Imagine a situation: you ordered the development of an online store, received a website, invested in advertising, using its various opportunities. It seems that everything is ready for success, but advertising budgets are growing, and it is unclear which of the tools is compelling.
To analyze the situation, it is necessary to know the key indicators and evaluate them regularly. This will help you avoid unnecessary costs and use only effective online store advertising. How to assess work?
The main indicator that demonstrates the effectiveness of the website. This is the percentage of active customers who have performed significant actions in the online store and their total number. Steps that need to consider can be different: purchase, registration, application, questions to the manager.
Formula: number of active visitors x 100% / total number of visitors.
This value will show how much it costs to attract a visitor who makes a purchase or otherwise active.
Formula: Costs per day/number of active visitors.
Return on Investment is the return on investment. It is essential to evaluate the effectiveness of website advertising, as it reflects how much investment in it increases sales.
Formula: Gross profit/investment x 100.
The average coefficient of ice closure
Average Lead Close Rate is the intermediate level or coefficient of ice (visitor who applied), demonstrating the usefulness of the sales funnel. The analysis conducted at the end of each month will help understand the sales department’s effectiveness and the quality of targeted traffic.
Formula: New customers / Total number of leads.
This is the cost of purchasing a customer, short for English Customer Acquisition Cost. The price of attracting each buyer is vital for assessing the return on investment. Calculations can perform for different periods: year, month, quarter. To make it the most useful, the total price should include marketing and advertising campaigns, wages, and other costs.
Formula: CAC = Total Marketing and Sales Price / New Customers.
SAS and its break-even point
In other words, it is the self-sufficiency of the price of attracting one buyer. The value will indicate the number of months during which you return the SAS, taking into account the average income and expenses for this period.
Formula: payback period CAC = CAC / income per month – cost per month.
In itself, this is an indicator of the duration of the interaction, an analog of the English Life Time Value. The LTV and CAC ratio shows the buyer’s value for the entire period of his cooperation with the company. It is a permanent or rather lifelong value of SAS. “Lifetime” here means the period from the customer’s first purchase to the complete cessation of commercial interaction with the online store.
The formula will determine whether the business is effective, whether it has prospects for continued existence and progress. LTV is considered good: CAC, three times or more than CAC.
Use these simple formulas to assess the current situation by promoting online business and its advertising, making forecasts, developing strategies, effectively planning your marketing budget, and getting rid of what hinders growth.