Maximize Your Profit

Get the most out of live chat!

Now you know the importance of conversion rate optimization, how to double your conversion rate, and capture all opportunities. We're sure you know more about live chat than 99% of web marketers, including your competitors. Congratulations! But wait a minute – you can’t graduate from our Live Chat University yet because you haven't taken the most important course: Live Chat Economics. Therein lies the formula for live chat profitability, and the secret for achieving profit maximization through live chat.

Let’s do some small calculations. You might hate math – that's OK. We’ll take care of the busywork so you don't have to. You can skip over the calculations if you want, but for the sake of your profit, don’t miss the formula and conclusions! Here goes the first and most important formula:

Live Chat Profitability = P - C

P = Customer profitability
C = Marginal cost per live chat conversion

First of all, you need to ensure that live chat is profitable for you. If it's not profitable, even though it might draw more customers and increase sales, it will still decrease your profit. If it's profitable, you’ll be able to maximize your profit using a method we’ll introduce later on!

Before that, let's first figure out the profitability. Marginal cost per live chat conversion means the cost per additional conversion obtained through live chat. The formula is quite straightforward. You can grow profit through live chat only if its marginal cost per conversion doesn't exceed your customer profitability: the average total profit that your customers contribute for life BEFORE the introduction of live chat. You can see customer profitability based on your sales record and finance reports. You may also ask your accountant for it.

Many websites miss the chance to grow their profit through live chat simply because they don't know if live chat is profitable to their business. Some other websites use live chat and see the sales increase, but don't know whether or not live chat is growing their profit, and whether or not it will continue to grow profit in the future. With the above formula, this type of confusion will never happen to you.

If you hate math, feel free to move on to the next section. Otherwise, read on:

Assuming:
P = Customer profit
N1 = Conversions before live chat
C = Marginal cost per live chat conversion
N2 = Additional conversions brought by live chat

Prior to the introduction of live chat:
Profit(1) = P * N1

After the introduction of live chat:
Profit(2) = P * N1 + (P - C)N2

Live Chat Profitability
= Profit(2) - Profit(1)
= P * N1 + (P - C)N2 - P * N1
= P - C

Marginal cost per live chat conversion

It's a bit lengthy, but for the sake of accuracy we can’t simplify it to "cost per conversion" or "cost per live chat conversion," because these two things are totally different. If you use the cost per live chat conversion, you risk overestimating your profitability.

The truth is that we can never get to know the exact data for C. You can always know the accurate number of total conversions. However, once you apply live chat, you can’t know your conversion rate had you not applied it, and vice versa. Luckily, we can estimate these figures and get data accurate enough for our purposes:

C = Live chat cost / (N - V * n / v)
V = Total visitors
N = Total conversions
v = Visitors you don't chat with
n = Conversion of visitors you don't chat with

The followings explains how we arrived at the above formula. Jump to the next section if you still hate math:

Conversion rate without live chat
= n / v

Estimated conversions if we don't apply live chat
= V * n / v

Additional conversions due to live chat
= N - V * n / v

Marginal cost per live chat conversion
= Live chat cost / Additional conversions by live chat
= Live chat cost / (N - V * n / v)

The data in the above formula must all be taken from the same time period, such as the same day or week. Do the calculation now to see for the first time whether or not your live chat implementation is profitable!

How to maximize your profit

If your current live chat implementation is profitable, you should allocate more resources to chat. Scaling up live chat might increase your total cost, cost per live chat, cost per conversion, etc. That's not important. As long as your P is greater than your C, you can be sure your profit will increase. When P is equal to C, you’ll have achieved maximum profit.

A common mistake is to stop increasing chat volume when cost per chat or cost per conversion goes up, and before C exceeds P. People often make this mistake because they get instinctively worried when their expenses go up. Experience tells them that their profits must decrease when the expenses rise. However, that's not necessarily true. Do a quick calculation and make a sound decision based on data. When it comes to money, math is always more reliable than your intuition!

Keep in mind: to maximize your profit, you need to keep investing more in live chat until C is equal to P.

The profit growth never ends

In fact, you can grow profit further and further even if you’ve achieve the profit maximization described above. We say it "maximization" with the assumption that you’ll maintain your website’s current traffic. This assumption keeps our profitability analysis simple – but in reality you don't want your traffic to stay where it’s at forever, right?

As you profit grows – and even before you achieve profit maximization – you will have an increased budget for advertising and SEO. You’ll be able to drive more traffic to your website. You’ll be able to convert more users and earn more money. You can start a new cycle of profit growth, until you’ve reached a new point of profit maximization.

How to implement your profit maximization program

We’ve provided the formula for live chat profitability. We’ve disclosed the secret of live chat profit maximization. However, not everyone who reads this page can achieve maximized profit – just like how not all college students can be equally successful after they graduate. Here, we'll provide some additional tips that may help you succeed with live chat.

The live chat profitability formula is simple and reliable. The thing that prevents some websites from applying this formula and maximizing their profit is not a hatred of math. Rather, it’s a lack of measurability. Measurability means the ability to measure or quantify the business activities in terms of input and output. How can you maximize profit if you don't even know the total amount spent on live chat – not to mention marginal cost per live chat conversion?

Today, there are hundreds of live chat programs for sale – but aside from Livemoz, we haven't yet found one that makes live chat measurable. With Livemoz, not only can you optimize your live chat conversion rate, but you can also easily track marginal cost per live chat conversion. Livemoz can even tell you when to increase live chat spending and when to decrease it. It makes live chat measurable, manageable, and profitable.

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