When it comes to online video production, its often said that its difficult and/or near impossible to calculate the potential return your video investment can bring. This is true to a certain extent however there areways by which you can determine the potential benefit, in monetary terms that adding a video to your website can bring you.
Here, we have compiled a step-by-step instructions on how you can evaluate the cost-effectiveness of adding a video to your website before you make the investment.
Step 1 – Calculate the BEFORE conversion rate of your website
As a business investment, your video should show you a potential return and the way to determine this begins with knowing what the current conversion rate of your website is. If you aren’t sure, take a look at this quick and simple guide on calculating conversion rates). Note – the “Sales” value on the aforementioned post is the number you’re looking at.
In a nutshell, the conversion rate formula is Number of website sales / Total number of visitors x 100.
For the purposes of this article, we shall assume your website’s conversion rate to be 4%. You also need at hand the number of visitors this percentage represents. Let’s say this number is 20.
Step 2 – Determine the average order value of a customer
Next, make a note of the average order value of a sale generated via your website. Let’s say this number is £100.00.
Step 3 – Calculate the AFTER conversion rate
This step involves calculating the improvements in conversion rates once you have added a video to the site. of course, since the purpose of this article is to determine this before you make the investment, we should look at the data on this that’s publicly available.
Unlike website conversion rates where 3-5% is widely accepted for a high percentage of commercial websites, the conversion rates for online video vary. For the purposes of this article, we shall assume the conversion rate improvement brought about by the video to be 2 times your current rates which we think is a conservative and reasonable figure (If you’re interested to learn more, you’ll find many online resources showing much higher improvements such as the Case Study on Visual Website Optimizer or the Improve conversion rate video on BIGCommerce).
So, we have a total conversion rate of 8%after the video (2 x original conversion rate of 4%) which equates to 40 orders (from 40 visitors). The actual improvement however is 20 orders.
Step 4 – Calculate ROI
Take the increase in orders (20), multiply it by the average order value (£100.00) and you get £2000.00. Compare this to the cost of having your online video produced and published and you can determine the potential ROI.
PS. Just like many other forms of Online Marketing, online videos isn’t an exact science. Although we have used numbers which accurately represent the performance of an average website, your website may be different and it may be over or underperforming.