I’ve purposely left the title of this article open. I haven’t defined what type of website or what type of business I am asking this question about. How do you determine how much traffic you need to your website? Can you even do it? Why would you even want to figure out how much traffic you need?
The answers to these questions are mind bogglingly SIMPLE, but they seem to go unanswered for SO MANY entrepreneurs and business owners.
I’ll answer the “Why do you need to understand how much traffic you need to your website?” question first.
Traffic = Cost
If you don’t have a clue about how much traffic you need, you have no clue about your business costs.
If you don’t know your business costs, you don’t know your profits and quite simply you’re already on your way out of business.
Can you even calculate how much traffic you need to your website?
What makes you think you can’t?
Typical answers are “but I don’t have any data”
I say PAH to that.
There’s tonnes of data out there, for various sectors and types of businesses that provide you with benchmarks on how many visitors to your website will convert into customers – split down into traffic sources.
Want to sell 20-30,000 units a year?
You’ll need about 1,000,000 – 1,500,000 visitors per year to your store.
It’s not rocket science. It’s simple maths.
2-3% of traffic on an ecommerce store converts (that’s all traffic, so that’s “fresh traffic” and “returning” traffic from emails, remarketing, loyalty campaigns etc.)
Bang – you can calculate what “100%” is.
Local Business? (Garage, plumber, kitchen fitter…)
How many customers can you service a year? 1 a day / 5 a week?
48 (working weeks) x 5 = 240 customers.
Local business websites actually tend to generate a lot of branded term traffic (people searching for the business name) because of referrals etc. As a result, the traffic converts really well. 10% is actually a solid benchmark
You therefore need about 10 visitors a day
2,400 visitors a year (200 visitors a month)
Do you know what’s spooky about these 2 comparisons though?
For the average kitchen fitter that would be about £4,000 per customer – about £1,000,000 in revenue.
For the average eCom store, assuming products cost about £30-35 – that generates about £1,000,000 in revenue. (£30-35 is product cost, but each customer could purchase more than 1 product, so this calculation doesn’t try and guess Lifetime Customer Value, it just accepts it and bakes it in at the traffic end).
The businesses generate the same revenue but the traffic requirement is MASSIVELY different.
Same goes for someone selling coaching
They likely won’t have 20-30,000 coaching slots available!
But clients are likely to deliver more than the £30-35 per product sale that you’re getting in eCommerce.
This highlights how important it is to think about YOUR marketing needs in the context of YOUR business sector.
If you try and compare what works in one sector, with what works in another you’ll mislead yourself on the numbers. Using 10% as a conversion rate for traffic in eCommerce is likely going to leave you bleeding cash.
Let’s just price up some Ads for a second.
The kitchen fitter needs 2,400 visitors.
Let’s assume the bidding gets out of hand and goes to £5 per click
That’s about £12,000 in traffic cost.
Or about 1.2% of revenue (1.2% AToS)
If we get that number wrong by say 100% – so it’s actually DOUBLE
That only moves the AToS from 1.2% to 2.4% (£24,000 spent)
The Ecommerce business needs 1,000,000 visitors.
Let’s assume that actually 50% of that traffic is returning via Email and other NON paid channels.
So we need 500,000 visitors in fresh traffic and paid returning traffic.
Say we’re down at £1 per click (that’s a drastic under estimate based on the data)
That’s £500,000 to bring those people into the store (keeping in mind, you only generated £1,000,000 in revenue).
That’s a 50% AToS
If we’re out on our budget by 100% (as we calculated with the kitchen fitter), we now spend as much on Ads as we generate in revenue.
We’re going out of business.
When you need a LOT of traffic in comparison with other sectors, as in ecommerce, you’re more susceptible to changes in the cost of traffic. Relavtively small variances can push your budget from being profitable to a complete all out loss.
Keep in mind that the State of the merchant report has the cost of Paid Ads increasing by double digits each year – between 10-20% year on year increases in CPA.