One of our favorite expressions at Spork is “you can’t manage what you can’t measure.” A lot of manufacturers and retailers in the auto parts and accessories industry have made big investments in online video. But what’s the ROI of these videos? Are these videos a good use of resources? Do they generate sales?
In this article, we’ll address that question, with a focus on metrics that can be used to approximate video revenue.
The Four Different Types of Online Video
Most videos related to auto parts and accessories tend to fit into one of these four buckets:
- Sales videos, which are intended to “sell” the viewer on a product’s features and benefits.
- Instructional videos, like demonstrations and how-tos, which help the viewer better understand the product and/or put it into use.
- “Cultural” videos, which portray the product in use in popular culture. The primary purpose of a cultural video is entertainment.
- Brand development videos, which are focused on portraying the company that sells or produces the product in a positive light without being overtly promotional.
While there is definitely some overlap between these types, we separate videos this way because ROI calculations differ for each type.
Key Metrics You Need To Know Before You Calculate Video ROI
In addition to knowing what type of video you’re measuring, you also need to know the following basic metrics:
- Average website conversion rate. This is the percentage of visitors that buy products, as a percentage of the total.
- Average ‘add to cart’ rate. This is the percentage of website visitors that add something to the cart.
- Average website revenue per unique visitor. Calculating this metric is easy – take the total amount of revenue earned by your website in the last month (or the last six months), and divide by the total number of unique visitors.
- Average revenue per ‘add to cart’ action. Take the total website revenue for the previous month and divide it by the total number of users who added something to their cart.
- Average number of calls to your business by day, week, or month, ideally by type of call. Knowing how many people call your company (on average) is important, because sales videos can increase the number of sales calls. Likewise, instruction and how-to videos can decrease the number of customer service and tech support calls.
- Current number of fans on Facebook, followers on Instagram and Twitter, etc.
- Branded searches for your business name and products*. Someone searching for your company by name – or your products by name – is searching for you by brand. These branded searches are a good representation of the public’s interest in your products.
*NOTE: You can track branded searches on Google and Bing by creating PPC ads that target your brand and product names. Google and Bing will tell you exactly how many impressions your brand targeted ads have received in any given time period.
Calculating the ROI Of A Sales Video
This video encourages the viewer to visit http://www.roughcountry.com/, but it also mentions the full line of products. Some viewers will take that list as a queue to research the brand on Google or Bing.
A good sales video will have encourage customers to buy a product. Upon viewing a sales video, we expect consumers will research the product and or attempt to buy the product. Because consumers are expected to take action after seeing a sales video, measuring ROI is simple.
For any given period of time (a day, a week, a month, a quarter), track the following:
- Visits to the website from the video. If you know how many website visits your video has generated – and you know the average value of a website visitor – you can estimate video sales revenue on this metric alone.
- What website visitors do. Obviously you want to track sales and conversions, but it’s also a good idea to track ‘add to cart’ activity. Again, you can estimate video sales revenue directly using this method.
- Branded search traffic, both for your company name and for your product(s). Tracking branded searches is important because a lot of video viewers aren’t going to click on the “learn more” link or button that accompanies your video. Instead, they’re going to go on Google or Bing search for your product to see if they can find some independent reviews. By tracking the number of branded searches – and then comparing that to the average – you can evaluate how much interest your video is generating. Ideally, you’re able to track revenue from branded searches as well.
- Website conversion and add to cart rates. Finally, a good video can lift conversions and/or increase cart activity. If you know the conversion rate has increased a few percent, you can determine how much revenue your video has produced.
Calculating the ROI of An Instructional Video
Here’s a great example of an instructional video from Mishimoto. This video probably benefits sales of the products shown, as well as reducing the number of customer support requests Mishimoto has to manage.
Instructional videos can boost sales, but the impact tends to be incremental. A good instruction or “how to” video placed on a product page, for example, will increase conversion rates and cart activity…even if it’s only viewed a small number of times.
Instructional videos can also reduce the number of customer service and tech support calls your company has to manage. Good metrics to track:
- Website conversion rates. If a video is helpful to potential buyers, that will show up in an increased conversion rate (either overall or for the specific product).
- Add to cart activity. While conversions measure sales, ‘add to cart’ activity measures intent to purchase. If a video increases intent to purchase, that will have good long-term effects.
- Phone call volumes, particularly for customer service and tech support. A good instructional video helps consumers, reducing their need to call and ask for help. Reduced call volume can save a fair bit of money if staff is reduced (or new people aren’t hired).
Calculating The ROI Of A “Cultural” Video
This video is an example of what we refer to as a “cultural” video. Yeti’s products are in this video, but they’re definitely not the focus. Instead, the focus is on a lifestyle or an ethos. The goal of a video like this is to raise affinity for the brand. As a result, the ROI of these types of video is hard to calculate.
Unfortunately, it’s very hard to determine the ROI of a cultural video. A nice video portraying your customers doing what they love, for example, will probably generate a substantial number of video views. Viewers will undoubtedly notice your product(s) and brand in the video. But noticing products and buying them are two different things.
Still, if you upload this type of video to YouTube and it gets 100k views, you can try and measure the impact by:
- Tracking website visits, and applying the average revenue per visitor metric to come up with a revenue estimate.
- Tracking branded search volume and comparing it to the average, which can help with making a rough estimate about a video’s impact as far as “branding” is concerned.
- Tracking fan and follower counts. A good cultural video should result in some spontaneous Facebook likes, Twitter and Instagram followers, etc.
Again, it’s difficult to measure the revenue that’s generated by a cultural video. For that reason, these types of videos probably shouldn’t be produced with an eye towards immediate sales. Instead, they should be viewed as an investment necessary to promote the company overall.
Calculating The ROI Of Brand Development Videos
While not purely a brand development video (the first 30 seconds are very promotional), this type of video can be expected to build trust with the consumer. That increased trust should translate to increase revenue per order and higher conversion rates.
While brand development videos help with branding, they often have a noticeable positive effect on website performance. If videos about the company’s history and staff are included on the ‘about’ page and the homepage, we often see higher conversion rates and higher average revenue per visitor.
So, to measure ROI of these brand development videos, track:
- Website conversion rates
- ‘Add to Cart’ activity
- Average website revenue per visitor
Finally, Beware Paralysis By Analysis
With all the metrics we’ve outlined – and many others available – it’s easy to get lost in the weeds. So, instead of trying to measure the exact ROI of a video, we suggest sticking with simple, quick calculations.
For example: Let’s say we created five new how-to videos for five popular products. A month after adding these five products to the website, we measure a 10% increase in conversion rates on all five products. Our ROI calculation is easy – we take the value of that 10% increase in sales and assign it to our videos.
Is that calculation foolproof? No. There are lots of factors that determine website conversion rates. Instead, we just have a rough estimate of the monthly revenue these videos add. This isn’t great, but it’s usually good enough to determine if the investment in videos is justified.