Jon Samsel

Defining the maximum revenue potential of any given website is a business theory I’ve been tinkering with lately. The topic inevitably comes up in any website creative project pitch - as the suits in the room debate critical business topics such as creative agency and development spends, timelines, online advertising budgets, SEO, web publishing/syndication, staffing, and the revenue potential/profits that a website might generate.

Knowing the maximum revenue potential of a website is important because it sets the stage for what is possible, and every decision thereafter can be focused on closing the gap between actual and potential profitability. Decisions about design, coding, calls-to-action, methods of interaction, frequency of placement, size, etc. – could be impacted when Maximum Revenue Potential is taken into consideration.

The concept of Maximum Revenue Potential first came to me after reading an intriguing article on how Gamal Aziz helped the MGM Grand casino resort dramatically increase its revenue by restructuring foot traffic and re-aligning high-revenue retail outlets throughout its property.

That got me thinking – could this same concept be applied to a website? Imagine if a website redesign project was looked at through this lens and a web marketer first asked, “What is the maximum revenue potential of my website?” Could an equation be developed to establish a baseline metric for how much revenue a site is capable of generating – and what the opportunity gap currently is? Wouldn’t this information be extremely valuable to business people trying to justify a site redesign project – or the website channel itself?

To calculate the maximum revenue potential for a website, one could calculate as follows:

If every site visitor purchased a product or service that generated the highest revenue (yes, this goal may be unrealistic, but hang with me a second)…

and…

…a website were able to reach its maximum, yet realistic, traffic growth goals…

Example

1 million site visits annually

x $50.00 (max revenue per product/service sold)

Maximum revenue potential = $50 million per yr

Subtract this from the actual annual revenue generated from the website…

Actual annual revenue = $1.34 million per yr

Difference = $48.7 million

$48.7 million is a company’s ‘lost opportunity.’ The goal for the website would be to close this gap – and close it substantially. (Note: Rather than looking at external variables, I have limited my analysis and thinking to known variables such as a realistic number of website visits and actual average revenue per sale on a single product. External factors such as a new competitor entering the market and taking away market share is out of scope for the purpose of this discussion).

Next Steps

• Look at leverage points and consider how much impact each change to your website might have on the bottom line. Look at effort v.s. reward. Idealistically, we’re always looking for the next activity to be the one that makes the biggest impact on results for the smallest amount of money / effort.
• Divide a web page into 100 grids and then determine the percentage of real estate that has been allotted to each product / service and corresponding action – and then see if some simple design adjustments can be made to the page placement and size of your content, offers, navigation, or calls to action so that the highest revenue generating products / services stand out.
• Of course, a good website is not all about attaining maximum profitability. Fulfilling customer needs as well as promoting a company’s other lines of business / products / services are important counterbalances to consider.
• Reducing clutter on a given page is key. Try this out. Look at your website and count the number of actionables you have on your homepage – hyperlinks, navigation drop-downs, footer links, buttons, phone numbers, tools – anything that is actionable from a site visitor’s P.O.V. Let’s examine a random website I pulled up – the Bank of the Web homepage.
  

I counted 159 actionables on the homepage alone! Now, when you give your site visitors 159 things to do on a given web page, not only is it a cluttered experience, but some portion of your visitors will do each of those 159 things. Meaning that the top 5 actions you hope your visitors will take will be watered down by the other 154 things they try instead. Wouldn’t it be better to first go through a serious clutter reduction exercise to streamline the number of actionables – by say, 50% or more? What if Bank of the West surveyed its visitors and asked them what the top 10 things they expected to be able to do on the bank of the West site – and then balanced consumer demand with Bank of the West’s desire to promote its top five highest revenue generating products / services?

The resulting website could be a streamlined homepage design that not only does a better job directing consumers to where they want to go, the the site restructuring could also send a higher number of site visitors down the most profitable action paths.

This entry was posted on Tuesday, September 9th, 2008 at 11:23 am and is filed under E-Business, Management, Marketing, Websites. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.