In 2022, just about every business has a website and is looking to maximise its return on investment (ROI).
There are many factors that go into generating high ROI for your website. From the design to its conversion-oriented user experience, there’s a lot that can be focused on to help you improve the return on your website investment.
After all, websites aren’t necessarily the cheapest of business exercises but it is necessary. So knowing how to generate and measure the ROI of your business is more important than ever.
How is ROI calculated?
In simple terms, a ratio is used to determine just how worthy a particular investment or expenditure is, based on the net income or gains brought in by that same investment.
Using a formula to calculate the ROI of your website, you can track whether the initial and ongoing costs of your website’s design and maintenance are improving or eroding your company’s bottom line.
Understanding and using ROI
When you’re trying to understand your return on investment, you need to consider the costs and the return/value.
Costs can include:
- The content, design, and development of the website. This can be the complete cost of getting an external website developer to create your site, or it can be reflective of the labour and wages of internal staff members working on your website.
- Required ongoing services such as website hosting and domain names.
- Ongoing maintenance work, such as security checks and software updates.
- Ad hoc/urgent support for when there are issues or outages with the website.
When it comes to the return side of the equation, this will be based a lot more on the particulars of your business and website. Consider the value of your conversions. For example, if one visitor to your website clicks through to the checkout and orders your product or service, how much lifetime value do they bring?
You can understand how this might lend itself to some disparities in how people view website ROI. A construction company for whom each conversion is likely to bring in hundreds of thousands of dollars in value won’t need nearly as many conversions on their website to generate a high return on investment. A company selling toothbrushes online will need far more sales through their website to achieve the same ratio.
Additionally, some sales happen instantly (e.g. online stores) while some leads may take weeks, months, or even years to convert into a sale. Thus, there is no single metric of website traffic that is universally applicable for all companies’ ROI calculations.
Thankfully, there is a fairly simple formula to calculate ROI:
The return on investment = (gain/profit – cost/expenditure) + cost/expenditure
In other words, take the total “return minus cost” and divide it by the cost to give you an ROI percentage. The higher the rate of return on your investment (i.e. the higher the answer to the above ROI formula) the better for your business.
Website ROI example
Let’s create an ROI example to help us understand this better.
Consider the following scenario: Your business’s website cost $5,000 to develop a year ago and you pay $300 in annual website hosting fees.
Over the past year since launching the website, the website brought in 200 sales of your product or service. The lifetime value of each of those sales is $100 in profit. (Note: Not revenue but profit, i.e. if every sale costs you $10 but you sell it for $110, your profit is $100.)
Your total gains therefore are $100 x 200 (= $20,000) and your total expenditure is $5,300. In this example, the formula to calculate ROI is:
(20,000 – 5,300) + 5,300 = 2.77
To put that in a dollar context: For every $1 you have invested in your website, your return has been $2.77.
What is a good ROI?
This is really a difficult question to answer. It will depend on a variety of factors but a good ratio is generally considered to be 5:1.
In other words, for every $1 you spend on your website, it should ideally bring you back $5 in return. Keep in mind that this won’t necessarily start from day 1, and without proper marketing in place, such as ongoing Search Engine Optimisation (SEO), it may never happen at all. But over the course of a year or two, with proper marketing and a well-developed website, you should certainly have seen a significant return on your original investment.
How to generate higher ROI
Knowing how to generate higher ROI on your website is really the golden ticket.
If you have a terribly designed website or for some reason the site just isn’t performing and converting as it should, don’t worry. There are a number of ways in which you can fix the problem. Will some of the strategies require an additional investment before you see a return? Yes. But is it worth it? Absolutely!
1. Website rebuild
Rebuilding your website might sound daunting but with an experienced digital marketing agency (like us here at GO Creative, wink wink), it doesn’t have to be.
There are numerous things to consider as part of your top to toe website restructure and rebuild. Firstly, it needs to be visually appealing and intuitive in its layout. Think about how and where the menu is displayed, where you want people to click and what sort of content will entice potential customers or clients.
The user experience (UX) is a critical part of this. From clear call to action buttons (e.g. “call us” or “arrange a free quote”), to ensuring that it’s easy for a visitor to your website to quickly find the information they’re looking for, there’s a lot to take into account.
2. Reduce costs
Understandably, when it comes to trying to generate higher ROI a lot of emphasis is placed on the R and not the I. While it’s important to focus on the return as well, look at the ongoing costs of maintaining your website. Are you paying exorbitant hosting prices or website maintenance packages you don’t need? Or are you paying higher fees for ad hoc support when a lower priced monthly plan would give you more value?
Cutting unnecessary expenditure will bring down the investment side of the ROI formula and thereby increase the return on every $1 spent.
3. Website and mobile optimisation
Optimising your website to rank higher in search engine results (via an SEO service) will help to increase traffic. Local SEO in particular can help you focus on drawing in specific audiences based on interest, activity or geographical location.
Combined with a well designed and highly functional website that meets the needs of your users, increasing your web traffic can filter through to generating higher ROI through more and better leads, more sales, and higher profit margins.
4. Improve and increase your data
Generating higher ROI requires you to understand your business and your website’s specific metrics. Knowing what a “return” on your investment means in the context of your website and having sufficient, accurate data to that effect is vital.
Some questions to help you get started include:
- How many visitors does your website get?
- How many of these visitors convert into sales?
- How many of these visitors who do not turn into sales turn into potential leads?
- What is the average value of each lead/sale?
- Which devices have the highest conversion rates, and why?
There are a variety of programs that can be used to gather this information and while some of them cost money, the knowledge is necessary for focusing on increasing traffic and profit.
5. Digital marketing campaigns
There are many different forms of digital marketing, from SEO to pay per click (PPC) ads in social media and search engines, and content marketing. At the end of the day, just about all digital marketing focuses on bringing in more traffic to your website and landing pages.
Effective and well considered marketing campaigns can help improve your ROI thanks to their ability to really refine the quality of your website’s visitors.
One thing to note here though is that pay per click advertising campaigns only work while the campaigns are running, and for many small businesses this advertising isn’t effective without a budget in the thousands per month. In contrast, SEO usually takes a little longer to yield results but provides a much better ROI in the long term for most businesses and will continue to provide benefits even if the service is stopped or scaled back.
6. Know your brand
Improving the return on your investment and gaining a high ROI requires you to really know your brand. Having an intimate understanding of your costs and profits associated with your website are, how you determine the lifetime value of each online sale, and what sort of strategies (marketing and otherwise) work for your brand will empower you to make considered ongoing decisions to improve the rate of return on investment.
The limitation of generating higher ROI
There are a few limitations when it comes to considering the value of knowing your ROI. While focusing on generating high ROI is almost always a good thing, there are several factors worth noting:
- Unexpected costs, for example website repairs, are often not taken into account.
- ROI focuses on financial gain and does not reflect your customer/client’s experience, the quality of your product and service, or your overall branding image.
- ROI does not reflect opportunity cost. In other words, it does not give you a comparison between investing in your website to generate a return against investing in another aspect of your business.
- It can be difficult to quantify, especially if you’re an organisation and not a business with sales tracking and profit-related data.
- Website ROI doesn’t take into account other value your online presence might offer visitors, such as educational information or brand awareness. Tracking these touch points from visitor to lead or sale can often be impossible to achieve.
- Your website’s ROI is just one overall factor to consider in your business calculations. You may simply need a website presence, regardless of ROI, as your profit comes exclusively from another channel.
There is one last point to take into account. Your website is more than just a lead-generating machine. It’s your business’s front-facing digital image. There is an unquantifiable value to having a well designed and functioning website even if its focus is not to produce revenue in the traditional sense.
It’s becoming more and more important for businesses and organisations of all types to invest in an online presence. Fortunately, this doesn’t have to be a costly exercise and even a simple website can produce dividends in more ways than one.
Find out more about how to generate higher ROI
If all this financial talk about return on investments and digital talk about SEO and website development has got your head spinning, make sure to turn to the team at GO Creative. Our end-to-end digital marketing services includes everything from website development and redesign to digital marketing campaigns.
We’d love to talk to you about the potential to generate higher ROI on your website. Just give us a call on (07) 3333 2932 to organise a free consultation!