Why “VPV” Reveals More Than Conversions

money-in-airUncovering your website conversion rate is easy to calculate and can transform a good online business into a great online business.

For instance, if 10 out of every 100 of your website visitors submit their email address and/or name in exchange for an ethical bribe, then you have a 10% opt-in rate (100/10 = 10 percent).

That’s not too shabby these days.

And if 2 out of those 10 opt-ins buy your offer, then you have a 2% buy-in rate (100/2 = 2 percent).

But your opt-in and buy-in conversion rates reveal only part of the marketing story.  The other part is how much value to assign each of your visitors, regardless if they decide to opt-in or buy-in.

This simple, yet critical metric is called the Value-Per-Visitor (VPV).  Its purpose is to tell you how well you’re doing financially and how much to budget for marketing.

Knowing your VPV gives you more insight and decision making power than simply knowing your conversionn rate because your VPV reveals things that your conversion rates are incapable of telling you.

You can have a high conversion rate, but a low VPV.  To find out how this is possible, just consider differences between Scenario A and Scenario B outlined below.

Scenario A: If your online offer sells for $10 and you have a 5% buy-in conversion, then your VPV is only $0.50 and here’s the math:

5% buy-in conversion =  5 out 100 visitors

$10 per buyer = $50 sales / 100 visitors

$50 sales / 100 visitors = $0.50 VPV

Got it?

Scenario B: Now what if your offer sold for $100 and you only got a 1% buy-in conversion?  What would your VPV look like then?  If we do the simple math again, here’s what we get:

1% buy-in conversion =  1 out 100 visitors

$100 per buyer = $100 sales / 100 visitors

$100 sales / 100 visitors = $1.00 VPV

Pop Quiz: Which Scenario would you prefer – Scenario A or B?  Of course the correct answer is clearly Scenario B because your VPV doubled which also means your marketing budget can also increase so you can get more “reach.”

Look, even if your buy-in conversion drops dramatically as in Scenario B (above), you still may have more marketing power because you have an increased value per website visit.

Focusing exclusively on your conversion rate can lead to trouble, struggle and even get you broke because your conversion rate doesn’t give you as complete a financial picture as your VPV does.

Key Point: Your online marketing budget has everything to do with a percentage of your VPV and very little to do with the percentage of your “gross revenue.”

The next time someone asks about what your marketing budget is, don’t give them an answer that’s a percentage of sales. Your answer should be a percentage of your VPV.

For example, if my VPV is $1 and I’m willing to spend up to 50% of it to acquire new customers, then my “spending allowable” (cost-per-visitor) is $0.50 per visitor.

That means, I have to spend $5,000 to generate $10,000 more in sales which translates to 1,000 more visitors.  Is this starting to become clearer to you?

It doesn’t make financial sense to create a “spending allowable” budget from your sales value, but it does make sense to develop your “spending allowable” from your Visitor Values.

Are you clear on this?

Bonus Tip: Identifying your VPV also gives you insight to two other metrics that are critically important in growing your online business more responsibly and giving clarity about where you stand financially.

The first key metric is your Cost-Per-Customer (CPC); and, the second key metric is your Annual Customer Value (ACV). Your objective is to minimize your CPC and maximize your ACV.

I could write another ten thousand words on how to do that, but what I suggest you do is “content dive” into this blog because I do provide my readers boatloads of complimentary resources and recommendations in past posts.

Knowing your metrics is summed up best by best-selling author, Tom Peters who says: “You can only improve what you measure.”

One word I’d add to that world-class idea is the adverb, “accurately.”  By doing so, you’ll have most of what you need to know to become a world-class marketer in just one 7-word sentence.  Here it is:

“You can only improve what you accurately measure.”

Your VPV is easy to measure and you can think of it as the “DNA of all metrics” on line.  To get accurate VPV metrics you need to know (or make a projection) of these four data points:

  • Your offer’s price point
  • The number of exposures
  • Your cost-per-click
  • Forecast your conversion rate

Several years ago, I had friend develop a spreadsheet (Microsoft Excel) that I call the VPV Calculator.

What To Do Now: You have free instant online access to this remarkable tool.  All you have to do is input the four data points and the VPV Calculator automatically does the rest with a ton of “what if” scenarios.

You have two ways to get it now.

The first is to give me your audio testimonial at www.AlexTestimonials.com and the VPV Calculator will be available to you to download on the “Thank You” page.

If you don’t want to give me an audio testimonial, then another way to get your hands on the VPV Calculator is to download it directly at www.VPVcalculator.com

Please give me your candid comment.

Comments

comments

Powered by Facebook Comments

About Alex Mandossian
0: