The return on investment (ROI) for the implementation of a website is directly related to the level by which the website is able to achieve its objectives. Even though this concept may sound trivial to the majority of business owners, establishing a series of objectives for a website and putting in place a methodology for measuring how well these goals are being met typically become more challenging tasks.
Traditional business managers and economic strategists have always had at their disposal a variety of methods for measuring and evaluating the degree of success of business objectives. For example, an increase in productivity, cost reduction initiatives, meeting certain sales goals, or the impact of an advertising campaign are all objectives that can be methodically measured and directly linked to a quantifiable level of success within a specific timeframe. Then, as businesses successfully accomplish their short-term goals, they are able to establish and pursue mid or longer term initiatives.
When those same business managers and strategists that are used to operating in traditional environments, and therefore are very familiar with managing and classifying clients, calculating penetration ratios, measuring profitability and forecasting sales, are now faced with the new paradigm of a virtual business, they seem to forget that most of what they already know and do, including the use of common sense, is equally applicable to an online economy. However, in many cases, it is very difficult to see how a company’s website aligns with its general business strategy and in extreme cases, a website’s only purpose is to provide the company with a presence on the Internet.
This reality is even more paradoxical if one looks at the fact that the Internet, due to its technological foundation and highly interactive nature, provides the ideal ground for quickly testing new ideas, inexpensively measuring their results, and effortlessly obtaining direct customer feedback to guide future changes or improvements. Let’s therefore take a look at some factors that will allow us to measure the performance of a website in terms of its ROI, and also at some strategies that our traditional business managers will have to establish to guarantee that the same level of success that they are accustomed to is also achieved in a virtual online economy.
1. A website must be fully aligned with the corporate strategic objectives
The objectives for a website must closely follow the general strategy for the company, as established by their executive management. Therefore, when the term website is used, it should not be interpreted as a piece of the company’s Information Technology (IT) or computer systems. Instead, the term website should trigger and be identified with concepts such as Marketing, Sales, Human Resources, Customer Service, Product Support, etc. In other words, if IT is the department responsible for your company’s website you should have plenty of reasons to worry.
2. A website must establish tactical objectives
After the general strategic planning has been completed for the website, each department must then establish the objectives for their own area of responsibility as an integral part of the overall plan.
For example, a department responsible for customer support could help alleviate the load of their customer-calling center by adding to their website a section that contains frequently asked questions (FAQs), or by simply implementing an e-mail based help page where customers’ questions could be answered during non-peak periods. As a matter of fact, many people would rather fill out an e-mail form with their question than waiting on hold for 25 minutes listening to the same melody or sales message.
In the above example, the objective is clear: to reduce the workload of our customer-calling center and improve customer satisfaction. We should be able to measure the performance of this objective by tracking the ratio between the number of calls experienced by the call center and the number of customer inquiries registered by the website.
As another example, the department responsible for buying pre-owned properties in a real estate agency would like to concentrate their efforts in purchasing those properties with the highest customer demand. The objective of that department, in this case, would be to optimize and adapt the agency’s property portfolio to include those profiles with higher customer appeal. This objective could be measured by calculating the percentage of successful inquiries experienced by the website’s property locator.
3. Identifying the Key Performance Indicators
Once each department has established their own tactical objectives, a web-based methodology must be implemented to measure the degree of improvement experienced. Although it might be interesting to know the overall web traffic statistics of a website (items such as unique visitors, pages visited, referrers, etc.) it is pretty obvious that special attention must be given to those visits that directly contribute to the success of the established objectives (buying, asking for an estimate, soliciting information, setting up an appointment, etc.)
This concept is very easy to explain by analyzing the behavior of visitors inside an online store. From all the visitors that access the homepage of an online store, only a portion will use the site’s product locator. Out of that group, only a few will add products to their cart, and from those, only a percentage will eventually complete the online payment process. The relationship between the total number of visitors that accessed our site and those that successfully completed a purchase can provide our website’s client conversion ratio. It goes without saying that the higher this ratio the better the performance of the website will be. This ratio is therefore an excellent Key Performance Indicator (KFP) for an online store.
But even if a website is not an online store, other KFPs, just as easily identifiable and measurable, can still be defined to evaluate the site’s objectives. For the customer-calling center objective mentioned above, the percentage of visitors that access the customer help page after having visited the FAQs could be considered a KFP. In other words, the fewer inquiries the help center page registers the better the FAQ page is probably performing and the less work the customer-calling center is therefore receiving. In the case of the real estate agency objective, a good KFP could be defined as the percentage of successful visits registered by the website’s property locator. Other effective KFPs for that website could be defined by measuring the number of visitors that access property specification sheets, or by calculating the percentage of visitors that eventually set up an appointment to tour a property, for instance.
4. Measuring a website’s performance
The identification of Key Performance Indicators allows us to implement two fundamental processes that will improve a website’s performance:
- A “translation” of the website’s traffic statistical data into concepts and values that can be easily recognized by the individuals in charge of a department or area;
- A “transformation” of that data into knowledge that will allow a department head to make decisions and take actions.
Let’s look at each process separately. Web traffic statistics, in general, contain technical information in a highly specialized language, and they measure an endless set of parameters, most of which lack any relevance to a department business lead. That is why, typically, this information is only accessed by IT professionals or webmasters, and even then, only sporadically.
If, on the other hand, we were able to identify only those pieces of information that are needed to calculate and measure the KFPs that have been identified to appraise the performance of a website, we would be “translating” the vast set of traffic statistics into a language that department heads could easily recognize and relate to. For example, someone in charge of a customer service department would not see that http://www.mydomain.com/customer/client_form.aspx has registered 23,547 hits. Instead, the information presented to that individual would convey that the number of users that submitted an inquiry to the customer help page has decreased by 10%.
By only serving to each department the data that is relevant to calculate their own KFPs, the task of decentralizing a website’s huge traffic statistical data and converting that information into a series of executive summaries, customized for the each department head, becomes a much simpler endeavor.
Implementing the translation process described above also guarantees a higher degree of involvement on the part of those responsible for each department. By providing familiar and recognizable data, these individuals will be equipped with the information necessary to “transform” the data received into knowledge that they can use to propose changes or improvements. This process will be most effective if the KFP changes are monitored over short periods of time (e.g., every two to four weeks.) It is in this manner that the executives will be able to observe trends, anticipate changes and notice the effect of recently implemented improvements. By providing this constant feedback, these decision makers will be kept involved and motivated, supporting a continuous improvement process.
5. Improving a website’s performance
Once the Key Performance Indicators have been identified, the gauge for each KFP is thought of being reset to zero. From that moment, each department is free to propose and develop strategies that will improve the performance of their own area. Since each department has a set of KFPs and a methodology to consistently and continuously measure their performance, they have the necessary tools to “test” new strategies and evaluate their positive or negative effects almost immediately. At the same time, this feedback will stimulate new decisions and/or actions for implementing improvements in each area. Finally, the changes measured by the KFPs will be excellent indicators for determining the level of alignment between our website’s objectives and the global strategy of the company.
The performance and ultimate success of a website is for the most part based on the efforts of individual departments working together towards a common set of corporate goals. It will be the improvements made by those individual groups, in order to achieve their own objectives that will drive the overall increase in Internet performance. If we then establish a relationship between the cost associated with each of the proposed improvements and the return expected from them (for example, in terms of a workload reduction, or an increase in the customer conversion ratio) we will be able to not only measure the ROI for our entire corporate website initiative, but also collect the necessary data to justify future Internet investments. After all, the World Wide Web is just one more avenue for conducting business. An avenue, nonetheless, that still requires us to establish objectives, measure their achievement, and act when necessary to provide improvements. We must also be aware that those same principles that we have so heavily relied upon in a traditional economy still apply in this new virtual business world.