Google AdWords Management: Let’s Talk Visitor Value

Every business and every industry has a basic measure of success. Retail is real estate, and the real estate in your local mall is rented by the square footage, so in retail sales the measure of store success is sales per square foot.

At Google, traffic is charged in dollars per visitor. Therefore, success is also measured in dollars per visitor. If 100 people visit your site and you get $ 200 in sales, then your value per visitor is $ 2. This is the most fundamental measure of your website’s success. Your mission in life is to have a high visitor value, or a high value per visitor.

If it’s high value to visitors, it’ll be like the hottest and most fashionable spots in a high-end mall: Nordstrom, Lord & Taylor, Starbucks, Saks Fifth Avenue, and Macy’s. If you have a low visitor value, it is bound to be like the stores in the malls: Dollar General, TJ. Maxx, Piercing Pagoda and Wal-Mart.

If your visitor’s value is even lower than that, you’re on the garbage heap, making a meager living at a flea market, or selling your excess inventory on eBay.

Profit is your goal. That is why you are in business in the first place. But your profit alone doesn’t tell you how elegant and effective your sales process is. You may be in luck with the unusually cheap click prices.

Visitor value is the measure of the true value of their clicks. It’s a measure of how smart your website is, how effective your sales copy is, how powerful your offering is. How is the visitor value calculated? Easy:

Visitor value = (your total sales value) / (your number of clicks)

So if you get a 50 percent margin on a $ 1,000 product and one in 100 visitors buys, then your visitor’s value is $ 10. In theory, you can spend up to $ 5 per visitor to buy the traffic and still break even. If one in 1,000 visitors buys, then your visitor’s value is $ 1, and in theory you can spend up to $ 0.50 to buy the traffic.

We know this is an oversimplification of what margins are and how they work. But the point is clear: visitor value tells you what their clicks are worth and what to do about it.