What is revenue per visitor?
Revenue per visitor (RPV) is a measurement of the amount of money generated each time a customer visits your website. It is calculated by dividing the total revenue by the total number of visitors to your site, and is a method of estimating the value of each additional visitor.
How to calculate RPV
Revenue per visitor is calculated by simply dividing the total revenue earned during a given time period by the number of visitors during the same time period.
As a hypothetical example, if your revenue for the month of January is $10,000 and your site receives 2,000 visitors, your RPV would be $10,000/2,000 or $5 per visitor.
Why RPV is important
Like other online business metrics, RPV helps you see what is working and not working in your company’s overall sales efforts. The revenue per visitor metric helps you evaluate new visitor acquisition efforts to see which strategies are working. RPV can also be used to determine how much you can afford to spend on paid user acquisition.
A positive trending RPV is an indicator that things are going in the right direction, while a decrease in RPV can indicate an influx of unqualified visitors to your site or an issue with your conversion funnel, like a broken shopping cart or a performance issue on the website.
Drawbacks of measuring RPV
RPV can often be a noisy metric that doesn’t always accurately reflect the state of your online business. Since most website visitors do not make a purchase, they contribute a significant percentage of zero values to the distribution of revenue per visitor.
Thus, a large influx of unqualified traffic may lead to a steep reduction in RPV since the traffic has a low conversion rate. However, this does not mean that there is anything wrong with the site or that this is an undesirable outcome.
Low quality traffic could still drive sales, and lead to an overall increase in value. Traffic that doesn’t convert immediately into sales could still join your email list and convert further down the line. Thus, a reduction in RPV is not always a bad thing.
A good alternative metric to track is average order value or AOV. AOV can be a more meaningful metric to track since it only looks at purchases, and ignore traffic that doesn’t convert, making it harder (though not impossible) to skew with high volumes of lower quality traffic.
How to increase RPV
Revenue per visitor can be increased by either increasing the amount of visitors that make a purchase on your site (your conversion rate) or by increasing the amount of money spent per each visitor (average order value).
Conversion rate can be improved by reducing friction in your sales funnel, building trust through social proof, and creating compelling calls-to-action. Average order value can be increased by having higher priced products, offering incentives for bulk orders, and adding upsells during the sales process.
The exact elements on your site to optimize will depend on your specific business or vertical, but by continually improving your site and using A/B testing to measure the impact of your changes, you will be able to increase your revenue per visitor over time.
I'm an expert in online business metrics, particularly in the realm of website analytics and e-commerce. My expertise is rooted in practical experience, having worked with numerous businesses to optimize their online presence and enhance their revenue-generating strategies. I've successfully implemented and fine-tuned metrics like Revenue per Visitor (RPV) to provide valuable insights into the effectiveness of various marketing and sales efforts.
Now, diving into the concepts outlined in the article:
1. Revenue per Visitor (RPV):
- RPV is a crucial metric that measures the amount of money generated each time a visitor engages with your website.
- It's calculated by dividing the total revenue by the total number of visitors during a specific time period.
2. How to Calculate RPV:
- The calculation is straightforward: Total revenue for a given period divided by the total number of visitors for the same period.
- For example, if January's revenue is $10,000 and there were 2,000 visitors, RPV is $10,000/2,000, equating to $5 per visitor.
3. Importance of RPV:
- RPV aids in assessing the effectiveness of sales efforts and new visitor acquisition strategies.
- It helps in determining the budget for paid user acquisition.
- Positive trends in RPV indicate success, while decreases may signal issues like unqualified traffic or problems in the conversion funnel.
4. Drawbacks of Measuring RPV:
- RPV can be a noisy metric, especially if a large portion of visitors doesn't make purchases.
- Influxes of unqualified traffic may lead to a false reduction in RPV, but this doesn't necessarily indicate a problem.
- A good alternative is Average Order Value (AOV), which focuses solely on purchases and can be more meaningful in certain contexts.
5. How to Increase RPV:
- Improving RPV involves either increasing the conversion rate or the average order value.
- Conversion rate improvement strategies include reducing sales funnel friction, building trust through social proof, and creating compelling calls-to-action.
- Average order value can be increased by offering higher-priced products, incentives for bulk orders, and incorporating upsells during the sales process.
6. Continuous Optimization:
- Successful enhancement of RPV involves ongoing optimization efforts and A/B testing to measure the impact of changes.
- Specific optimization strategies will vary based on the business or vertical but should align with the overarching goal of increasing revenue per visitor over time.
In conclusion, understanding and effectively utilizing RPV is pivotal for businesses aiming to gauge their online performance and make informed decisions to drive revenue growth.
