions.com

7) Usability Testing e.g. UserTesting.com and Steve Krug’s book Don’t Make Me Think

8 ) Ethnio.com pop-up surveys

9) Your ears and mouth (listen and speak to customers)

10) Tell a Friend King

11) Kampyle.com feedback analytics

12) Google Site Search

13) Serph reputation monitoring

14) Google Website Optimizer

Face-To-Face Selling

- Use face-to-face selling to research objections.

- Go through your website with salespeople.

- Listen to customer calls.

- Read FAQs coming in from customers.

- Ask salespeople to create a table of objections and counter-objections

- Seek out an opportunity to sell face-to-face.

Psychological Methods to Use When Designing Your Experimental Web Pages:

• Tackle objections head on e.g. “Buy shoes online? No way!” was the headline of an advertorial by an online shoe store in the local newspaper. It was highly effective at removing the common objections people have to buying shoes online.
• Add a reason why people should buy
• Establish authority
• Create urgency
• Promote scarcity
• Create exclusivity
• Use Advertising In Disguise (AID) e.g. a *free* call your friends in the UK phone card which later became an upsell to a paid service. Another example is the *free trial* AOL Online CD that used to come with new PCs and magazines.
• Reverse inertia e.g. home delivered DVD rentals
• Use product demonstrations
• Use customer and media testimonials to say stuff you wouldn’t be game to say yourself (e.g. legal implications)
• Use evidence of your success
• Produce a cost-benefits analysis for them e.g. “You’ve just saved another hour of typing using TextExpander, when you consider the value of your time, our product is a bargain. Register Now!”
• Use an apples/oranges comparison chart
• Use bargain appeal
• Show commitment and consistency e.g. the VistaPrint business card / website upsell technique
• Use risk reversal methods e.g. Domino’s pizza delivered in 30 mins or your money back
• Use simplicity, make it easy to sign up, easy to use, easy to upgrade
• Play on human emotion and a desire to belong e.g. the iPhone set
• Mention the common enemy e.g. tax office, criminals etc.
• Create involvement and ownership
• Use storytelling as a tactic

* Photo courtesy of Andrew Ballard of ReBusiness

SEO, Online Marketing, Recession and ROI (Return On Investment)

By Jeffrey Smith in Featured

With recession and (ROI) return on investment staring each other face to face, being brutally honest about the profit and return on your search engine optimization or online marketing campaign has never been so important.

For those who may not have noticed, various industries typically replete with activity in the market-place are coming to a screeching halt as result of inflation and the value of the dollar plummeting on a global scale. The trend for consumers to spend less on impulse items, auxiliary products or services and more on bare essentials continues to escalate as a result of a weakened economic state.Online sales are just one region taking the hit as the sales cycle and the consumers within this cycle are looking for greater value at the fair price. Needless to say, due diligence has taken on an entirely new definition as the business with the best offer, sale or SEO promotion gain the favor of the masses. To appease such value-conscious times, refining your content to represent the most compelling and tactful value proposition is necessary to supplement slouching sales and traffic (less money equates to less spending).

Despite this economic recession, observing the latest trends in competitive verticals while forecasting demand to convert new prospects into customers has become as much of an art as a science.

Incentives and promotions for cross-market exposure are just one example of businesses with larger budgets attempting to infuse and find the ideal hybrid shopper and capitalize on the vulnerability of other markets. Sign up for Product A (from one market) and receive a free 30 day trial period, or get 15% off your favorite movie, etc. from Industry B. In summary, the emotional triggers that incline consumers to purchase are evolving as well as those who are crafting the offer.

This is because tactics that may have worked 6 months or a year ago online or promotional methods based on years of success and stability from traditional offline channels no longer hold their sway over the masses as value is subjugated to the rules of survival of the fittest.

Is it the fact that A) the market is evolving, B) that money is tighter, C) the fact that online consumers are savvier than ever or D) a combination of all of the above? Typically, those with larger budgets (like publicly traded companies) wield the spoils of a collective advertising and marketing campaign piggybacking promotions on industries with less favorable returns (much like trickle-down economics).

This is not to suggest that smaller more nimble companies do not stand a chance, it is merely that the scalability of an advertising campaign designed to optimize 1000 keywords for example vs. a smaller company who may only have the budget to target 10 leaves a margin of opportunity and exposure that unfortunately provides advantages that the smaller firm may not be able to grasp due to budgetary constraints.

Now is the time to take advantage of narrow-casting instead of generalized broadcasting your message to reach the audience with the most likelihood for conversion.

Business is business and opportunity and expression determine the course of action for websites that need to produce a profit to survive. While being a highly trafficked site may be great for the ego, having a highly trafficked site that sells thousands of products, generates dozens of sales leads a day or has viral appeal to social networks is even more better.

In summary, make sure you identify your audience, growth is nice but stability amidst crisis is even better. Looking for greener grass instead of tending the yard you have can leave your marketing plan depleted and out of focus. It’s better to have 10% of something than 90% of nothing, so make sure before you extend your scope of the market to reach new prospects, you reap the equity of the authority and presence you have developed in your primary niche.

Healthy margins are the bottom line, so if you have them, then this message is not nearly as crucial as it is to those who are feeling the impact of a languishing economic crisis in their industry. SEO is a valid solution, but also being aware of the trends and circumstances that impact everyone in an economy can shed some light on why some periods are more fruitful than others. The key is not to get flustered and diversify your tactics to spread the risk and reward for your online campaign.

Jeffrey Smith is an active internet marketing optimization strategist, consultant and the founder of Seo Design Solutions Seo Company http://www.seodesignsolutions.com. He has actively been involved in internet marketing since 1995 and brings a wealth of collective experiences and fresh marketing strategies to individuals involved in online business.

© Copyright 2012 All rights reserved. Jayde Online, Inc.

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