Gross Profit per Visitors (GP/V) is exactly what it sounds like; how much gross profit can you expect for each visitor to your website. There is nothing tricky about it, in fact it's a calculation that can be made, given access to the necessary data, with no more than a few lines of an Excel spreadsheet.
With 'big data', business intelligence, KPI dashboards, etc., it's clear that data is the new currency for businesses. As platforms emerge for small and large enterprises alike, it's important to stay focused on how this newly accessible information helps you analyze the performance of your business. With GP/V, you can calculate the impact of changes to your website strategy:
- Predict the 'breakeven point' for how many visitors would need to be generated with a change to your SEO strategy.
- Predict the return on investment in a website design or redesign.
- Predict the ROI of a paid search campaign versus a social media campaign.
Here’s How GP/V is Calculated
Relieve Healthcare Consulting provides management services to small private practices. Their average engagement is worth $25,000 and has around a 50% gross profit margin. If they average 1000 visitors to their website per month, convert 3% of visitors to leads of which 50% of the leads are qualified and of those 30% close, Relieve Consulting would generate $112,500 per month from their website and average a $56.25 gross profit per visitor. A nice little business.
So what can Relieve Consulting do with this newly found $56.25 GP/V? Let's say they were speaking with two different web strategists about ways to increase revenue through their website. One suggested investing in an SEO campaign that would cost them $5,000 and the other a website redesign that would cost $20,000. What should they do? Without knowing their GP/V, it would be difficult to determine the actual value of each approach. However, knowing their GP/V, they can now look at each investment and determine the Point of Breakeven Performance and the Return on Investment.
The first vendor has historically seen their campaigns of this level produce an increase of roughly 250 visitors per month. The second vendor has seen their website redesigns produce an increase of conversion by 3%. Using the same math as we did before, we can determine the following:
Adding an additional 250 visitors to the website would not increase or decrease the GP/V but rather increase Gross Profit by $14,062.50, meaning a 181.25% return on a $5,000.
Increasing conversion from 3% to 6% would increase the GP/V to $67.50 and increase Gross Profit by $67,500, meaning a 237.50% return on a $20,000 investment.
Many companies might have opted into the more affordable SEO investment at first glance. Obviously these numbers are being looked at within a 'box' to a certain degree, but all else notwithstanding, you can see the importance of the GP/V calculation.
Increasing Your Gross Profit / Visitor
How does one increase their GP/V? If we return to the assumptions we used to calculate GP/V, we actually see three 'buckets' of data:
The first two numbers directly correlate to how you're driving traffic to your website (total monthly website visitors) and what's happening to that traffic once they get there (% visitors converted to leads). Just looking at the Relieve Consulting example, we can evaluate web marketing strategies as a means to increase traffic and web design strategies as a means to increase on-site conversion.
The second two numbers (% leads converted to opportunities and % opportunities won) correlate directly to your company's sales efforts. A higher close rate on opportunities will naturally lead to a higher GP/V.
The last two numbers (average deal size and average deal gross profit margin) are tied directly to the operations of your companies. How efficiently are you delivering the goods and services you're selling to customers?
Where Does Gross Profit / Visitor go from Here?
This is really just a high-level look at GP/V as there are a number of more advanced elements we should consider such as:
- How to calculate GP/V per source (i.e. SEO, Paid, Social, etc).
- How to track the impact of lead nurturing on GP/V.
- How marketing and sales expenditures factor into the GP/V calculation.
The important thing to ask right now: Does your company have access to the data necessary to populate the GP/V's assumptions? If so, how accurate do you feel this data is? If not, how will you implement the proper systems to capture this data? In a world obsessed with instant results, it's all too often we see companies unfortunately throwing money at their web strategies through social media initiatives, expensive marketing platforms, website redesigns, etc. without first implementing the proper means of measuring the potential success. When considering whether to make your next investment in your web strategy, just ask yourself: What's your GP/V?
Do you need help calculating the Gross Profit / Visitor metric for your company? Feel free to reach out to our web strategy team and we'd be happy to setup a time to discuss how Growth Spark can assist.