Thanks to everyone for checking the new blog out and for the comments coming in so far. I added an XML button on the right so people can subscribe–I’m going to try FeedBurner again to see what kind of stats they’re able to generate (feed metrics are a hobby of mine.)

Neil Mason asked:

Eric - are you going to focus on site centric KPIs or are you going to widen the field? For example, what about customer satisfaction, reach etc? Are you planning to cover these as well?

Absolutely! I hope to be able to cover a number of non-traffic and commerce related key performance indicators including customer satisfaction, site performance and response times (e.g., Average Time to Respond to Email Inquiries.) It is my firm belief that once companies get up-and-running with web KPIs the next place they should be looking is at the web-as-a-business.

Sam and Jerry had commented about the use of average as opposed to something that communicates more information (e.g., median). I had already written (but not blogged) a section header about averages that hopefully covers this. In general I agree but KPIs should be easily and quickly calculated. Does anyone have a simple strategy for calculating the median value for indicators like these?

Most of the other comments have been KPI-specific and are great! I’m going to use my Gmail account to keep careful track of everyone who contributes and will do my very best to acknowledge everyone in the final draft.

No, that does not mean I’ll be sending you a check ;-)

A reason to describe KPIs for “Average Revenue per VISITOR” and “Average Revenue per VISIT”? Same problem for cost per visitor and cost per visit?

For some reason I cannot think of a good business reason that a company would want to differentiate these two metrics.

Can any of you? If so, I’d love to know!

Revenue per visitor is a critical metric but not just for online retailers and advertising supported sites. Marketing sites can better understand their marketing efforts by estimating value based on conversion events and customer support sites can approximate revenue supported.

Definition
In general:

Sum of Revenue Generated / Visitors = Average Revenue per Visitor

Each business model will calculate revenue generated or supported differently:
• For retail sites the sum of revenue generated is easily calculated.
• Advertising-based sites can use the sum of advertising revenues generated or a calculation of average CPM times impressions served.
• Marketing sites focused on lead generation are encouraged to estimate the value of leads generated by comparing similar quality leads to past results.
• Customer support sites should ideally sum the amount of customer contract value supported by the site. For example, if you know that 100 people are getting support for a $100 product and 50 people are getting support for a $500 product, the sum of revenue supported would be 100 x $100 + 50 x 500 = $1,250,00

While the customer support case is obviously artificial it serves no less value for sites to track the value of visitors they support.

Presentation
As with other dollar-based KPIs, presentation should be fairly obvious. The only exception would be for the customer support model in which the indicator should be clearly titled “Average Revenue Supported per Visitor.”

Expectation
As you would expect, the more revenue per visitor you’re able to get, the better off you are. The obvious strategy for improving this performance indicator is to attract more valuable visitors to your web site. Consider using average revenue per visitor to critically examine each new visitor acquisition effort, segmenting as necessary, to determine whether different strategies are actually working.

Action
If this number drops off suddenly or precipitously likely the first call you should make is to your marketing department and the next to your operations group. Often times either a large group of unqualified visitors has been attracted to the site or something has gone wrong with your revenue realization path (e.g., your shopping cart is broken or your site is performing slowly, thusly reducing the number of advertising impressions you serve.)

This key performance indicator makes the list of “RED BUTTON” KPIs that, when they go wrong, should bring everyone to a screeching halt while the problem is diagnosed.

Regardless of your business model, conversion is one of the most important visitor activities you need to track. By calculating the average cost per conversion you can ensure that you’re not paying too much to acquire visitors.

Definition
The general calculation for average cost per conversion is similar to average cost per visitor and average cost per visit:

Sum of Acquisition Marketing Costs / Conversions = Average Cost per Conversion

Sophisticated marketers may want to segment this KPI for individual conversion events; to do this you need to have a pretty good system for tracking marketing costs so that they may be associated with the intended act of conversion. For example, if your site is designed to generate leads but visitors can also sign up for a newsletter, you may want to assign the lion’s share of marketing costs to the former and a small fraction to the latter—only the marketing you do to grow your newsletter subscription base. Doing so will inevitably produce a better-looking KPI for your newsletter subscription conversion event but this makes sense as long as the latter event is ancillary to your marketing goals.

Similar to average cost per visitor it does make sense to segment average cost per conversion by marketing channel to help identify strategies that are ineffective from a cost perspective.

Presentation
Because this KPI is dollar-based it and critical to the success of most businesses it is unlikely you’ll need to change much in the presentation. It is worthwhile, if you break down your cost by conversion event, to both provide a global view (all marketing costs divided by all conversion events) for reference and also clearly identify the conversion event for micro-events.

Expectation
If you’re paying more for conversions than the conversions are worth then clearly something has gone wrong. For most companies this is not the case and the expectation is that even nominal ongoing savings in conversion costs can add up. By constantly re-examining your marketing acquisition efforts and cutting waste, your cost per conversion can be dramatically improved.

Action
Any time average cost per conversion increases it is advised to immediately examine your marketing efforts to see what has changed. The most common case is that some expensive program has recently been launched and is failing to drive an appropriate number of conversion events. In this case you usually don’t want to immediately cease the marketing activity in question but do want to pay close attention to said effort, watching for any improvement.

Visitor acquisition costs often spiral out of control when left untracked. While tracking these costs can be difficult in the long run the effort is worth it.

Definition
A function of the total sum of marketing costs, the average cost per visitor is defined as:

Total Acquisition Marketing Costs / Visitors = Average Cost per Visitor

For most companies the tricky piece is summing acquisition marketing costs, owing to the fact that few companies are accurately tracking these numbers on anything more granular than a quarterly basis. It is recommended that you limit the summation to online marketing activities only unless you strongly brand your URL in offline marketing materials. By adding up the costs of search, email, banner, partner and feed-based marketing activities a fairly useful KPI can be generated.
This indicator is a good candidate for segmentation by marketing channel. For example, you may want to calculate the average cost per visitor for your email, banner and search based marketing efforts.

Presentation
Because this KPI is dollar-based little usually needs to be done regarding presentation to attract stakeholder interest. Especially if the average cost per visitor is high, most executives and managers will pay close attention to this indicator.

Expectation
Ideally visitor acquisition costs are low and contribute to a well-run, high margin business. Unfortunately the ideal case is rarely observed. It is worthwhile to set the expectation that the company will work diligently to lower visitor acquisition costs and carefully critique each marketing channel.

Action
If cost per visitor suddenly increases it is worthwhile to compare this increased cost to average revenue per visitor and relevant conversion rates. If cost per visitor is going up but revenue or conversion are flat or decreasing something has gone awry. The converse is also true: if your acquisition costs drop suddenly you want to make sure that this fortuitous event has not happened at the expense of revenue or other measured value.