# It's A Numbers Game

I wonder how many warriors really understand the metrics behind

Let me give you an example..

Let's say you promote someone else's product as an affiliate and
you earn a 50% commission on a product which sells for \$67.00.

The sales conversion rate for the traffic that you are sending to
the merchants sales letter is converting at 3.6% and that translates
into an income of \$1.20 for each visitor that you send to the site.
The equation is: (\$67 x 50% x 3.60)/100= \$1.206

Now, if you are using paid traffic, you know that to make a profit
you need to spend less than \$1.20 per visitor.

Let's say you are using an advertising network and you are paying
\$13.50 per 1,000 impressions and you are getting a 1.3% click
through rate. Your actual cost per visitor is \$1.04.
The maths: \$13.50/(1,000 x 0.013)= \$1.0385

Great! You are making a profit of \$0.16 per visitor.

Just how profitable are your promotional efforts?

More importantly, do you know?

John
•  Originally Posted by John Taylor I wonder how many warriors really understand the metrics behind their businesses. Let me give you an example.. Let's say you promote someone else's product as an affiliate and you earn a 50% commission on a product which sells for \$67.00. The sales conversion rate for the traffic that you are sending to the merchants sales letter is converting at 3.6% and that translates into an income of \$1.20 for each visitor that you send to the site. The equation is: (\$67 x 50% x 3.60)/100= \$1.206 Now, if you are using paid traffic, you know that to make a profit you need to spend less than \$1.20 per visitor. Let's say you are using an advertising network and you are paying \$13.50 per 1,000 impressions and you are getting a 1.3% click through rate. Your actual cost per visitor is \$1.04. The maths: \$13.50/(1,000 x 0.013)= \$1.0385 Great! You are making a profit of \$0.16 per visitor. Just how profitable are your promotional efforts? More importantly, do you know? John
It is VERY much a numbers game...

And you're so right John.. I think the problem for most people comes from the fact that they "stumble" into the industry with no real business education at all..

So metrics are overlooked... and to me it is the most important element..

I know each and every penny that goes in and out of my business on a a daily basis...

I'm no scrooge, it's business metrics 101... keep a track of EVERYTHING, otherwise.. how on earth are you gonna know what to change if you hit a blip?....

The most common issue I see with metrics is people "trying" PPC...

They have some good weeks of sales without proper tracking, and then when the sales dry up a little, the profit vanishes.. they cry foul and conspiracy.. when really, at least 80% of the keywords they were using were actually losing them money in the first place..

If they had monitored properly and kept track of their metrics.. they would have killed the dead keywords early on and remained in profit during the seasonal changes that caused the drop in sales...

Great, insightful post John

Jay
• Hey, John -

In my experience, loads of marketers either...

1. Have no clue how to calc their metrics

2. Don't know where to start

3. Do basically little or nothing

4. Have no idea that all traffic sources... uniques and repeats... visitors and buyers... cold leads and JV leads... all convert differently and all have different visitor values and ROIs

5. Don't consider the differences in traffic and sales metrics and don't know how to calc them...

6. And they don't have a clue how to predict latency, relevancy, customer defections points, and the higher math metrics...

It is indeed part art and part science [math,] but few people in my experience even know where to start. This is why I developed a metrics program awhile back that I kept for myself and shared with a few others who asked for it.

Chip Tarver

PS -- Metrics are the core of ROI... and marketers should do whatever it takes to learn, analyze, and implement this important aspect of every business whether online or off...
• John, thanks for a very important post. As a cheap SOB, I don't need to
use paid advertising, I even do estimates beforehand to see how much I
think my profit is going to be. If you have a product that has been out
there for a while and know the conversion rate, this is easy to do. You
just plug in the cost per click that you expect (easy if you're using Adwords)
into your formula and you can get a very good idea if even starting an
Adwords campaign is going to be profitable.

Great stuff John. Thanks.

I'd give you some rep but they done gone and threw it out with the bath
water, the baby and the dish washer.
•  Originally Posted by John Taylor I wonder how many warriors really understand the metrics behind their businesses. Let me give you an example.. Let's say you promote someone else's product as an affiliate and you earn a 50% commission on a product which sells for \$67.00. The sales conversion rate for the traffic that you are sending to the merchants sales letter is converting at 3.6% and that translates into an income of \$1.20 for each visitor that you send to the site. The equation is: (\$67 x 50% x 3.60)/100= \$1.206 Now, if you are using paid traffic, you know that to make a profit you need to spend less than \$1.20 per visitor. Let's say you are using an advertising network and you are paying \$13.50 per 1,000 impressions and you are getting a 1.3% click through rate. Your actual cost per visitor is \$1.04. The maths: \$13.50/(1,000 x 0.013)= \$1.0385 Great! You are making a profit of \$0.16 per visitor. Just how profitable are your promotional efforts? More importantly, do you know? John
No, the question is: Most importantly, do you know HOW?

I have no idea how to set up metrics like this, but I do see the value in doing so.

So, any blueprints on how to set this up effectively?

Thanks!
• Think about the numbers game from the merchant's perspective.

Maybe the affiliate's spending \$30 for every \$35 they make at a 50% commission - but the merchant just sits there and and makes the full \$35.

I know, it's IM 101, but many people fail to see this...

-Chris
•  Originally Posted by Chris Hunter No, the question is: Most importantly, do you know HOW? I have no idea how to set up metrics like this, but I do see the value in doing so. So, any blueprints on how to set this up effectively? Thanks!
Chris,

The answer is in my original post, the formulas are there, just

John
•  Originally Posted by John Taylor I wonder how many warriors really understand the metrics behind their businesses. Let me give you an example.. Let's say you promote someone else's product as an affiliate and you earn a 50% commission on a product which sells for \$67.00. The sales conversion rate for the traffic that you are sending to the merchants sales letter is converting at 3.6% and that translates into an income of \$1.20 for each visitor that you send to the site. The equation is: (\$67 x 50% x 3.60)/100= \$1.206 Now, if you are using paid traffic, you know that to make a profit you need to spend less than \$1.20 per visitor. Let's say you are using an advertising network and you are paying \$13.50 per 1,000 impressions and you are getting a 1.3% click through rate. Your actual cost per visitor is \$1.04. The maths: \$13.50/(1,000 x 0.013)= \$1.0385 Great! You are making a profit of \$0.16 per visitor. Just how profitable are your promotional efforts? More importantly, do you know? John
John

I use the glass jar method.

If there are more beans in the glass jar at the end of the week, then business is good.

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