Forum Moderators: buckworks
You need to look at your product, profits, conversion rate etc. and then make a decision as to how much each visitor is worth to you.
Let's say you sell a product for $100 and that the product costs you $50, and that your average order is for one product. Let's also say that at your current turnover you have other fixed costs, (office, hosting, employees etc.), that amount to $10 per order. So that leaves you with $40 gross profit per order. Now you need to know your conversion rate. Let's day that you have a "normal" conversion rate of 1:40, (for every 40 visitors to your web site you get one order), that would mean that each visitor is worth $1 to you in profit. Now, if you spend $1 per visitor to get them to come to your web site you would only increase turnover and workload without making any more money. However, if you spend a maximum of $0.50 per visitor then you would still have $0.50 profit left over per visitor, which seems reasonable.
One important thing to understand when doing these types of calculations is that not all traffic is equal. As an extreme example, if you get targeted search engine traffic to your web site from AOL, and those visitors have actually been looking for a keyword for your product and then found it at the top of the SERPS and entered your web site to buy that product, your conversion rate should be pretty good for those visitors. On the other hand if you have a "forced" pop-up window that brings people to your web site when they made a search for something else, irrelevant to what you sell, your conversion rate will be pretty low. :)
I am sorry if this was too basic for you, and didn't answer your question but at least I tried. :)
If the domain name is highly descriptive and gets lots of type-in traffic then YES it would be a very good investment.
eg: company in the UK who owned Domains.co.uk went on to become one of the larget UK domain providers without much advertising spend apart from owning the ultimate domain name which people typed in.
hope that makes sense.
Shak
How much did it cost just to make 1? How much extra will it cost distribute and when does it become cheap (distributing large volumes.
These are your fixed and variable cost and marketing concerns will fit into fixed cost since this is usually independ of distribution.
Break even analysis is more art than science. The assumptions you need to plug into the equation, are only as good as your optimism for "how many sales you will make over a fixed period of time".
(If everyone actually knew this as a certainy we would have any worries.
The Break-Even Calculator [connection.cwru.edu] of Weatherhead School of Management is actually quite good for accurately determining what you need to know based on variations in your model.
It won't tell you how to get rich but it will tell you how long it's going to take. At least this way you can determine how much and long your marketing will take to do the job and by default how much you can afford to spend per customer.
I'm not sure if I agree with the first part of your reply. Vitamins.com was shipping out over 200,000 orders a day, DR. Koop spent over 30 million in less than four months, MontherNature.com was spending $56 a visitor, and MoreOnline.com was on 20/20 and these four guys who lived together were shipping out so many packages that they had UPS picking up three times a day and were literally sprinting to load the truck. Three of these companies went out of business.
What would the value of a domain such as Stamps.com vs. IStamps.com be?
Each industry, and segment, market, and niche market is different.
A large corporate marketing budget with a marketing staff of 2,000 professionals doesn't have the same concern or strategies as a 100 employee (in total) medium size company and neither of these resemsble a sole proprietary one person operation or a mom and pop business. In addition, none of these can be compared to an online pureplay company, the models are so vastly different and so are the strategies for making and retaining customer loyalty.
The only real comparision each has, is in risk management. If you spend $0.50 per customer you tend to get a $0.50 return. Although the more per customer you spend may tend to indicate greater volume of returns as your above examples reflect, all costs must be appreciated with your bottomline.
Product costs to develop, inventory and distribute are usually your primary difference between gross profits and net profits and therefore marketing consideration (cost per customer) reflect "what you can afford" and "how long you can afford to go before seeing a return" which is your break even point.
I doubt if anyone could give a precise recommendation to "how much we should be spending to aquire a new customer?". The question is too vague without an accurate understanding of your business, industry, markets, and products.
In addition to finding out how much to spend to get a new visitor, I want to find out how to place a dollar value on a domain name that is for sale.
That's what I thought - check out the thread I quoted above.
