How to Make Money by Measuring Things

A while ago, I wrote an email course for Black Chair about how small businesses can use their websites more effectively. You can sign up for it here, but you don’t have to, because over the next several weeks I’ll be reproducing that series on this blog. (Side note: this is one of the reasons “people” talk about writing “evergreen content“—I think I’m going to be too busy to blog over the next several weeks but I can reuse this thing I wrote months ago.) The first unit is about measurement, which I think is important.

Good measurement is crucial, because otherwise it’s impossible to tell which of your marketing efforts are working and which aren’t. Measuring actions on your website is really easy (using tools like Google Analytics or KISS Metrics), but the important part is knowing which metrics matter for your business.

Besides knowing the amount of visitors your website sees in a month, you need to know where they come from (ie. which ad campaign, link, or search term) and what percentage of them “converted”.

There are different kinds of conversions; they don’t all necessarily mean that the visitor bought something, but they represent a step in that direction. For example, when someone uses your contact form or signs up for your email list that is a type of conversion.

Online marketers describe the set of conversions leading to a sale as a funnel. The terminology isn’t really important, but the concept is; potential customers rarely buy from a company on initial contact. Instead, you need to lead them through a series of steps. Keeping track of those steps is a huge part of using your website as an effective sales tool—you want to know the percentage of people that make it from one step to the next.

There are many strict-ish definitions of conversion funnels out there, with fancy acronyms for the different steps, but for most small and medium sized businesses with a website the system can be much simpler and just as effective.

Basically, there are four conversions that any online sales funnel needs to measure, and for many cases these are the only four that matter:

  • Initial contact: the first time someone visits your site. You’re probably already measuring this to some extent.
  • Subscription: when a visitor gives you permission to contact them, either by signing up for your mailing list, following you on Twitter, liking your Facebook page, etc. If you don’t have any of those things yet, don’t worry; that’s what this course is for. You might not need them all (we’ll get into that in the next few weeks) but you certainly need at least one subscription channel.
  • Interaction: a member of your subscription audience takes some sort of action that represents interest in your company. It could be as simple as clicking a link in an email, but ideally involves some sort of response or sharing action (replying to a marketing email, tweeting your link to their followers, etc.)
  • Contact: a person interested in your company takes action to contact you—for example, by using the contact form on your website.

It’s entirely possible for visitors to skip any of the steps, but thinking of the online sales process this way is enormously beneficial. If you’re paying attention, you will have noticed one glaring omission: none of those steps actually involve the potential customer becoming an actual customer, ie. giving you money. The reason it’s not listed is because many of the businesses we deal with can’t directly measure that action using normal web tracking software—usually because closing a sale involves a phone call or physical transaction. Even the fourth step (using the contact/booking form) is not a useful conversion metric in certain businesses (most restaurants, for example, won’t see a meaningful amount of contact form use unless they accept reservations online). Nevertheless, tracking the steps leading toward a sale and comparing those metrics with your overall sales metrics will allow you to see how they’re related.

(Quick side note: for what it’s worth, some of the work Black Chair does is based on trying to measure the last few steps in the funnel more carefully—we can build phone analytics software, for example. It’s a lot of work for a relatively small additional benefit, but for companies where a 2-3% increase in annual sales represents a lot more than what it costs to achieve, the extra effort becomes well worth it.)

Once you’re measuring your funnel, optimising conversions is greatly simplified. We’ll get into more of the details in the weeks to come, but for now it will suffice to understand that by breaking the problem down this way it allows you to focus on a single step at a time. Improving performance at any level of the funnel will increase your overall sales.


Software developer, book writer, beer brewer :)

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