Deflategate, Gas Laws & the Equation to Double Your Revenue

/Deflategate, Gas Laws & the Equation to Double Your Revenue

If you follow the NFL or pay attention to any sports-related news, then I’m sure you’ve heard about the infamous, “Deflategate.”  This is the scandal regarding the Patriots using deflated footballs during their games.  The NFL has rules that regulate the inflation pressure of footballs and the Patriots were found using balls that were below the acceptable pressure limits.

Who cares right?  Well, bear with me because I’m about to give a quick chemistry and math lesson that directly applies to your digital marketing.

Football

 

Remember the Ideal Gas Law?

I studied engineering in college and that meant I was forced to memorize a few chemistry laws and equations.  One in particular that could be applied to many real life examples (including Deflategate) was the Ideal Gas Law.  This law states that an amount of gas is determined by its pressure, volume, and temperature.  Here’s the law written as an equation:

PV = nRT

(Pressure) x (Volume) = (amount of gas) x (gas constant) x (Temperature)

Don’t worry, there won’t be much math in this article.  In fact, the most important takeaway here is to understand and focus on the relationship between the variables in that equation.

For example, what happens to P (pressure) when T (temperature) increases?  If everything else stays the same, then when the temperature rises, then pressure has to rise as well.  That’s the only way the equation will hold true.  In other words, pressure is directly proportional to temperature.

That means if the temperature falls, then pressure will decrease as well.  Voila! We just proved that it’s possible the Patriots may have inflated their footballs correctly, but when the balls were exposed to lower temperatures the pressure decreased below the acceptable range.

All we did was look at the relationship between pressure and temperature and we were able to see a plausible explanation.

The “Ideal Digital Marketing Law”

Let’s shift gears away from football and chemistry to see how to apply this to your marketing.  If you’ve attended my webinars, then I’m sure you’ve seen the following equation that I’ll call the “Ideal Digital Marketing Law”:

R = T x C x V

Revenue = (Website Traffic) x (Website Conversion) x (Customer Value)

Again, don’t worry about using numbers in the equation; Focus on the relationship between the variables. This equation tells us that your revenue from digital marketing is directly proportional to:

  • the amount of traffic to your website
  • the conversion rate from website visitor to customer
  • the value of your customers

That means there are 3 different ways to increase the amount of revenue generated from your digital marketing.  You can increase your website traffic, increase your conversion rates and/or increase your customer value.  As any one of those variables increases, your revenue will have to increase proportionally.  Just like how the pressure has to decrease when the temperature falls.

 

Doubling Your Revenue Is Easier Than You Think

OK, before we wrap this up, there’s one more exciting fact about this equation that makes doubling your revenue much easier than you may think.

The secret is in improving all three variables at the same time.  If you can simultaneously increase your website traffic, your conversion rates, and your customer value, then you only need modest improvements of about 26%.  I’ll use a simple example so you can see how this works.

Let’s say you have 1,000 visitors per month, your conversion rate is 1% and your customer value is $500.  Then your total monthly revenue would be $5,000 (1,000 x 1% x $500).  Now, let’s increase each variable by just 26%.

Your new website traffic is 1,260 (just 260 more visitors), conversion rate is 1.26% and your customer value is $630.  When you multiple these new numbers (1,260 x 1.26% x $630), then you’ll see you have in fact doubled your revenue to $10,001!

When I first learned about this, it blew me away.  I don’t know about you, but doubling your revenue sounds almost unbelievable.  However, when you break it down using this formula, then I hope you see that it actually does not require enormous improvements!

 

Register for Free Webinar

You’re invited to register for my Free Webinar on Thursday at 1pm ET, called:

“How to Create a Successful Digital Marketing Plan!”

If you haven’t already, NOW is the time to create your digital marketing plan for 2015. And I’m hosting this webinar to show you how to do it right.

Click here to register for the webinar

 

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By | January 25th, 2015|Categories: Conversion Rate Optimization, Strategy, Tracking and Analytics|Tags: , |

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