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How to measure website ROI

How to measure website ROI

Kia Motors America Inc. values its online customers; it just doesn’t value them equally. The company assigns different numeric rankings to website visitors who request contact from a dealer, download a brochure or ask for updates, says David Schoonover, online and CRM marketing manager at the Irvine, Calif.-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 website is crazy, because it is measurable,” he adds. 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 website 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 website 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 Forrester Research Inc. “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 website, 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 website. 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 website 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 Corp. knows how much it costs to handle a package-tracking request online versus how much it costs to take that request at a call center. 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 Memphis-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 center. “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 website functions, design and, ultimately, spending, says 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 $3 million to redesign your website, you’ll say, ‘Wow, that’s a lot of money.’ But if I said, ‘Our website generates $12 million in net profit, but we can increase the conversion rate and generate $37 million in net profit with a $3 million investment,’ you’d take that deal any day.” That’s something Bank of America Corp. understands. E-commerce and ATM executive Sanjay Gupta says the Charlotte, N.C.-based bank analyzed its online customers and found that they were not only more loyal but also had 15% higher deposit values and 20% 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.”

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