Menu
Menu
Measuring Your Web Site's Return on Investment

Measuring Your Web Site's Return on Investment

Whoever isn't measuring ROI on their Web site is crazy, because it is measurable

Kia Motors America values its online customers; it just doesn't value them equally.

The company assigns different numeric rankings to Web site visitors who request contact from a dealer, download a brochure or ask for updates, says David Schoonover, online and CRM marketing manager at the US-based car manufacturer.

Kia gives higher scores to visitors who, based on market research, are the most likely to actually buy a car (those who request contact from a dealer) and lower values to those further away from a buying decision (the keep-me-updated group).

Schoonover says Kia uses those figures to calculate the return on its online investments and drive design and functionality decisions.

"Whoever isn't measuring ROI on their Web site is crazy, because it is measurable," he adds.

The question isn't how much you're spending; it's, what kind of return are you getting for your investment?

Forrester analyst Harley Manning

IT has to justify every dollar it spends, so it's crucial to understand how technology investments drive business results. Yet analysts and IT leaders say many companies still don't calculate ROI on either individual online functions or their overall Web sites, leaving uncertainty about the sites' effectiveness and what could be improved.

But there are best practices for measuring Web site ROI - even for sites like Kia that don't handle sales transactions. Those practices mirror the considerations and calculations used to rate the success and effectiveness of any other IT investment.

Defining ROI

ROI is really a measure of what a company cares about, says Michael Kogon, CEO of Definition 6 LLC, a consulting and IT services company in Atlanta. "If you measure everything but still don't know what's important, then you can't measure return," he says.

For a useful measure of ROI, Kogon says, understand the business objectives behind the site and then measure the site based on achievement of those goals. A professional services firm, for example, might have a Web site objective of attracting new customers. It could measure the number of white paper downloads, because experience shows that a certain percentage of potential customers who read a firm's white papers are likely to become actual customers.

But ROI needs to look at costs as well as benefits, says Megan Burns, an analyst at US-based Forrester Research. "What does it cost to build this functionality and to maintain it? What does it cost to be used? How many people use it? What's the alternative if we didn't have it on the Web site, and how much would that alternative cost us? That's the kind of thinking you have to have," she says.

Take, for example, a retailer's Web site. The retailer can easily determine the value of a purchase online compared with the investment it takes to handle that sale. But it can also calculate the value of, say, the store-locator function, because a certain percentage of Web site visitors who use that feature will actually go to a brick-and-mortar store and spend money that they might not have spent otherwise.

"What ROI models allow you to do is run through the 'what if' scenarios so you know if it's falling on the positive or negative side and by how much," Burns says.

For instance, FedEx knows how much it costs to handle a package-tracking request online versus how much it costs to take that request at a call centre. The shipping company also knows how much it costs to complete a supply request online versus processing the request through a paper order or phone call, and how much it costs to do an online invoice adjustment compared with what it costs to have an agent do it.

David Zanca, senior vice president of e-commerce technology at US-based FedEx, wouldn't disclose figures, but he did confirm that online processing is generally the least costly method of handling transactions. Imagine what it would cost if the 4 million daily tracking requests on FedEx.com suddenly shifted to the company's call centre.

"We have a tremendous amount of information about traffic and flow, and we watch very carefully about how we place things to drive activity," Zanca says

Toward better decisions

Understanding such ROI dynamics is key to making better decisions about Web site functions, design and, ultimately, spending, says US-based Forrester analyst Harley Manning. "The question isn't how much you're spending; it's, what kind of return are you getting for your investment?" he says. "If I say it's going to cost you $US3 million to redesign your Web site, you'll say, 'Wow, that's a lot of money.' But if I said, 'Our Web site generates $US12 million in net profit, but we can increase the conversion rate and generate $US37 million in net profit with a $US3 million investment', you'd take that deal any day."

That's something Bank of America understands. E-commerce and ATM executive Sanjay Gupta says the US-based bank analyzed its online customers and found that they were not only more loyal but also had 15 percent higher deposit values and 20 percent higher loan balances than offline customers. With those figures in mind, the bank continually creates and improves online functions to bring and keep customers online. For example, Gupta says, the bank introduced online chats about two years ago, so customers can now access a specialist right away if they can't find what they want on the site.

"By doing the right thing for the customer," Gupta says, "we see financial benefits."

Web site balance sheet

Although no Web site function is guaranteed to produce a strong return on investment, experts say some are almost universally worth the effort and expense. Other features can prove to have a negative ROI if customers don't want or need them.

Plus

  • Search. This is a fairly inexpensive function that helps customers find what they want, thereby keeping them on your site.

  • Blogs. Lively blogs can generate new leads, and they require a relatively small investment in technology -- plus the time it takes to maintain them.

  • Videocasting. Digital equipment makes this a lower-cost option than it used to be. And, of course, we all know a picture is worth much more than words alone.

Minus

  • Registration. Visitors get turned off if they're required to register. They're more willing to do so if they get something out of it, but that extra something can cost you.

  • Music. It costs extra, and some users find it annoying. Make sure there's a good business reason for it.

  • Multiple languages. A multilingual site can look impressive, but if your clients don't need it, save the expense.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!

Error: Please check your email address.

More about E-Commerce TechnologyFedExForrester ResearchPLUS

Show Comments

Market Place

Computerworld
ARN
Techworld
CMO