"If I was selling $10 bills for $2, how many would you buy?" In his book 1 Page Marketing Plan, Allan Dib asks this pretty simple question. The answer is obviously as many as you could possibly get your hands on. The point of his illustration was that you should have an 'unlimited' marketing budget as long as you are getting a return on your investment. This sounds nice, but clearly no one has an unlimited budget, so what gives? Do I need to spend more money on marketing? Do I need to spend less? Are people finding my business currently? In this article we will look at your most impactful marketing tool, your website, and determine if it is worth a significant investment.
Business that don't need to market: Before we jump into the nitty gritty, there is a type of business that doesn't need to invest in their website. If you are fully booked for the next 12 - 24 months, then you don't need to market! The point here is that new bookings, clients, and revenue streams are the results of good marketing. If you don't need any of those things then you can rest easy knowing you don't need to make any changes to your marketing strategy - for now. If you are like 99% of businesses in the world however, this doesn't describe you, so let's move on.
Where is this free money we discussed in the opener? Well, just like buried treasure, there is a little work that needs to be done to uncover it. First, as a business owner, you need to understand what your current website is doing. Don't have a website? That's easy: your website is doing nothing. The issue is that even if you have a website, it could still be doing nothing and that is a problem. So how do you know what your website is doing? Well, just like every other aspect of your business, it comes down to numbers. You need to know what the Key Performance Indicators (KPIs) are for your website. Just as with your financial performance indicators, not all numbers are equally important. ($250,000 in revenue is not all that important if you have $300,000 in expenses). For this article, there are three numbers that you need to know to track how much money you are making as a result of your online business.
First is your profit per customer or gross profit. This is a business number and doesn't necessarily have anything to do with your website, but hang with me a second. Your profit per customer is how much money you make from each customer after expenses. To get a clearer picture, we can use a hunting outfitter as an example.
Let's say you charge $5,000 per customer for guided hunts. When you actually take those customers out, you have to consider a lot of expenses that you would not have If you didn't have any customers. You have to pay the guides, the cooks, and the ranch hands. You also have to buy food for your customers and animals. Let's say that you spend $4,000 per client on all of these expenses. Your gross profit per customer is $1000 or 20%*.
* Important note: this is not your outfitter profit margin. When calculating the profit per customer (gross profit,) your fixed expenses such as mortgage, vet bills, etc. are not considered. Dividing your fixed expenses by your gross profit = your break-even point. For example, if your fixed expenses are $20,000, you need to book 20 clients per season to cover your fixed expenses.
Okay, so now that you have your profit per customer, let's talk about your website numbers. The first number is your number of actual visitors. If you have no one visiting your site, you cannot have any business generated from your site. How do you get people to visit your site? Long story short, you need to appear relatively high in search engine results for your business or type of business. If someone typed "best fly fishing trips in Colorado" into Google, you would want your business to appear at the top of that list. There is an entire industry that revolves around manipulating your position in these search results to land in the top percentage. Improving your results is known as Search Engine Optimization (SEO).
SEO is an enormous subject and will be the subject of its own article. For this article though, it is important to know that SEO is often a law of diminishing returns; that is the more money you spend on it, the less value you receive. More pointedly, the difference between being result number 15 and result number 10 is much larger than the difference between being result number 10 and being result number 5. In even simpler terms, you don't have to be first, but you absolutely can't be last. This is where your web design comes in. In a future article, I will go into depth about the detail of SEO and the factors that play into website ranking. One important point, however, is that a search engine relies on how authoritative it thinks your website is. If your website is not mobile friendly, not readable, not secure, or is using old technology, you will not appear high in search rankings. A modern website will inherently eliminate many of these issues and will help your 'de facto' SEO ranking. A more authoritative site = more views.
Finally, the last number you need to know is conversion. Conversion is typically represented as a percentage and is the number of visitors that ultimately become customers. Although the principle is easy, often the conversion number is unknown to website owners. Outfitters often have an additional wrinkle when calculating this number because customers need to call to complete the final elements of their purchase. Keeping track of this number is the subject of another article, but even a rough estimate will provide valuable insight into your website performance. All other numbers you may have heard (bounce rate, click through, time on page) are just ways to measure how effectively elements of your website design are converting customers. If you want to ignore all of these other numbers, the effectiveness of your web design can be measured simply by conversion.
Okay, so hopefully you are still with me after all of that and now we have our important metrics defined. This is where the magic happens and our free money finally appears. With these numbers you can quantify what your return on investment is with your website. I think the best way to show this is with a quick example.
Let's say your gross profit per customer is $1,000
Let's also say with your current website, you get roughly 1000 visitors to your site per year.
Finally, let's say your conversion rate is 7.5%
So of the 1,000 visitors, you converted 75 of them bringing your gross profit to $75,000.
Now let's invest $5,000 into your site. If this $5,000 increases each of these metrics by just 10%, see what happens.
Your profit per customer is still $1000 (unless you raise your prices)
Instead of 1,000 visitors, you now have 1,100
Instead of 7.5%, you are now converting 8.25% of visitors to customers
Multiplying 8.25% * 1,100 = 90.75 customers. Multiply that by your profit per customer ($1000) and your annual gross profit jumps to $90,750!
As you can see, for a $5,000 investment, your site has made you an additional $15,000 (or more, depending on how you count that .75 customer). This is the power of making your site work for you.
As you can see from the example, investing wisely in your marketing tools can yield some pretty incredible returns. There are some key assumptions to capitalize on this money however. First, you need to know how to calculate and measure your key metrics and second, you need to know how to design your site to improve your metrics. This is where Neat Lines comes in. We are experienced web designers and know the key metrics and nuances of the outdoor recreation industry. Contact us today to get your project started, and claim your "free" money!