Working Back from Your Revenue Target
let's take a step back for a second. Why are you looking to improve conversion rates for your website? The answer is probably clear. You want to make more money before we go back to our one sheet to do one last bit of math. Let's first introduce some new definitions. First there's revenue target, this one's easy. How much money do you want to make? 2nd average order value or a ov? This is the average amount spent each time a customer order something from you calculating you're a ov is simple divide your total revenue or how much money you made by the total number of orders you had or conversions And remember to stay consistent with your time period. So let's say you made $20 last year. That's a lot and you had two orders in this very simple example your average order value is $ divided by two, which is $10. Quick note. If you're a B two B or business to business marketer, you're likely using your site to drive leads for your product. In that case you can think of the average order valu...
e or a OV as the average value of the leads that come in through your site. Now that you know what your revenue targets and average order value are or at least how to calculate them. Let's do the last bit of math in our worksheet First. How much money do you want to make in a year or whatever time period you chose. In my case I want to make $10,000 in one year To understand how many conversions I need to achieve this goal, I need to divide this number, $10, by my average order value or a ov which in my case is $12. That tells me that in order to hit my goal of making $10,000 a month I need to have 833 sales each one at an average of $12. Now I plug in this number into my conversion rate formula to calculate my goal. So 833 conversions assuming the traffic to my site stays exactly the same at about 50,000 visitors per year. It means that 833 divided by 50,000 gives me a conversion rate of 1.6%. Now do we feel like this is reasonable if you're the owner of this business which I am, how confident are you that you can achieve this conversion rate thankfully we had pulled benchmark data before to help us understand whether 1.6 is a big number or a small number. 1.6% sits in between are high and medium benchmark numbers. Actually it's much closer to the mid one. If this were my business which again it is, I would say yes 1.6% seems like a great objective. So let's do it. My objective is to have my website convert visitors at 1.6%. When you sit down to calculate your conversion rate goal, you might find that it's way above industry benchmarks. If you do, don't worry, you have options, you might say, you know what I think I can increase traffic to my site. So I have 833 conversions. What I need to make $10,000 a year, which is my objective. And I divided instead by 75,000 visitors instead of the original 50,000. Suddenly my conversion rate target goes from 1.6% To 1.11%. Or option two. You might decide to increase your average order value from $ to $15. This means I would need fewer conversions or sales to achieve my goal. So 666 conversions over 50,000 visitors leads to a conversion rate of 1.3, Or finally you might decide that you want to do both increased traffic and increase your average order value. This would then give me a conversion rate of .8%. Very, very reasonable. There are many marketing tactics you can use to increase traffic and or increase your average order value but we won't go into them. In this course, we just have too much to cover with conversion rate alone. But it's important that you know, traffic and average order value are two additional levers that you can pull to increase your site's revenue generating potential. Now go back to your handiwork sheet and spend some time calculating a conversion rate goal. That makes sense for your business or the business that you're supporting.