How
To Calculate Your
Conversion Rates
Once
you start promoting your website you will want to find out
the value of each visitor so you can calculate how much
you can afford to spend on advertising.
In order
to make these calculations you will need to know your total
number of sales, gross revenues, total expenses, and unique
visitors for a set period of time.
Conversion
Rate
To calculate
your conversion rate you divide the number of unique visitors
to your website by the total number of sales you made in
a given timeframe.
So if
you got 4,000 unique visitors last month and you made 50
sales, you would divide 4,000 by 50 which equals 80 unique
visitors per sale.
To find
out detailed traffic statistics check the server logs for
your website (contact your host if you need help finding
this information).
Net
Profit Per Sale
To calculate
your net profit from each sale you subtract total expenses
from gross revenue and divide that figure by the total number
of sales you made in a given timeframe.
So if
you made 50 sales at $47 each last month your gross revenue
would be $2350. If your total expenditure for last month
was $500 you subtract it from your gross revenue which equals
$1850. You then divide this figure by the total number of
sales you made last month which equals $37 net profit per
sale.
Visitor
Value
To calculate
the value of each visitor to your website you divide the
net profit per sale by the conversion rate in a given timeframe.
So if
your net profit per sale is $37 and your conversion rate
is one out of 80 unique visitors, you would divide $37 by
80 which equals $0.46 visitor value.
This
means that you can afford to spend up to $0.46 to attract
a single visitor to your website. So if you spend $50 on
advertising it should generate at least 108 unique visitors
to break even (if one of them buys your product), otherwise
the campaign has failed.
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