ROI and Performance Framework

It is not a simple step to purchase a website; rather it is an investment with a high initial cost
in terms of time and money bringing together aspects such as:

 Design and Brand

 Functionality
 Content

To get the most from a website there are on-going requirements such as:

 Hosting
 Maintenance and Support
 New Development
 Marketing

Whilst these areas are not the normal buzz terms associated with website deployment they
start to make clear that a website is a business investment, and as such it should have a
measurable business return and should be judged against performance and targets as a
normal investment would.

Website Return on Investment (ROI) pulls together various statistics about the website:

 Page views
 Visitors
 Contact forms completed
 Total purchases
These key metrics (and others), are the building blocks of website ROI and performance
modelling; however by themselves they are just numbers. Measuring online ROI and
performance requires the concepts of worth, value and adherence to goals rather than
simple numbers.

Establishing worth and value can be a haphazard approach; the remainder of this document
seeks to create a simple framework to allow the creation of website ROI and performance
models before the website is built. Building ROI and performance models before the
creation of the website allows focus for all parties (namely the client, the digital consultants
and the website designers and developers) to what is important and an agreed structure to
monitor performance.

The Framework
Setting the scene

Background

In creating the model the background to the company and any previous website must be
known, and should be documented as part of the model creation in clear English.

The purpose of documenting a background is to establish a starting point for that can be
agreed by all parties creating the website that can be used to judge the feasibility of
expectations and aims; e.g. the feasibility of a website with no previous presence to attract
100,000 visitors in the first month is distinctly lower than that of an established website
already receiving 100,000 visitors.

Aims and Expectations

With a background in place the aims and expectations of the site can be formulated. The
aims of the website are generally on-going and can be documented in clear English, since
year on year it is unlikely that these will change.

Expectations are derived from the aims in light of the background of the site. Expectations
should be performance driven and treated in the business case; later in Areas of Worth we
use the four precepts of Information, Conversion, Breadth and Focus to group each return,
expectations should be aligned with one of these precepts. Expectations should be brief and
bulleted; if expectations are convoluted there is the potential for misunderstanding.
Expectations should also be rated in order of importance (most important first).
Website Returns

Website returns are the metrics by which ROI and performance can start to be measured.
These are the simple building blocks such as:

 Page views
 Visitors
 Contact forms completed
 Total purchases

They are not yet rated into worth, value, or compared against expectations; they are the
points at which fixed numbers are collected. Against each return (tangible or non-tangible),
a fixed measure of when that return is achieved has to be specified.

Tangible Website Returns

The easiest returns to measure are tangible website returns. These have a direct
measurement against normal website metrics; examples of these would be:

 Sales through the site

 Leads generated through contact forms
 People signing up to the newsletter
 People calling a dedicated website telephone number

Each of these actions can be given a simple definitive value to a company and can normally
be mapped against ROI and performance on any existing marketing efforts.

Non-Tangible Website Returns

Non-tangible returns are somewhat harder to derive since these have a layer of analysis
over and above direct measurement; examples of these would be:

 Brand Awareness
 Reputation / Impression
 Presence
 Education

Each of these could be a direct benefit of a website; however they are not directly
measurable. To derive the return on these simple metrics (visitors, repeat visitors, people
browsing certain sections of the site), can be used to calculate when these benefits have
been achieved.
Worth

Areas of Worth

All aspects of worth on a website development have to be tied into business case to have
any worthwhile meaning. Returns should be placed into the areas of Information,
Conversion (measurement of goal achievement), Breadth (measurement of access variables)
and Focus, as the website expectations have been previously. Although a website can have
returns and expectations in all areas Information and Conversion are the opposite in the
worth they return as are Breadth and Focus.

 Information

Information is passed freely from a website without barriers.

 Measurement of Goal Achievement

Conversion seeks to take anonymous members of the public into leads, recurrent triggered marketing
opportunities and sales.

 Measurement of Access Variables

Breadth follows the approach of many things for many people, in online marketing it is sometimes referred to as
the long-tail approach.

 Measurement of specific focused messages/terms

Focus invokes a specific message or route tied to speciality.

Worth Map

To create a worth map the following steps should be taken:

 Each area of worth should be rated 1 to 10 in order of importance (1 = Trivial, 10 = Critical), the rating of these
should align themselves with grouping within the Aims and Expectations
 Each return should be rated 1 to 10 in order of importance (1 = Trivial, 10 = Critical)
 The area rating should be multiplied by the return rating to establish a measure of worth
 Worth can then be mapped on a graph the X axis would be Information to Conversion. They Y axis would be
Breadth to Focus
Placing Value

The value of a website is split into the financial value of website returns and the
performance of the website. These should be displayed in a table to allow quick reporting
over reporting periods.

Establishing Financial Value

It is easy to over simplify certain areas of fiscal value reporting. In ecommerce sites it is
tempting to measure performance on total transaction values ignoring elements such as
margin per transaction. It is also for non-tangible returns difficult to place a fiscal value.

For a simple framework fiscal values can only be approximations; however over the lifecycle
of the website ROI and Performance framework fiscal values can be amended based on
evidence to give better approximations.

Fiscal values can either be fixed, or be calculations based upon simple measurements; e.g.:

Return Fiscal Value

Total Sales 20% average margin
Sales above £100 5% additional margin
Brand Awareness 1% given brand value for each 10,000 visitors over 100,000

To avoid counting the same value twice each return and value should be aware of previous
returns (e.g. If a visitor is worth 1p and a newsletter subscriber is worth 3p: since a
newsletter subscriber is already a visitor the additional fiscal value of a newsletter
subscriber is 2p).

Establishing Performance

Whilst value is a useful reporting and measuring tool, perhaps what is more useful is
performance. Since performance can only be measured by achievement of the site, it needs
to factor the worth of each return. Performance is calculated:

Performance = (Fiscal Value of the Return x Worth ) / Mean Worth for all Returns

For reporting the performance should extend the fiscal value table to allow both
measurements to be seen side-by-side. The report should be structured:

Return Worth Fiscal Value Performance Mean Worth

Total Sales 64 100,000 128,000 50
Sales above 100 76 10,000 15,200 50
Brand Awareness 35 10,000 7,000 50
Conclusions
Reporting and Amending

Whilst building a Website, ROI and Performance models benefit greatly by clarifying the
goals and associated importance. The key for the model is regular reporting after site launch
to measure the performance and ROI of the site. By following the framework, all of the key
indicators and values should be established to allow rapid reporting over given reporting
periods (suggested monthly).

As important as monitoring the ROI and performance using the model it is also important to
monitor the accuracy of the model itself. Simple amendments to the model can be
performed by changing the fiscal values, indeed fiscal values can also be calculated against
reporting period trends. To this end the model should not be considered static, and should
be amended and grow alongside the website.

Analysing Reports

Each model created using the framework is likely to be different in the same respect as each
company’s Aims and Expectations are likely to differ. The framework has to a greater degree
normalized outlying areas of the site in accordance to value and worth as defined by the
Worth Map and incorporated into performance.

By reporting performance and ROI normalized against expectations a number of trends can
occur; some of the more common are below.

Performance Values exceed Fiscal Values

The model is weighted toward increasing the performance values of those areas deemed
important. This trend highlights either the success of the site in core areas, or that specific
areas of the site have been given to greater importance. The model will normalize instances
where all areas of the site are important.

Fiscal Values exceed Performance Values

If Fiscal Values exceed Performance Values this is an indicator that the site is not performing
in the chosen areas. It may be that prominence is given to areas that detract from targeted
returns, or the returns are too hard to get to. If the bottom line Fiscal Values are within or
exceed the expected ROI for the given reporting period it may be that the targeted returns
do not reflect accurately the goals of the site.
Performance totals are primarily from low worth Returns

Although unique in each case this could be an indicator that the website is not maximizing
the opportunities to move people towards higher worth returns. This could be routes to
entry; this could be by targeting groups that have little interest in higher worth returns.

Performance totals are primarily from high worth Returns

Whilst this is an indicator of a successful site, it could also be indicative of low audience
levels or too higher worth being assigned to certain goals.

During each reporting period reports should be analysed to ascertain where improvements
can be made to the site. The bottom line totals should be analysed against expected fiscal
returns (e.g. Factoring 'break even' periods against the total cost of the project).

This blog post was written by Richard Conyard

For more information please visit: http://www.redant.co.uk