You should always be thinking about your website ROI, as generating a return on your investment is the reason you created the website in the first place. You invested time and money creating your website with the goal that it would provide you with some value, whether it’s sales leads, e-commerce sales, or advertising dollars.
Determining your website’s ROI is not as easy as it seems. Your website ROI can change over time—sometimes, very quickly.
There are different methods of determining a website’s ROI, depending if it’s a content website or a sales website. You need to know how to calculate your website ROI correctly and how to improve it.
At first glance, you may decide to use a calculation like this:
Total Internet Sales – Total Website Investment & Costs = Total Website ROI
But, you would be wrong! Even for an e-commerce website with clearly defined sales income, this calculation could seriously overvalue or undervalue your website ROI. A miscalculation of either sort adversely affects your decision making.
- Jump to Calculating Website ROI for an E-Commerce Website
- Jump to Calculating Website ROI for a Content Website
Calculating Website ROI for an E-Commerce Website
E-Commerce Website ROI %= { [ ( NIS-COGS )-( AORC-RCS ) ] / ADC } * 100
It looks complicated but we’ll define those acronyms below. Keep in mind, all figures are to be calculated for the time period you are trying to analyze, whether it’s your yearly ROI, monthly ROI, or your ROI for the past 30 days.
NIS (Net Internet Sales)
Gross online sales dollars – returns of online purchases
NOTE: You may also want to add any advertising revenue generated by your website as well as the Value of Online Conversions such as new leads, memberships or newsletter subscriptions. The significance of these values vary greatly from company to company.
COG (Cost of Goods Sold)
- Original cost of goods
- Handling & inventory costs
- Packaging & postage (include return postage as needed)
- Insurance
- Value of damaged returns
- Online marketing costs
- Offline marketing costs
- Online customer service costs
- Website updates & maintenance costs
- Website hosting fees
- Software & e-commerce license fees
- Consulting fees
AORC (All Other Related Costs)
- Online marketing costs
- Offline marketing costs
- Online customer service costs
- Website updates & maintenance costs
- Website hosting fees
- Software & e-commerce license fees
- Consulting fees
RCS (Related Cost Savings)
This number will be different for every business. Some examples of potential cost saving are:
- Reduced catalog printing and mailing costs
- Reduced lead time
- Reduced long distance phone calls
- Reduced marketing materials – printing, updating, waste and mailing
- Reduced handling
- Reduced inventory
- Fewer sales returns
- Increased market reach (estimated value)
- Fewer bricks and mortar stores
ADC (Associated Development Costs)
Your website development costs, including website design.
Calculating Website ROI for Content Website
Content Website ROI % = { [ ( WIS + AR + VOC + VOI ) - ( ARC - RCS ) ] / ADC } * 100
It looks complicated but we’ll define those acronyms below. Keep in mind, all figures are to be calculated for the time period you are trying to analyze, whether it’s your yearly ROI, monthly ROI, or your ROI for the past 30 days.
WIS (Web Initiated Sales)
The dollar value of sales your company can attribute to being initiated on your website. Your company may track this information very carefully and have a precise value you should use. If not, you may want to establish such a practice. Otherwise, you will have to extrapolate this value based on discussions with your sales and customer service managers. You can look at the number of completed contact forms and follow those inquires through to sales to get a feel for how many web based leads convert to offline sales during the period you are analyzing.
AR (Advertising Revenue)
You may have a content rich website to attract “eyeballs” from a particular demographic or the public in general. Once you have established the number of repeat and unique visitors over time, you may be selling advertising space on your website much the same way as TV, magazines and newspapers do.
VOC = (Value of Online Conversions)
the value your company places on: new leads, newsletter sign ups, new memberships, new contact info.
VOI (Value of Intangibles)
The value of increased brand awareness or products & services awareness. This should be expressed as a dollar figure.
ARC (All Related Costs)
- Content development costs
- Online marketing $$
- Online customer service costs
- Website updates and maintenance fees
- Website hosting fees
- Software and e-commerce license fees
- Consulting fees
RCS (Related Cost Savings)
This number will be different for every business. Some examples of potential cost saving are:
- Reduced catalog printing and mailing costs
- Reduced lead time
- Reduced long distance phone calls
- Reduced marketing materials – printing, updating, waste and mailing
- Reduced handling reduced inventory fewer sales returns
- Increased market reach (estimated value)
- Fewer bricks and mortar stores
ADC (Associated Development Costs)
Your website development costs, including website design.
Get Help Calculating your Website’s ROI
If you want to learn more about your Website ROI, request a free website review from Pittsburgh Internet Consulting. One of our knowledgeable Internet Marketing Consultants will provide you with more information about our valuable website consulting services including the help you need to define and optimize your website ROI.
