8 Essential Web Marketing Terms You Won’t Succeed Without

By on February 22, 2013
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Web Marketing 101 – Key Metrics

I wish that when I was just starting out, there were a legend for all of the acronyms and jargon being thrown around. So, I decided to put this together for driving traffic subscribers.

The key metrics below are the yardstick of web marketing. Without having a clear picture of the following metrics, you are driving blind. In order to improve it is essential that you learn from your mistakes and successes, not to mention be able to identify a win from a loss.  Spending money on traffic or marketing without measuring performance is more or less a waste of money. Even if you came out ahead on the other end, you forewent a chance to fine tune or scale your efforts. By knowing your performance you are able to create a better road map for the future of your company.

These terms below are the vital signs of your online business’s projects & ultimately your business. When you make changes or test something new, the results are measured by these concepts. Knowing things like conversion rate allows you to also know where you are in your product’s life cycle. By watching these metrics you will be able to spot and diagnose issues before they become major problems. By split testing you can often identify what is helping and hurting your promotion.

With an understanding of how your list / product / page performs you are able to take your venture to the next level. Most of all, these metrics will allow you to make informed decisions about split tests, buying traffic, and the direction of your company as a whole.

CPC (Cost Per Click) – When purchasing traffic whether it is from a dedicated email drop, banner traffic, retargeting, PPC, this is how the cost to you is measured (with the exceptions of CPM). Every time someone clicks on the link that brings him or her to your landing page you pay this amount.

Conversion Rate – This is the rate at which a visitor completes a goal or follows a “call to action” (CTA). This can be “opting in” to your newsletter, clicking add to cart, or ordering your product from an order form. In most cases you are converting a visitor to a subscriber or a prospect to a buyer.

Goals Completed / Unique Visits = Conversion Rate

CPL (Cost Per Lead) – By using the above cost per click and the conversion rate of your lead capture page, you can calculate your Cost Per Lead. Cost per click divided your landing page’s conversion rate will give you your Cost Per Lead. This is how much you have to spend in order to add a new subscriber to your list.

CPC / Conversion Rate % = CPL

EPC (Earnings Per Click) – Earnings per click is the average amount that you earn per visit to a page. In this case you are using the conversion rate of a product or funnel and the earnings of that product or funnel. Take your total amount of money earned by a product or funnel and divide it by the total number of (unique) visitors to your landing page (product page / video sales letter / what ever leads to the checkout page). This can also be deceptive with affiliate sales since affiliates earn a variable percentage of each sale. This is often clarified by saying “total EPC” or “EPC your way”.

Earnings / Visitors (clicks) = EPC  

ROI (Return On Investment) – Traffic & advertising costs money. This term is used to evaluate the effectiveness of a given form of traffic. ROI is equal to the revenue generated from your venture, minus the cost of the traffic, over cost of the traffic. You do not have a positive return on investment until the money made is more than what was spent on the promotion.

(Revenue generated – Cost of traffic) / Cost of traffic = ROI

If I spent $500 on an email drop and I sold $1000 worth of my product, it would look like this.

( $1000 – $500 ) / $500 = 100% Return on investment.

Self-Liquidating Offer – This is when you price a product low, so that the cost of getting that customer is equal to what they spend on that offer. The reason someone would purposely do this, is because they know that they will generate profit through the rest of the sales process or during the lifetime of that customer. Everybody likes value and that value is typically apparent in self-liquidating offers.

Customer Value – This is the average amount of money generated by a single customer. When you have a multi step checkout process or upsells, the customer value will often times be more than that of the product that they chose to add to their cart initially.

Lifetime Customer Value – This is the amount of money the average customer will spend with you over the lifetime of your relationship with them. This can be a little trickier to calculate, depending on how your business operates. The metrics involved are how long the average customer will continue to make purchases from you, the amount of the average purchase, and the average frequency of purchase. You can see how this requires a substantial amount of time and tracking to produce accurate rates and measurements to calculate this. This metric is typically reserved for well-established businesses that have somewhat consistent performance or a track record to work off of.

If these are new concepts to you just know that these metrics are not difficult to calculate provided you have the tools you need. The only thing you will need to set up beyond your shopping cart or affiliate platform is in most cases analytics software, like google analytics. Once you start becoming more familiar with analytics you can begin to experiment with more complex kinds of tracking and testing. The more you know about your business the better decisions you can make.

About Kevin Clanton

Kevin Clanton is part of the new generation of Internet marketers, originally starting his career as a programmer obsessed with all things information / technology. Online Marketing has quickly become his primary focus; where he is able to leverage his background in development to implement his dreams & ideas in order to quickly produce data on their effectiveness. Google Kevin has an intense drive to be as well rounded as possible in his business pursuits. He isn’t satisfied until he has a firm understanding of all aspects of a given business strategy.

12 Comments

  1. entrepreneurship

    April 28, 2013 at 8:50 pm

    I actually do rely on each of the suggestions you could have shown for your post. These are genuine and will undoubtedly work. Still, the actual blogposts are extremely speedy to begin with. Might you want extend these a little bit via next moment? Information article.

  2. Michael

    April 18, 2013 at 8:19 am

    I thought that Return on Investment was:

    ROI=Net profit / Investment × 100

    Michael

  3. Rob Golding

    March 3, 2013 at 5:13 am

    ROI is based on *profit* not *revenue*, even if you (incorrectly) assume all the revenue is profit, use the right term in the formula ;)

    If you’re updating the article, delete the section on LCV – we don’t want everyone knowing the most important metric ..,

  4. Dita from Blogging Spree

    February 25, 2013 at 12:38 am

    Hi Kevin,

    Self-Liquidating Offer I was not familiar with. Thanks.

    I remember when I first started online I had no clue. I spent hours searching for terms. I finally put all my notes together and eventually created an IM dictionary for newbies on one of my sites. I have to place SLO there

    There is so much to learn when you start working online.

    Cheers,

    Dita

  5. Johannes Stockburger

    February 23, 2013 at 5:37 pm

    Hi Kevin,
    thanks for this post.

  6. Eric Bobrow

    February 23, 2013 at 3:00 pm

    This article is a good summary of key marketing terms that I’ve been slowly learning over the past few years. Thank you.

    One clarification or correction: the Cost Per Lead is not calculated by multiplying the Cost Per Click by the Conversion Rate, it is done by DIVIDING it by that rate.

    For example, if your cost per click is $1 and you have a 25% conversion rate (one quarter of the people who visit the page sign up for a newsletter), then your cost per lead is $4. If you take the $1 and multiply it by 25% (as you wrote above) you get 25 cents per lead. Instead, you should divide it by 25% (or 1/4).

    An equivalent method is to calculate the “reciprocal” or “inverse” of the percentage (in this case, 4) and use that to multiply the Cost Per Click. The inverse is the fraction turned upside down, so the inverse of 25% (25/100) is 100/25 or 4; the inverse of 40% is 100/40 or 2.5.

    • Kevin Clanton

      February 23, 2013 at 5:18 pm

      You are absolutely right thanks for pointing this out

  7. David Hoo

    February 23, 2013 at 1:35 pm

    Your ROI definition and equation is fundamentally incorrect. The return is NOT calculated on revenue but rather on the revenue minus the incremental cost of the product or service or incremental profit. Indeed, everything is on an incremental basis, the cost of the traffic.

    • Kevin Clanton

      February 23, 2013 at 5:24 pm

      In terms of physical product sales, i see what you mean. In terms of info-product or digital product sales I have to disagree, since there is no incremental cost to the digital product once it has been created (aside from over head).

      See here: http://en.wikipedia.org/wiki/Return_on_investment

  8. Dennis

    February 23, 2013 at 11:47 am

    Do you just use an Excel sheet to track all of these metrics? Or do you have any other suggestions for tracking or recording?

  9. Les Wallack

    February 23, 2013 at 10:54 am

    What a great article or post! I am new to I.M. as well as blogging so to speak. I am a “newbie” and have been attempting to learn the techy stuff involved. I’m from the old school and started with a K-pro computer (before Dos) and you had to write your own programs with C-Basic!! Even though I had that experience…I seem to have a mental block with today’s technology. With all that being said…I really enjoyed your writing. As I begin to matriculate all of today’s technology. The info in your post will be a huge help!!

    Thanks,
    Les

    • Kevin Clanton

      February 23, 2013 at 5:28 pm

      Les, If you can write in C or basic you will not have much trouble picking up these or other IM concepts. So glad that writing in basic not a daily requirement anymore. I’d love to hear your challenges with today’s technology, i might be able to make it into an article.
      Good luck on your endeavors!

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