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 (KPI) for an online store.
But even if a website is not an online store, other KPIs, 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 KPI could be defined as the percentage
of successful visits registered by the website’s property
locator. Other effective KPIs 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 KPIs, 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 KPI 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 KPIs 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 KPIs will be excellent indicators for
determining the level of alignment between our website’s
objectives and the global strategy of the company.
Conclusion
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.