Understanding Economic Value
- Posted on: Oct 17 2012
Return on investment (ROI) and conversion rates are important business metrics applied to marketing strategies to determine the effectiveness of certain activities. However, calculating ROI and conversion rate only shows half the picture.
ROI and conversion rates don’t take branding and micro conversions into account. Micro conversions are the small steps people take along the purchasing cycle that ultimately result in a purchase. Focusing only on conversion rate means your missing a huge opportunity.
Start considering the overall economic value of your online marketing efforts.
Economic value is calculated by adding the revenue plus business value. The economic value shows the complete value of your online marketing activities.
Economic Value = Revenue + Business Value
Lets expand the Business Value portion of the equation. The business value is a combination of micro conversions and macro conversions.
Economic Value = Revenue + [Macro Conversions + Micro Conversions]
Macro conversions are actions that a visitor takes on your website that essentially equate to dollars. For instance, a macro conversion for a plastic surgery practice website would be scheduling a consultation. A macro conversion on an ecommerce site would be a purchase.
Macro conversions are the desired outcomes of marketing strategies.
Micro conversions are small actions that ultimately lead to macro conversions. Tracking micro conversions builds an understanding of the process visitors take to complete a macro conversion.
Analyzing the micro conversions can identify road blocks in the process or highlight content that is encouraging conversions.
Why are micro conversions important?
Micro conversions are activities like watching a video, signing up for email newsletter, downloading content from your website or visiting a directory listing. Visitors to a website that are early in the purchasing cycle complete micro conversions as part of their decision making process. Each micro conversion successfully completed by a visitor takes that visitor one step closer to becoming a paying customer. Ignoring the micro conversions limits the overall effectiveness of your marketing efforts.
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