When analyzing your website performance data one of the most important metrics to assess is revenue. Conversions tell you how many and at what rate people are turning into leads or customers, but revenue lets you know if your business is, can and will survive, and at what conversion rates.
If you’re only looking at conversions, you might think that a record setting month of 1,000 conversions (or 10,000 or 10B, you pick) is something to shout about. And while those make for great benchmarks, it’s the revenue number that will tell you if you actually gained (or lost) money on all those conversions.
Let’s say that each month you average 500 conversions at a value of $150 each. That earns you $75,000 in monthly revenue. You want to increase your conversions so you embark on an advertising and marketing campaign. After a couple of months you found that your conversions have doubled to 1,000 per month! Sweet!
But unfortunately, you also see that the average value of each conversion plummeted to $50 each. Unsweet!
What seemed awesome a minute ago is actually a huge revenue loss. In this example, more conversions but a lower average order reduced your revenue by $25,000!
Of course I’m using an overly-dramatic example, but the point is made. Conversion increases are great, but only when those are coupled with an increase in revenue. Put simply: Not all conversions are equal.
When you start factoring costs of advertising and marketing, the importance of revenue becomes even more stark. Your revenue needs to increase to not only compensate for the costs of marketing but it should give you additional profit on top.
It always takes money to make money, but without revenue all is lost. Measuring your revenue, along with other metrics, allows you to truly see your true profitability zone.