THE RETURN ON INVESTMENT OF WEB DESIGN
The Return On Investment of Web Design
Often times people ask us “What is the Return On Investment for a new website?” There are a lot of ways to answer this question and the response to the question may vary from business to business. In this article we will break down the topic of Return On Investment so that you can set Specific, Measurable, Attainable, Realistic and Time-Sensitive (S.M.A.R.T.) goals. Having said that, there are some things we need to cover first to gain a better understanding of web development.
A good web design company will sit down with you and discuss your responsibilities in the web development process. Generally speaking, your responsibilities will include the following:
•Provide information about your hosting provider
•Provide your logo or trademarked materials
•Provide graphics (unless you hired the company to create your graphics)
•Provide content (unless you hired the company to create your content)
•Identify your targeted market demographic
•Briefly explain your business goals
•Make your payment
Armed with this information, the company can begin the process of developing a website that meets your needs. Knowing this information is extremely helpful to the development company and will reduce the time needed to develop your website because the information has been made readily available.
Understanding The Design Process
In most cases, a custom website will involve a 6 phase process. This process can take anywhere from 6-12 weeks or more to complete depending on the size of your website and the special features you would like to include in the site. For example, LUCID uses the following process and time-line:
•Planning: 1-2 weeks
•Search Engine Optimization (if applicable): 1-2 weeks
•Content Writing (if applicable): 1-2 weeks
•Design: 1-2 weeks
•Development: 1-2 weeks
•Launch: 1-2 days
Most design and development companies charge based on an hourly rate. This rate takes into account the time involved in the project, overhead, other expenditures and profit margins. The average hourly-rate will vary from state to state based on economic conditions and competition within that state. For example, in Alaska the average hourly-rate fluxuates between $80 – $150 per hour. Most start-up web design companies will set their prices low to gain a competitive financial edge, however a well-established company may set their prices very high.
The End Product
It is always a good idea to assess a company’s final product or end product. Many companies will post a portfolio on their website to show potential customers their end product and these portfolios will give you specific insight on the company’s end product. When reviewing a company’s portfolio take into consideration the navigation menu, ease of use, load time, visual quality and call to action location.
Return On Investment
With any investment a return is seen over a period of time and the ROI on a web design is no different. A well thought out web design will increase the presence of your business in your targeted market segment, increase your rankings within the search engines, increase traffic and ultimately lead to an increase in sales. So let’s take a quick look at these factors.
Ranking and Traffic
To estimate how rank affects visits, we have to understand that a higher rank means exponentially more clicks. In other words, a chart showing the number of clicks for the 10 highest ranking sites is a curve, not a line. All things being equal, the top ranking site gets a LOT more traffic than number two, and so on down the line. Therefore:
(Search Volume Rank) * CTR = Visits
Getting traffic from search engines is great! But it’s not the same as leads. Even if people looking for services find your business, they’re not leads, they’re just visitors. When a lead calls or fills out a contact form, they’re officially a “conversion.” The better the site, the higher the “conversion rate.” There are many factors that determine this, including design quality (brand loyalty, overall appeal), content format (text, images, video), the content itself (compelling, informative, relevant), and usability (navigation, easy-to-use form).
Visits x Conversion Rate = Leads
Now to convert the leads into actual customers. If you have a solid sales process you can close around 50% of your leads. Let’s say each time you close a sale you make $1,000 in sales. It costs you about $500 in time and materials each time you provide this service. So generally speaking, the value of a lead to you equates to about $250.
(Leads x Closing Rate) (Price – Delivery Costs) = Profit
Check out this article on 7 Ways to Increase Conversion Rates for more insights.
Estimating Your ROI
Now it’s time to do the math. Let’s plug in our estimates. If you can meet all of the targets above, the new website will bring in up to $5,000 in profitable leads per month. In other words, if a $15,000 website ranks well and converts visitors, it will pay for itself in 3 months. After that, it will be profitable. Over its lifetime, the new site will likely generate tens of thousands of visitors, thousands of leads, and hundreds of thousands of dollars in revenue and profit.