- [Instructor] Most of your website visitors
won't purchase right away,
so how do we measure how much such traffic is worth?
There are actions a visitor might take on your website
or in your app that correlate with purchases:
visiting the pricing page,
signing up for the newsletter,
or adding to cart.
All have some incremental value.
These are called indicator metrics or micro conversions,
as opposed to the macro conversion
of actually purchasing the product.
So for example, if I'm browsing the Allbirds website,
and I'm looking for a nice pair of running shoes,
and I find the one that I like,
then I choose my size and add to cart.
This proves that I'm a valuable visitor.
I have some purchase intent.
I might not purchase right away.
In fact, the vast majority of the people who add to cart
don't purchase right there and then.
They usually come back later.
Now, does this mean that I'm worth nothing?
The marketing campaign that sent me
doesn't deserve any credit at all
just because they didn't purchase something right now?
No, of course that's not true.
You need a way of accounting for these micro conversions.
Otherwise, you're never going to be able to optimize
your campaigns in real time.
Let's look at a B2B example,
and then we'll work through the numbers,
so I can show you how to correct for this.
This is my website vexpower.com,
and I sell training material for Marketing Mix Modeling.
So, if you scroll down,
there are a couple of ways you can go through this.
You can try the free simulator,
or you can go all the way down
to the pricing page and pre-order.
So, there's a demo here.
And then you have the pricing here.
So typically people don't buy straight away.
They look at this pricing page and they think,
okay, this is something I'm potentially interested in,
and then they go away to their manager
and ask for permission to expense it.
So, the purchase actually happens in a couple of days,
in a couple of weeks.
So how can I account for this
when I'm running social media campaigns
and driving some traffic to the website,
and some of that traffic gets to this pricing page?
Is this a successful campaign or not?
So here's how you can calculate
the value of that pricing page.
First thing you need to do is segment out your traffic
into people who visited the pricing page and purchased,
in this case 35 people;
people who visited the pricing page
and didn't purchase, 60 people;
people who didn't visit the pricing page
and still purchased, that's 75;
and then people who didn't visit the pricing page
and also didn't purchase, 1200.
That is going to be the biggest bucket all the time,
because most of the people who get to your website
just never do anything on the website.
Now, if you add these together,
you can figure out your traditional conversion rate.
Total purchased is 110.
And total who didn't purchase is 1,260.
So if you work out the conversion rate, that's 8.03%.
And to work out that conversion rate,
we just looked at the total people who purchased,
divided by the sum of people who purchased
as well as the people who didn't purchase.
Now, we can do the same thing
but just for the individual segments.
So first, let's work out the conversion rate
or CVR of a non pricing visit.
To do this we just take the people who purchased
who didn't visit the pricing page,
and then divide it by those people plus
the people who didn't visit the pricing page
and also didn't purchase.
So 75 divided by 1,200.
And what we have here is a conversion rate of 5.88%.
Now the conversion rate for the pricing visits
is much, much higher.
You can see here that
35 people purchased,
and only 60 people visited the page and didn't purchase.
So the conversion rate is very high.
It's 35 divided by 60 plus 35,
and that's 36.84%.
That means that visiting the pricing page
is an indication that you are 500% more likely to purchase.
Now, if I know my average purchase value,
I can work out how much that is worth.
The expected value of a visit is $7.90.
And I get that by multiplying
the average purchase value by the conversion rate.
I can work out the same thing for the different segments
in the same method.
So here I'm just taking the $99 average purchase value,
and multiplying by 5.88%.
I'm finding that the average visit
without a visit to the pricing page is worth $5.80.
The average visit with the visit to the pricing page
is worth $36.50, because $99 times 36.84% equals $36.50.
Now, this is a huge jump,
and I can work out the contribution
that visiting the pricing page makes
by subtracting the $5.80 from 36.50.
So that means if someone visits the pricing page,
they're worth $30.70 more to me.
And now I can take this and add this as a value
on that event in my analytics.
And doing this means that I'm going to capture
the actual value of the visitors
if they visited that pricing page,
because I know that that makes them so much more likely
to buy in the future.
Using indicator metrics like this to optimize
will let you know a lot quicker if a channel
or campaign is driving the right quality of visitor.
It'll help you make better optimization decisions
to improve your ROI.