Product Search: Calculating Return on Investment

Once you’ve invested in paid product placements on comparison shopping sites, knowing the return you’re getting from your investment will play an important role as you decide which products to continue placing on which web sites. By calculating return on investment (ROI), you’ll be able to tell how many customers came from a specific site, how much money those customers spent, how important paid product searches will be as you continue defining your marketing efforts, and how much of your budget you should dedicate to product search efforts.

Because many of these sites charge a per-click fee, it is easy to count the number of visitors who found your site through a comparison shopping site. Compare this number to how many customers you were able to secure using other marketing efforts during the same time period.

Where Are Your Customers Coming From?
While web traffic alone is easy to measure, tracking sales directly from a shopping directory is a little more involved. Here are some effective ways to determine how you are obtaining customers:

• Use the tools offered by the shopping directory . Depending on their tracking capabilities, the directory sites will be able to tell you which visitors entered your site through theirs. They usually provide detailed reporting services, allowing you to compare results between products to help you determine the success of each listing. When placing products with a shopping directory, be sure to ask about its tracking methods.



• Ask your customers. Include a question on your checkout page asking buyers which site led them to yours or influenced their purchasing decision.



• Set up unique URLs. If you are listingproducts using both free product listings and pay-per-click advertising, figuring out where the sales are coming from will help you decide whether to continue spending money on paid ads. To do this, you’ll need to capture the referral URL when a buyer first visits your site. One way to accomplish this is to ask each of your comparison shopping sites to embed a code in the product’s URL that will track which site and which part of the site a customer came from.

How to Calculate ROI
Here is some of the information you’ll need to determine how well your comparison shopping site listings are paying off:

• Ad Cost: The amount you are spending with comparison shopping sites.
• Clicks: Also provided by comparison shopping sites, this refers to the number of visits from paid listings.
• Number of Sales: The number of completed orders from product searches.
• Revenue: The dollar amount generated from paid listings for that product.

To determine your ROI, you’ll first have to determine the profitability of each listing and how much it costs to generate each sale. To determine the listing’s profitability, simply subtract the ad cost from the revenue generated. For example, if you spent $500 on a product listing in one month and you sold $1,500 worth of that product during that time, you have a $1,000 ad profit.

To determine how much it costs to generate each sale, or Cost Per Acquisition (CPA), divide the ad cost by the number of sales. For example, if your ad cost $500 and you made 20 sales based on that ad, your CPA would be $25.

To determine your ROI percentage, you then divide your ad profit by the ad cost and multiply by 100. In this case your ad profit is $1,000 and your ad cost is $500, so your ROI would be 200%.

If you use multiple comparison shopping sites, it’s easy to determine which ones to continue using after you’ve listed your products with them for a period of time. Side-by-side comparisons are the easiest way to start calculating ROI. Let’s say you list with two shopping directories, pay each $1 per click, and receive 1,000 clicks from each site. To determine how well your $1,000 investment is paying off, you’ll want to know how those clicks add to your bottom line.

From one site, of those 1,000 clicks maybe 10 resulted in sales with profit margins equal to your expenses. That leaves you with a negative ROI. However, if on the second site 100 visitors made purchases, it’s clear that this site is sending you more serious visitors or is more accurately reaching your target market.

Looking at these numbers, you’ll want to consider investing more of your product placement budget with the second site or rethinking how you categorize the products on the first.

Each business has its own ROI expectations. Setting realistic goals and tracking your results will tell you if your marketing efforts are paying off. While experiencing results from product placement can take a little time, calculating your ROI and making adjustments to your online product placements will help you determine which web sites and placement methods are best for your business.

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