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How to justify the existance of a website to a client?
specifically how to measure potential benefits
hairycoo

10+ Year Member



 
Msg#: 2064 posted 8:44 am on Oct 25, 2005 (gmt 0)

I'm still in the learning process of understanding clients and what they are looking for so bear with me.

The consensus appears to be that you have to show them the clear, measurable benefits of having a website. I have a bit of a problem understanding how to do that.

As far as I know, when deciding the viability of a website you look at:

1. Online demand (number of people looking for a product/service). This is determined by looking at say monthly/daily searches on Overture and Google for certain keywords. This is where it starts getting hazy.

We know that usually there are a handful of keyphrases that mainstream searchers use (car insurance, auto insurance for example) and also lots and lots of other specific, more refined combinations, mispellings, synonyms, regional, etc.

So do you just give monthly figures for the main keyphrases (car insurance) but also tell them about other countless people using more refined combinations? Wouldn't they be skeptical and find it a bit too vague?

2. Worth of online demand. I'd do this by looking at existing bids for the main keywords say $9. Let's say that there are 2,000 searches a month for "car insurance".

Although we know that many bidders don't even break even, many get involved in bidding wars that push the prices up and set limits on their advertising budget would it be accurate to say that to them, the online demand (the 2,000) is worth $18,000? In other words, if all 2,000 people would click on their ads they'd have to be generate at least $18,000 to break even.

Would this comparison help clients understand the worth of a website? For example, if someone were to get a website that attracts 2,000 qualified visitors they'd be looking at $18,000 in generated business, roughly, based on bidding prices.

3. Competition
I'm not quite sure how to fit this into the equation. It obviously doesn't matter for a small business if a website could bring them $100,000 if it requires huuuge investment on their part. They simply don't have the resources. We also know that competition is not measured solely by number of results in Google for a keyword but by how difficult it is to rank for it.

How should these 3 factors be tied together to explain and present to a potential client the measurable value of a website? Is there another clearer more accurate way of doing it? What steps do you take when determining the viability of a website, for yourself or for a client?

Thank you,

 

larryhatch

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 2064 posted 9:42 am on Oct 25, 2005 (gmt 0)

A hard headed businessman will want to see tangible benefits, real numbers.

One thing is really hard to quantify however, and that is visibility.

Simply stated, for anyone on the web looking for any product or service,
if you don't have a website, you simply don't exist.

I went looking for rat traps a year ago. I wasn't about to trudge to the brick and mortar.
I wanted to compare prices, availability, delivery speed, and of course not get ripped off.

Your guy could have the best deal on Earth.
Two-cent traps. Without a site, he doesn't exist. -Larry

hairycoo

10+ Year Member



 
Msg#: 2064 posted 2:22 pm on Oct 25, 2005 (gmt 0)

Hi Larry ,

Thanks for the reply. But how can you quantify how many sales a website could get him?

stuntdubl

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 2064 posted 4:01 pm on Oct 25, 2005 (gmt 0)

One of my favorite ways to justify a website is to compare it to the yellow pages. Many business owners still pay top dollars for those listings that bring very little business. Give them past examples of the ROI you've earned with the same amount that they spend every month on their YP ads.

travelin cat

WebmasterWorld Administrator travelin_cat us a WebmasterWorld Top Contributor of All Time 10+ Year Member



 
Msg#: 2064 posted 5:40 pm on Oct 25, 2005 (gmt 0)

About 11 years ago, we developed the "20 reasons to put your business on the WWW". This has been tremendously succesful for us and we allow anyone to use it for their own website as long as they link back to us as the owner.

Many of the numbers in the original are out of date, but the basics all still hold true...

[edited by: stuntdubl at 6:00 pm (utc) on Oct. 25, 2005]
[edit reason] brief edit [/edit]

johntabita

10+ Year Member



 
Msg#: 2064 posted 5:45 pm on Oct 25, 2005 (gmt 0)

I think the key lies in not necessarily "showing them" but arriving at a consensus together. In other words, it's a collaborative effort, not simply showing your client some numbers and promising him some pie-in-the-sky profits.

I'm talking with a prospect right now. There are about 1.4 million monthly searches for all of her keywords and their variations. I'm going to want to know two things from her:

1. What is her average sale?
2. What does she hope to make per month in gross revenue?

If she hopes to make $2,000/month and her average sale is $10, then she'll need 200 sales per month. Now, we're talking about organic SEO, not PPC, so we know we won't capture a top position for every single keyword. But let's say we could get a top ranking on a third of them. That cuts her monthly exposure down to about 460,000 searchers. Suppose she sells to only a half a percent of all those searchers? That would mean 2,400 sales a month. At at $10 each, that's $24,000.

Perhaps that seems to optimistic. I always want to err on the side of being conservative, so let's look at it from another angle. What percentage of 460,000 is 200 sales? It's way less than a half a percent. So to reach her revenue goals, she'll need to sell to .0004 percent of the 460,000 people looking for her product.

Now, if she were to invest $5,000 into this, she'll need 2-1/2 months of sales at $2,000 to recoup her investment. Assuming 3-6 months before she begins to see results, she could realistically make that back within a year. The following year, lower SEO costs to maintain her ranking would make her more profitable.

You see, it's not really about benefits, it's about results. Knowing that there are no guarantees, I'm simply presenting the data and letting the prospect decide if he's willing to assume the risk, in order to get the results he wants.

Personally, I don't compare the web to the Yellow Pages, because oftentimes, that's comparing apples to oranges. For example, I have a client who spends an obscene amount of money each year on YP ads. They thought they could eliminate some or most of that by migrating online. Problem was, 98% of their business comes to them from people looking in the YP, not online. So in this case, eliminating those ads would have been disastrous for them. It all comes down to whether there are enough people online searching for what you're selling. In the case of rat traps, larryhatch found his online. I would have just ran down to my local hardware store, and guess what -- I would have looked in the YP to find it. Whose behavior is more typical? That's what you need to find out before deciding to sell rat traps -- or any other product -- online.

If you present it to the client in that manner, truly keeping his best interests in mind and helping him to make smart and informed decisions, then you won't have to "justify" anything.

Hope that helps.

hairycoo

10+ Year Member



 
Msg#: 2064 posted 8:48 pm on Oct 25, 2005 (gmt 0)

johntabita, thanks, that's exactly what I needed. If anyone has other angles at looking at this, pleast post. I didn't necessarily want to talk about benefits/results but how to put a figure on either of them.

iamlost

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 2064 posted 12:29 am on Oct 26, 2005 (gmt 0)

The reasoning and the formula to derive ROI varies on the business.

The reasoning for a local restaurant differs from a toy retailer differs from a vegetable wholesaler differs from a lingerie manufacturer ...

For the local restaurant the YP reasoning is pertinent, as is ease (and possible employee cost reduction) of reservation handling, take out orders, etc. Possibly cross/up-selling a DB for ordering, inventory, staffing, etc. is also appropriate.

For the toy retailer what is the cost of a new retail outlet? In practical terms the e-commerce site and an equivalent bricks-and-mortor solution can be directly compared. Again if the current operation does not have a DB backend this is a possible add-on benefit (paper to DB business cost savings can be great).

For the veggie wholesaler: is there already a restricted access B2B ordering site? If not, direct cost comparisons between people and phones/fax and an e-commerce site apply. Is there an open front-end website branding and marketing those not yet customers? If not, how are they getting customers now? How are their competitors? Direct cost comparisons between the methods should be straightforward.

For the lingerie manufacturer what is the margin given to retailers? Compare to a direct e-commerce situation.

Basically: what will it cost to expand the business as they want by traditional means versus doing so with a web solution. It does mean you must (as must the client) be clear about what current operations entail/cost and where/what they want to be/have in the end. Sometimes it is worth doing, sometimes not.

Now if you are proposing straight SEO/SEM that is totally different. Then you are not business building but selling signage and siding. You don't make many sales of improvements if the location to improve doesn't exist.

Don't play the n-searchers for keyphrase game (or any similar). Remember that there are lies, damned lies, and then statistics. So 10-million people did a search for "take-out pizza in New York"; how many are likely to order pizza from any one NY restaurant website? Such things can be useful in targeting for affiliate sites but those you should build for yourself.

hairycoo

10+ Year Member



 
Msg#: 2064 posted 4:58 am on Oct 26, 2005 (gmt 0)

Ok, I understand now how futile are keyword numbers and statistics and how important it is to take into account profit margins per sale for a particular business.

iamlost, your points are very good but don't they apply to businesses who want to expand, especially from the retail sector? What about businesses in the travel sector (not necessarily accommodation) that don't want to expand but simply to get more customers.

Let's take a tour agency as an example. Their ROI would derive from higher margins due to reduced costs with booking, etc or due to cutting out the middleman (aff). In this case what would be the ROI formula you mentioned?

Thanks

iamlost

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 2064 posted 2:19 am on Oct 27, 2005 (gmt 0)


but don't they apply to businesses who want to expand, especially from the retail sector? What about businesses in the travel sector (not necessarily accommodation) that don't want to expand but simply to get more customers.

Getting more customers is expanding.


Let's take a tour agency as an example. Their ROI would derive from higher margins due to reduced costs with booking, etc or due to cutting out the middleman (aff). In this case what would be the ROI formula you mentioned?

You are on the right track. My presumption is that this is an existing business looking to grow that does not have a (viable) website.

Put the web aside. Go back 20-years. Existing bricks-and-mortor tour agency wants more customers. How would they do it? How can the same or better be done via the web?
* advertising in YP, newspapers, magazines, radio and TV spots, etc.: what are the costs compared to an optimised website plus targeted AdWords, etc.
* if the agency is already paying (formal/informal) affiliates for qualified leads cost the ROI of providing optimised landing pages, quality content for added stickiness, etc. Work to increase the conversions. And if some viewers book direct - all the better.
* if the agency is marketing by handing out brochures, answering recurring questions in person and by phone etc. show those costs against web pages with links to additional information, FAQ pages, etc.
* In person each potential customer takes the time of at least one employee. A properly designed website requires the same number of staff (almost) regardless the viewer volume. Harder but not impossible to cost. Much less time spent qualifying clients.
* open branch offices versus website costs. Easy.
* replacing paper bookings with virtual ones. Binders with DBs. Easy to cost and compare.

The one thing the travel industry has going for it is content. Zillions of pages/places of wonderful content. Only on the web you say? Yup.

It is critical, especially in such a diverse industry as travel, that a tour agency be very very clear on their target: exactly who are they trying to sell precisely what? Detail each tour offered and its audience and create pin-point marketing that can not be matched by any other medium. Such web abilities are difficult to give concrete numerical values but they work wonders as fill: combining explicit ROI with implicit ROI adds vision to the bottom line, a very powerful combination in selling anything including websites.

If the existing business is wholly virtual then the answer is to add websites and content and SEO and play the affiliate game which is a whole other pail of worms.

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