In e-commerce, there's no reason why you shouldn't be measuring "VORP", or "Value Over Replacement Product".
Take one of your landing pages. You feature twelve items. Every visitor to the landing page views each item. You measure demand for that item after the customer views the landing page, divided by the number of people who visit the landing page.
- Example: Item #1 = $30,000 demand divided by 100,000 views = $0.30.
- Example: Item #2 = $20,000 demand divided by 100,000 views = $0.20.
Armed with that information, VORP is calculated as follows:
- Item #1 VORP = $0.30 - $0.17 = $0.13.
- Item #2 VORP = $0.20 - $0.17 = $0.03.
The second item generates $0.03 * 100,000 = $3,000 of VORP.
VORP is the metric that you use to determine the incremental value of any product on any landing page, or on your home page. It is the metric that marketers use to protect themselves from merchants looking to hijack the home page with products that may not resonate with the customer.
At HSN, we used "average net profit per minute" to look for products that were really driving incremental profit versus sucking the life out of the infrastructure.ReplyDelete
Clearance excluded, of course!
Sure, none of this stuff is new, as a song from ten years ago said ... "It's all been done!"ReplyDelete
Kevin, you are the Bill James of web analytics. Good Stuff!ReplyDelete