When you boil it all down, digital marketing success is determined by just two numbers: RPV and CPV. If your RPV is higher than CPV, then you’re profitable. If not, you’re losing money on that particular marketing channel.
Can you guess what these numbers are?
In this article, I’ll define them and explain why it’s important to focus your time and resources on one versus the other.
What is RPV and CPV?
RPV is your revenue per website visitor. More specifically, it’s revenue per visitor per marketing channel. You’ll always want to calculate this per marketing channel because it varies greatly depending on the source of website traffic.
To calculate your RPV, pick a date range where you have sales data. For example, let’s say last month you generated 2 sales from your AdWords advertising for a total of $2,000. I’ll use AdWords as the source of traffic in this example, and you’ll want to do this for all other traffic sources like SEO, Social, Email, etc.
Next, look at how many visitors you had from AdWords during that same date range. To keep things simple, let’s say there were 2,000 visitors to your site last month. That means your RPV, or revenue per visitor from AdWords was $1 ($2,000 divided by 2,000).
What does that mean? It means you can afford to invest a maximum of $1 per visitor for that marketing channel. If you invest more than that, then you’ll lose money.
Now, you probably guess the other number, CPV, is your cost per visitor. This number is calculated by looking at your total monthly investment into the marketing channel divided by the total number of visitors. Again, the simple equation we’re looking at is:
Profit = RPV – CPV
Where Should You Focus?
The first time you run these numbers, you’ll likely come to the conclusion that you need to find a way to make your CPV smaller. The lower your CPV, then the more profit you’ll generate. It’s completely logical, but it’s the wrong number to focus on!
Sure, you may be able to drive down your CPV a bit and I’m certainly not saying you shouldn’t try… but over the long term, the cost of website traffic is not going down. As more competitors enter the market, they will naturally drive up the costs. It’s inevitable.
With that in mind, you should focus more of your time and resources on ways to increase your RPV. That is where you can gain a huge competitive advantage in any market.
How to Increase Your RPV
There are only two ways to increase your RPV:
- Improve your website conversion rates. If you can convert more of your visitors into customers, then you will drive up your RPV. Some ideas to increase conversion rates are: improve the offer on your website, add a free lead magnet to collect visitor contact information, use email marketing to follow up with prospects, launch retargeting advertising to bring prospects back to your website.
- Increase your customer value. Obviously if the value of your customers increases, then your RPV will also increase. Some ideas to increase customer value are: raise your prices, offer additional products and services to help your customers, offer a subscription service so you get repeat sales automatically.
Take some time this month to calculate both your RPV and CPV for each of your marketing channels. This will give you your baseline numbers.
Next, review the ideas above to see how you can double your RPV in 2015. That may sound like a stretch goal, but if you can simultaneously increase conversion rates and your customer value, then you shouldn’t have a problem doubling your RPV!