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Know Your ROI?

Jan 1, 2007

If you do not know how much return on investment you are obtaining from your website, you are not alone. Even some retailers bringing in millions of dollars online cannot quantify the ROI from their website, according to a study by interactive agency Brulant.

Of 102 senior managers across industries, of which retailers constituted about two thirds, 56 percent said they could not confidently demonstrate ROI for their online channel. "It is not that the online channel does not generate more ROI, it is that companies have not figured out how to measure it," says Len Pagon, Brulant's chief executive officer. He notes that this is so, "Ten years into the internet adoption curve."

Retailers whose online sales are growing at the annual rate of 25 percent or more understand their online business and make continual investment in it, according to Pagon. However, that leaves a field of retailers who are not growing web sales at anywhere near that rate. He attributes this to two major factors.

One is a lack of awareness and sponsorship of the site at the retailer's level. The other is a lack of dedicated, experienced managers to run the online part of the business. A lack of the right experience in such positions can be costly in terms of lost opportunity.

Without naming the company, Pagon cites one multichannel retailer that does about $35 million in annual online sales. A probe of why conversions at the site actually declined following a $2 million investment in upgrading the site revealed that the retailer did not even accurately understand its conversion rate prior to the site upgrade.

Investment on a site pays off only when site operators understand such basics and have a firm grasp on analytics. That includes an understanding not only of how to calculate web ROI, but also knowing how to quantify the web's effect on offline channels.

"The online channel is growing between 25 and 60 percent annually, while other channels are maxing out at seven percent growth," says Pagon. "This alone is sufficient justification for not only investing in the online channel, but also for investing in the tools and expertise needed to effectively measure web ROI." This article was edited from a story in InternetRetailer.com.

Topic: Wholesale News

Related Articles: ROI 

Article ID: 17

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