Fundamentals Of Online Business: Traffic, Sales Conversions, Profit

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We measure the success of a business by it’s profits. But aside from what it earns, we also want to know its potential to earn. In online business we have the benefit of easily measuring a website’s “potential” by it’s traffic — the amount of visitors it receives.

With enough traffic you can look to improve sales conversions in order to earn more from your business. Without enough traffic you’ll have to focus your efforts on marketing — in order to generate more exposure to your products.

“First you get the traffic. Then you improve the conversions. Then you get the money.”

This post is a good starting point for anyone launching a blog, shop, or any other type of online service. It teaches the basics.

What Traffic Means For Your Online Business

It’s just like running a physical shop. If floods of people start coming in every day, then you can be pretty confident you’ll generate some sales. Provided your products are good, of course.

You’d expect 100 people entering your shop per day to generate more profit than 50 people per day. The more visitors you have, the more chance you have of making sales. It’s exactly the same principle with web traffic.

The physical-digital shop analogy works on several other levels, too:

  • Location: If you place your shop in an usual location, such as the wilderness, will anyone go to it?
  • Experience: If your shop is rammed and disorganised, will people continue looking around it? Will they come back again?
  • Transparency: If you trick people to enter your shop by pretending to sell one product, and then try to sell them something entirely different, will they buy from you?
  • Price: If your products are too expensive or poor value, will people buy them? Will they seek alternative shops?

Doing the ‘right’ things online, as you would with a regular shopfront business, is vitally important for attracting customers and generating sales.

Fundamentals Of Online Business: Traffic, Sales Conversions & Profit (Basics of Online Business Guide)
Malls bring physical shops together, creating a local “go-to” place for consumers. But online shopping has far less bounds and limitations. It opens the door to a lot more potential customers.

But before you can truly perfect your online sales strategy, you need traffic — people coming through the door, entering your shop in the first place.

Note: there’s some situations where traffic doesn’t correlate to profit. For example, where existing customers are retained in repeat purchases, or choose to buy an upgrade. In those cases it’s unrelated to current website activity.

How To Drive Traffic To Your Products & Services

There are numerous ways you can increase traffic to your website. I’ve written several specialist posts on the subject:

I also recommend thinking about how you can align your business to its audience.

There’s plenty of ideas in those posts. It took a couple of years of trial and error to figure out what worked best for my projects. Hopefully sharing my experiences will save you both time and money.

Analyse Your Traffic To Learn More About Your Customers

Answer Key Questions

Monitoring website traffic using Google Analytics enables you to analyse, improve, forecast — even value — your online business. You can use the stats to start answering key questions, such as:

  • What marketing campaigns bring the most/least traffic to my website?
  • What pages/posts are being viewed the most/least by visitors?
  • Am I doing enough of what visitors are interested in?
  • How long do visitors typically spend on my site?
  • What’s the average bounce rate?
  • Are the sales conversions what I expect for the amount of traffic my site receives?
  • Do some products/pages receive a much higher/lower sales conversion to others?
  • How do my sales conversions compare to the industry average?

… and so on.

This list of questions isn’t extensive by any means. You’ll also benefit by taking it a step further by asking “Why?” to each of them. This is where you’ll need to think for yourself. For example:

“Why are my bounce rates so high?”

  • A bad scenario: your site looks so unprofessional that people bounce immediately without changing pages (for example).
  • A good scenario: you are successfully convincing visitors to buy an external product; they click through your site without browsing any further. In this case the high bounce rate is a good thing.

Insights from Google Analytics are there to help you understand the consumer, and decide how to improve your business. The aim is to make changes that’ll drive more traffic and sales.

Over Analysing Your Website Traffic

I’ve noticed that some startups and marketing agencies have a tendency to delve deep into web analytics right from the outset. But it’s only truly effective once you have enough analytics data to work with.

Fundamentals Of Online Business: Traffic, Sales Conversions & Profit (Basics of Online Business Guide)
Here’s some stats for a relatively new — but still growing — sports website. There’s just about enough visitor data here to start looking for trends. Around 1,000+ users (over a given period) is a good starting point.

New startups typically have low traffic, meaning their analytics data set is unsubstantial, and difficult to deduce anything meaningful from. You can of course try to read into any amount of traffic, look for patterns, and understand what’s working and what’s not…

  • Last Tuesday there was a sale. Does this mean Tuesday is the “big hitting” day for your business?
  • How about that Instagram post which converted into a sale. Does the key to your success lie in social media marketing?

The fact is, you won’t know the answer to such questions until you have sufficient traffic. One-off events don’t say a lot.

Build up your traffic before relying on site analytics.

Analytics Needs Context

Analysing and observing analytics data helps you to improve your site internally. But it has limitations.

For example, if you want to measure your sales performance compared to the industry average, then that’ll require some research or knowledge on that industry. Google Analytics itself won’t explicitly tell you whether your “12 sales this week” is a little or a lot. It doesn’t have a frame of reference for everything.

Therefore business owners and decision makers are instrumental to interpreting the analytics data, as they (should) have a sound understanding of the market they’re in. The data will make a lot more sense with a bit of background context.

Basic Metrics Outside Of Google Analytics

I use a few free tools to learn more about my sites:

  1. Alexa Rankings. I compare how my site ranks next to competitors in my niche. This gives me an indication of how close I am to catching them.
  2. Google Trends for Keyword Searches. This helps to provide some frame of reference as to how popular my content/products/services are now, and were historically. It’s great for gauging where the public interest is.
  3. Google Rankings. I use free keyword tools, such as this one at Small SEO Tools, to find out where I’m ranking in specific Google searches. If I’m ranked high for my target keywords, then I know I’m doing well for organic SEO; so I’ll focus my efforts on weaker areas of the business.
True story

I once asked to partner with another (competing) site, but was promptly turned away because my Alexa ranking was “too low”. This was surprising to discover, as I performed much better than this site in Google keyword searches. So what was the deal?

I found that this particular competitor drives almost all of its traffic from other sources: YouTube, mainly. Importantly, this told me more about where I needed to focus my marketing efforts than monitoring my own traffic analytics ever could have done. I’d missed an obvious opportunity: video marketing.

The moral here is to make sure you don’t become too tunnel-visioned.

Remember: Improve Sales Conversions To Earn More

We’ve covered the basic principles of driving high quality traffic to your products. Now it’s time to maximise your profits by improving the sales conversions.

Start out by reading my post 10 Ways to Increase the Profitability of Your Online Business.

And remember to avoid spending all your time monitoring the results. Improvements won’t take place without action.

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