March 24th, 2009
By: Alan Robbins
By K. Alan Robbins
The developer discipline views a web site from an engineering perspective. A web site is a machine made of interconnected parts. Building one is akin to constructing a house, piece by piece. One often overhears conversations like this:
Developer to Sales person: “You’re asking me to quote a price for a house, but you haven’t told me how many floors it has, or how many bedrooms, or what kind of roof it has!”
The creative crowd views the web site as a work of art. Crafting a web site is akin to painting a beautiful masterpiece. It starts with inspiration that becomes the artist’s vision, rendered on a modern, technical canvas. One might over hear conversations like this:
Creativeto Client: “Sure I can make that box red instead of blue. Of course that will ruin the design integrity of the page, and destroy the mood we are conveying.”
Granted, these are extreme stereotypes, but these types of discussions are surprisingly common. The synergies of these two mindsets, carefully managed within a budget are what differentiate the best websites from the worst. Is a web site a construction project, or a painting? The answer is that it is neither.
Web sites play a major, ever increasing role in determining whether someone ultimately transacts with a company. Both the technical developer and the creative artist fulfill valuable roles in the process; a web site must be attention grabbing, pleasing to the eye, and functional. It is however first, and foremost an investment that should be laser focused on one goal and one goal only
: Return on Investment.
Organizations put the developersin charge, because they mistakenly believe that the Internet is all about technology, so technology people know best. Or, they put the artists in charge, because they are committed to the old rules of interruption based advertising, and think the Internet is just an extension of TV, Radio, and print based advertising campaigns.
Most of us have a limited number of dollars to invest. The challenge for a responsible CEO is choosing where to invest limited discretionary dollars to achieve the greatest return. Is a web site a cost center, or a strategic asset? Given a web site’s increasingly pivotal role in the consideration phase of the purchasing process, isn’t it time to start treating it more like an investment property and less like a cost of doing business?
Before you bought a piece of investment property, you would be well advised to decide what it was you were trying to accomplish with it. Perhaps you desire an asset with a net return greater than what you are getting from your broker. Cast Away movie download
What are you trying to accomplish with your web site? Is it a lead generation tool? Is it a sales platform? A way to reduce support costs?
This question often draws blank stares from the same people who can articulate the design, usability, and navigational issues of their current web site in great detail.
If you decided to buy an apartment building as an investment, you’d need decide who your target tenant was going to be. Are you going to rent to transients, families with kids, or working professionals? Does the property you a looking at anticipate the needs of your target tenant?
Who’s your web site for? Is it designed for the audience it is trying to reach? Does your Web site anticipate likely visitor needs?
You’d probably drive around the neighborhood, look in the newspaper, and talk to a few realtors. You’d want to know who else you’ll be competing with for your tenants. Does the competition have a swimming pool, or offer the first month’s rent free?
What does your competition’s site look like? Viewed through the lens of the Web site only, how does your company look like in comparison? What opportunities are you missing because your Web site is mediocre compared to the competition? Is your web site overbuilt?
The biggest investment property most of us own is the home we live in. If you had $50,000 to spend on your house, what factors would you consider in order to determine where best to spend it? Update the plumbing, modernize the kitchen, or buy art for the living room?
This kind of logic is rarely used when it comes to deciding how to invest limited resources in a website. The correct approach is to use numerical analysis. You can’t do that if you aren’t measuring each and every action on your web site with the same kind of precision that you handle your money with. If you are tracking the performance of each page, you can determine whether or not to work on conversion optimization, driving more traffic, or reducing your cart abandonment rate. You’ll know which skill set, or combination of disciplines, is best suited to the challenge at hand.
Reframing your web site as an investment property, and knowing when to leverage the right expertise at the right time, will insure that you are spending your dollars wisely.
Here’s a simple example:
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Which is better: More uniques or a higher conversion rate? Should you spend your budget on word buys and banners, or web development? Assume baseline metrics of:
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Conversion Rate: 2%
Uniques: 1M/Month
Sales: 20,000
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Total Sales: 2M
If you spend $100,000 on driving traffic this month, increasing your uniques to 1.1M, you’ll see a net sales increase 2.2 million, resulting in an ROI of 100%. This follows the logic of traditional advertising, based on Sarnoff’s law, which says that advertising cost is proportional to the reach and therefore the return.
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On the other hand, a $100,000 analysis of the landing, content, detail, and cart experience pages based on metrics, with incremental changes executed, measured, and refined over several months could demonstrate returns on investment as follows:
Increasing the conversion rate by .01% is break even.
Increasing the conversion rate by .05% has a 400% ROI.
Doubling the conversion rate to 4% has an ROI of 1,900%.
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This ROI would be realized each month, month after month.
Treating your web site as an investment first, and managing it as such, will guarantee that the dollars you spend on a web site go to the right places.
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