The iorg.com Newsletter - October 2003
Dollars and Sense: Measuring
the value of web sites
Web sites matter for two
reasons: today's customers expect a company to
have a web site, if only to provide contact information or locations,
and at least some parts of most companies have discovered that web
sites can cut costs, generate additional revenue, or both. However,
even a simple web site comes at a cost, so it is important to make
certain that the business value is known and optimized.
For example, if a company spends an average of $20 supporting each call
in their call center, and the average cost of the customer serving
himself on the web site is $.50 then each support event that happens on
the web rather than in the call center saves the company $19.50. For
every thousand diverted calls that is $19,500. However, if half the
customers coming to the web site intending to support themselves do not
find the support section, the right answer, or otherwise fail at using
the web-based support, the value of the web site goes down by $9,750
per thousand events.
The example above shows that a web site can be either a drain or boon
depending solely on its effectiveness at meeting the business
requirement. The difference requires an understanding of how
investments in the web site tie back to and improve business value,
then managing the factors that create barriers. This ultimately leads
to the need for appropriate metrics.
Linking web site design to
business objectives
Most web sites have multiple
destinations or functions that visitors
can access. This creates a complex situation, because the overall
business value of the web site comes from the sum of the destination
values. Therefore, each destination should have explicit business
objectives.
The most difficult metrics to generalize are those that measure
progress toward business objectives. This is due to the wide range of
possible business objectives. In many cases measurements may be
required that do not involve the web site at all. For example, if the
business objective is to use web site self-service to reduce calls to
the call center, then the evaluation must include tracking changes in
the number of calls to the call center.
Business objectives generally tie back directly or indirectly to either
reducing costs or increasing revenues. Clearly the easiest business
objective to measure is a direct increase in revenue or sales. However,
even in this case, additional metrics are advisable to track more
detailed parameters that lead to that objective and to track early
indicators of future changes.
Places to look for measurable
value:
Revenue
- Can you document sales that would not otherwise have been
made? Don't overlook mechanisms that track web-based research leading
to store purchases.
Cost (self-support)
- Can you document a reduction in human assisted services?
Generally, the cost of human service can be quantified and compared.
Common activities where web self-service can replace at least some
human service support are: customer or employee assistance, account
management, and sales.
Lost Customers
- The most obvious measure to document here is the lost
future revenue. However, the cost of original acquisition of the
customer should not be overlooked. This can be treated as a cost
amortized over a shorter period, and hence higher for each purchase
made
before the loss. If you want to get more sophisticated, you might also
factor in the risk of not being able to replace this customer with a
new one.
Time to Market or Task Completion
- Time savings often are tied to increased revenue. For
example:
- In industries with high-value, patent-protected products,
like pharmaceuticals and pesticides, reducing the months getting to
market has been shown to dramatically affect revenues and profits.
- In industries that bid on complex proposals, the ability
to communicate rapidly, across time zones, either internally or with
partners can affect the ability to respond at all. Tracking proposals
and wins (revenue) that could not have happened provides the value
metric.
- Completing tasks ahead of schedule can sometimes be
translated into cost savings, particularly at the project level.
However, be careful not to use this unless you can measure and document
how the time saved is actually transferred to another value producing
task.
- A more difficult, but not impossible, task is documenting
how completing a project or service on time or ahead of schedule can
lead to repeat business, both directly and through client referrals.
Quality
- This is an important, but difficult to measure attribute.
It often can be documented by relating the result to one of the value
measures discussed above. For example:
- Loyalty is the positive side of “lost customers.”
- Repair / rework costs are related to the “self service
support” metrics.
- Anytime / anywhere service is measured as increased
revenue.
Developing metrics for harder to
measure business objectives
The following questions can help
guide the process:
- How will we know if we succeeded?
- What do we want to be different
after we implement this?
- What will that difference look like?
- How can we measure
that difference?
- Can we translate the difference into monetary value?
- Is there direct revenue or savings?
- Can we put a value on satisfaction (the value of each
percentage increase/decrease in retention, turnover, etc.)?
- Can we put a value on time to market/completion (per
hour, day, month)?
Summary/Recommendations
If you do not manage your web
site to business objectives, and measure
business results, it is very likely your web site is dramatically under
performing, or worse, costing more than the value being realized. You
can counter this situation by:
- Setting business objectives
for each web site destination or function
- Identifying metrics for each
objective
- Capturing baseline status for
each metric
- Tracking progress on a regular
basis
Please feel free to forward this
newsletter to a friend or colleague who might be interested.
|
