How to determine Monetary Value of Non ecommerce Conversions

 

When conversion is a product order, it is easy to determine its value. Whatever is the price of the product, is the value of the conversion.

For example if price of the product is £500 then value of your conversion is £500. But

how you will calculate the values of your conversions which are not orders but something like leads, downloads, newsletters signups, phone calls etc?

There are many websites on the web which don’t have any macro conversion (like placing an order) but only lot of micro conversions (like downloading a brochure, watching a video, request for follow up etc).  These are often the websites which sell very high priced items like properties, cars, yacht etc.

Since people generally don’t buy such items online, you won’t find shopping cart set up on such websites.

If you are doing marketing of a non-ecommerce website then how you will report the value you have added to the business bottomline through SEO, PPC, Social media etc?

Suddenly all the metrics we were so proud of, start collapsing like a house of cards in Lord Sugar’s boardroom.

What went wrong here?  

Well, the marketer failed to convince, how his marketing efforts are impacting the business bottomline in monetary terms.

What is the impact of increasing the traffic by X in monetary terms?

What is the impact of improving the site engagement in monetary terms?

What is the impact of increasing the video viewership by X in monetary terms?

What is the impact of increasing the Facebook fan base by X in monetary terms?


Businesses want to hear this. Business Tycoons like ‘Lord Sugar’ want to hear this.  This is what really matters to them. That is why they are big businesses and that is why they are run by business tycoons.

Businesses measure success in monetary terms.

If you don’t tie a monetary value to your conversions then you may have hard time convincing senior management, why they should not hire someone else.

Businesses understand the language of £££…$$$$… more than anything else.  So speak in their language.

Related Post: SEO ROI Analysis – How to do ROI calculations for SEO

Senior management may not have the time to go through your ranking reports, link building reports or other reports. But they are definitely interested in one thing and that is how your marketing activities are impacting the bottomline and whether they should continue with you.

 

Case Study - Meridien Modena

Let us understand the calculations involved in determining monetary value of non-ecommerce goals through a case study.

Meridien Modena sells pre owned cars in UK.  I picked up this company because one of their showrooms which sell Ferraris is close to my house and I am simply fascinated by the cars they sell.

Since people don’t buy a car without a test drive, without looking and physically touching it, you won’t find any ‘order now’ button on this website or such type of websites. This website has no macro conversion as such but has a lot of micro conversions like:

  1. Viewing a vehicle detail
  2. Printing out the specifications/details of a car
  3. Filling out a contact form
  4. Making a call

Now how you will tie a monetary value to these micro conversions?  

Let us determine the monetary value of ‘printing out the details of a car’:

Step-1: Track the number of people who print out the details of a car each month.  
You can track such people through event tracking in Google Analytics.  Let us suppose 500 people took print outs in a month.

Step-2:  Track the number of people who showed up at one of the car showroom with the printouts.
Let us call the people who showed up with a print out as ‘Clients X’. You can track ‘client X’ by calling and asking the car dealer of each showroom. Let us suppose 100 people (of client X type) showed up at various car showrooms in a month.

Step-3: Track all the ‘clients X’ who made a purchase and also track the revenue generated as a result of such purchases.
Again you can get these numbers through car dealers.  Let us suppose 25 people made a purchase and the net sale was of £1.5 million.

Step-4: Ask your car dealers how many people on an average who showed up at their showroom eventually make a purchase and what the average value of a purchase is.

Here you are determining the conversion rate of your car dealers and the average order value.  You can’t get such type of insight through any web analytics tool. Let us suppose that one person out of 10 who showed up at a showroom make a purchase on an average.  Let us suppose that the average value of a purchase is £20000

 

Step-5: Calculate the monetary value added by a person who showed up at a car showroom:

If 1 person out of 10 who showed up a car showroom makes a purchase on an average and the average purchase value is £20000 then:

Monetary value added by a person who showed up at a car showroom = £20000 * (1/10) = £2000

100 people showed up at various car showrooms with a printout in a month. Out of these 100 people 25 people made a purchase and generated a net sale of £1.5 million. The other 75 people didn’t make a purchase but they still showed up at showroom.  So they are still adding value to the business bottomline. The monetary value added to the business bottomline by these 75 people is:

75 * £2000 = £150000

So the total monetary value added to the business by 100 people

= £150000 + £1.5 million = £1.65 million

 

Step-6: Calculate the average value of ‘printing out the details of a car’

Average value of ‘printing out the details of a car’ = Revenue generated by ‘Clients X’ /number of print outs

= £1.65 million /500 = £3300

So the monetary value of ‘printing out the details of a car’ from the website = £3300

Who would have ever though that a print out can be worth that much?

You can add this value as Goal value in your Google Analytics profile and show it to your client along with the conversion volumes.

Similarly you need to find and report the monetary value of:

  1. Viewing a vehicle detail
  2. Filling out a contact form
  3. Making a call

Needless to say, it is not very easy to calculate the monetary value of non-ecommerce conversions.

But that’s the way it is for you esp. if you are into real estate or other very high priced items market where macro conversions don’t happen on the website but in the offline world.

Pro Tip

Never assign monetary value to ecommerce goals like ‘orders’.  If you do that then you will inflate the revenue metrics. 

Always tie a monetary value to whatever you report otherwise don’t report esp if you are reporting to senior management in a very big company.

Reporting visits, number of new rankings acquired, site engagement, facebook followers, twitter followers etc are all meaningless unless they don’t show the impact on the business bottomline in monetary terms.

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  • https://www.thesslstore.com/symantec.aspx Symantec SSL

    Nice analytis for people engaged in offline and online both channel. As most of the internet marketing guys fail to show their efforts in offline market revenue.

  • http://www.timpeter.com/blog Tim Peter

    Good article, Himanshu. I’ve got a couple of questions for you.

    In step 5 you say, “The other 75 people didn’t make a purchase but they still showed up at showroom. So they are still adding value to the business bottomline.” How? Most senior managers would say that the folks who showed up but didn’t buy only increased their costs (additional labor to meet with these folks, offering other amenities like coffee, etc.)

    I agree that the ones who printed out the sheet are a great customer group (they’re converting at 25% [25/100] as opposed to 10% for everyone else. But I’m not seeing any added economic value from the other 75. Are you double-counting them (first for the 25 who convert, then again for 1/10 of the remaining 75)? What am I missing?

    Second, why wouldn’t you assign a monetary value to orders? I get that it “inflates” the value of the site, but if you’ve got actual order values, why wouldn’t you report them?

    I do like your thinking on offline-vs.-online conversion, though. Not enough people talk about it.

    • http://www.seotakeaways.com/ Himanshu

      You can re-target the 75 people who didn’t make a purchase and then track how many of them who didn’t make a purchase on their first visit end up buying. You can show this data to the senior managers. That is why the people who showed up add value to the business bottomline. They all our prospective clients. Even if they don’t immediately make a purchase they are exposed to your brand and that brand exposure has value of its own. Moreover you have done your job of sending qualified leads. These are qualified leads because no one is going to make a great effort to visit a showroom unless he/she is really serious about buying a car. If the buyers are still not converting then it is the fault of the sales man at the showroom.

      An e-commerce conversion like order already has a value associated with it and that is its price. If you add your own value then you are actually inflating the price of the product. I haven’t said anywhere not to report actual order values. But this is something which you can’t do in web analytics tools like Google Analytics if the conversion is taking place offline. You need to report such values separately in an excel spreadsheet.

  • http://www.timpeter.com/blog Tim Peter

    I see what you’re saying. I’d typically recommend against claiming any additional value for those folks until they convert (post-remarketing, for instance). Just as the sales guy doesn’t claim any value on the 9 out of 10 who don’t buy (using your earlier example), I wouldn’t recommend to most e-commerce managers to claim benefit beyond those who have purchased.

    And thanks for clearing up my confusion on the second point. I misread your “Pro Tip” as “don’t measure value,” not “don’t arbitrarily assignvalue.” Good tip.

    In some (highly unfortunate) cases, I have clients whose shopping cart software will not capture the actual transaction value at time of purchase. In those cases, we do assign a value; however, it’s based on either the average order value or the median order value depending on how skewed their data is. While imperfect, it does allow for simple reporting of transaction value while not overstating their actual revenues.

    • http://www.seotakeaways.com/ Himanshu

      Thanks for the tips Tim. It is useful.