The ROI of Site Search
The calculation of ROI (Return on Investment) is a critical step of the business decision making process. It can also be the most intimidating step. Even those who sat through Finance 101 and understand the concepts of ROI calculation may not fully understand how to do it in practice. Fortunately, we’ve had a lot of experience in using this tool, especially in calculating the ROI of site search improvements.
Determining what to do and how to make the most money doing it would seem to be reason enough for calculating ROI. But there’s another, almost equally important reason. Communicating the returns on business decisions is the language of business. You’ll need this information to convince the IT and Finance guys to make the investment. But (ironically) many businesses fail to put the proper time, resources, and methodology to determining ROI, and end up allocating their resources poorly. Site search is a great example of this problem.
Even though up to 50 percent of your customers use your site search, I bet you don’t have technical and human resources dedicated to it. That’s something that needs to be remedied. You’re leaving money on the table. You need to build great partnerships with stakeholders from across business functions to change the status quo and you need to be able to express the need for change in terms of value. Fortunately, you don’t have to have an MBA to figure out the value. Here’s the steps you need to be taking in your ROI process.
Look for evidence of value
We’re looking for value in everything we do. The question of “How much will we gain from doing this?” may not be explicitly asked, but it’s always implicit. Many decisions are based upon a combination of experience and instinct. But what’s very often skipped is going further to really look deeply into the drivers of value, to test the assumptions that are driving your gut.
Site search is a great example of where a more rigorous decision-making process could change your default behaviors and increase the value you’re bringing to customers and to your business.
First, let’s recognize the opportunity through some basic data gathering. For site search, traffic is the first place to start. You likely already have much of this data available to you via your web analytics program.
- How many of your visitors come to your site each month?
- How often do they visit each month?
- How many visitors use site search?
- How many searches are conducted?
That last question is the data that feeds the ROI calculation. You should be able to measure this objectively. However, if you can’t measure it objectively, you can use other data to estimate the number of searches by taking some educated guesses at the rate that search is occurring. For example, take a look at search sessions vs total sessions.
Also, don’t lose sight of the context that these metrics can provide. What you’re trying to model is the value that can be unlocked by improving the customer experience. So, not only do you need to know how many searches are being done, but you also want to have some sense of the relative importance of search to your prospects and customers. Looking at search volumes in the context of your broader site search metrics can provide this perspective.
To Understand Failure Is To Understand Opportunity
The value opportunity in site search is in reducing the number of failed searches. For the optimists in the group, the goal is to improve the number of search successes. But failure is where we start. It comes in the form of two metrics:
- The percent of site searches that fail
- The percent of the failures that are fixable.
These are not easy things to measure but they can be estimated.
If you have enabled search measurement in your web analytics tool you may be able to find the number of search exits that occur. You could use this as a proxy for search success. The inverse of that number is search failure. If you don’t have that measure, you can rely upon our experience for an estimate. If you’ve been ignoring site search, the number of failed searches may be as high as 70%. But let’s use 50% as an estimate. It’s what we see, at best, in our clients.
The percentage of failures that are fixable is not something you can measure so I’ll give you this: 20% can be easily fixed and we’ve seen fix rates as high as 50%. There are diminishing returns on fixing the long tail of broken searches, so pick a number in that range.
The Value Is The Thing
What the values you’ve calculated previously will tell you (through some simple calculations) are the number of searches that can be fixed. But what you really care about is the value of fixing those searches. That requires three more pieces of data.
- How many of those searches are related to a sales-related use case?
- What is the average conversion rate for your website (how many of those searches turn into sales)?
- What is the average order size for each conversion?
If you run a B2C commerce site, the answers to the above questions should be easy to get (it also means you’re already paying attention to site search). But for complex B2B sales they’re going to require some estimation. Many people are measuring their site search wrong. So what’s the right way?
First, there are two primary business use cases on a website, sales and support. So, make an educated guess. We normally guess 100% of searches are sales related. While that overstates the number of sales use cases, it actually understates the value you will calculate; it’s a more conservative way to go. Why? Well, fixing support use cases is generally more valuable than fixing sales use cases because the cost to your business of support calls is quite high. And, expense reduction is 100% margin, it all falls to the bottom line. So, estimate 100%.
The average conversion rate is the next tricky aspect. Again, ecommerce businesses can measure this objectively. B2B guys are going to have a harder time but you probably have enough data to make an educated guess. If you assume that a site visitor is early in your sales funnel, an unqualified lead, you can use whatever metrics you have about yield on leads to estimate this number. In the absence of a number, choose something small — 1% is probably a conservative number.
The final value, average order size, should be much easier to estimate. It’s going to be somewhere in your sales system. Talk to the sales guys.
Crunching the numbers
You can use our Increased Revenue Calculator to crunch the numbers. This is going to tell you how much revenue you can expect from fixing your site search problems. Knowing your average gross margin you can then calculate the “profit” from fixing site search. This will tell you how much investment you can make each year in building and maintaining an excellent customer experience in site search while still delivering value to the company. If you need some help shoot me a note and we can help you work through it.
Where’s my return?
The most common sources of anxiety (and pressure from your finance team) in ROI calculation are ones where the results aren’t immediate. Remember, this is a business case, a spreadsheet, and not reality. In reality, you’re going to have to identify people, acquire technology, learn, iterate, repeat. But not having immediate quantifiable results should not be mistaken for having no results. You’re going to need to build momentum but don’t lose sight of the end game, you’re harvesting the value you’ve demonstrated in your business case.
For example, social media has transformed the business world, but some businesses have taken way too long to catch on, and even some still haven’t figured it out. Part of that is because despite the business value they know is there, they’re stuck in a chicken-egg loop. It can be difficult to quantify the value to social media and marketing in general, but the value is demonstrated every day. Don’t mistake the difficulty in quantifying results with no results at all.
ROI needs to be in your DNA
As a leader, ROI needs to be in your decision-making toolkit. While it can be intimidating to sit down and crunch the numbers, seeing the math not only helps you clarify your thinking but it also helps you communicate the value to others in language that is important to the business.
While the role of experience and intuition isn’t going away, quantitative tools can help you check your decisions. Do research, consider all aspects of investment, and think critically about what value each choice gives you. What separates many successful businesses from the struggling ones is making excellent resource allocation decisions. Not thinking critically about your ROI is playing business on hard mode.