What is Sell Through Rate ?
Sell Through Rate is a sell-side metric that is sourced and calculated from either an Ad Network’s Ad server or a individual publisher ad server and represented as a percentage. It represents the number of paid impressions sold divided by the number of ad impressions available for sale. Subject matter experts believe that it is the percentage of your inventory that you sold to your customers because it reflects the number of units sold.
A sell-through rate measures the amount of inventory received from your manufacturer(s) during the same time period to inventory sold during the month (or another period of time). STR compares the amount of inventory you have sent to a manufacturer vs the amount of goods you have sold in a month. It helps to determine the profit margin of companies. It works as a rate calculator for many companies because it helps them in rate calculations. Moreover, your sell-through rate is the ratio of the amount of inventory you buy from your supplier or manufacturer and the quantity you sell within a predetermined time frame.
How to Calculate Sell Through Rate
Start by keeping track of the overall number of units sold throughout the month, quarter, or year you wish to measure, as well as the inventory that is currently on hand. Divide the total number of units sold by the inventory at the beginning of the quarter to determine your sell-through rate. When you want to express this amount as a percentage, multiply it by 100. The Sell Through Rate formula is represented by;
(Paid impressions / Total impressions served) x 100 = Sell Through Rate %
Your website had 1,000,000 total impressions or “ad calls” for a given period. Only 870,000 of those impressions returned a paid advertisement:
(870,000 / 1,000,000 ) x 100 = 87% Sell Through Rate
Many industries have inventory management software that helps them to determine the sell through rate str.
80% is the industry average for a good sell-through rate. Anything above than 80% is a high sell through rate whereas, lower than 40% is a low sell through rate. The normal range for the sell-through rate is 40% to 80%.
The optimal inventory turnover ratio for the majority of sectors will be between 5 and 10, indicating the business will sell and refill goods every one to two months. Product turnover demonstrates your company’s capacity to swiftly recover expenditures by selling things that are currently in stock.
What Contributes to the Sell Through Rate?
A publisher’s Sell Through Rates can be used to understand the overall revenue performance and in many ways is a culmination of all digital sales options which represent “Paid Impressions” such as
- Direct Sold
- Header Bidding / Prebid
- Programmatic Guaranteed
- Programmatic Deals
- Programmatic Open Exchange
- CPA / Cost Per Acquisition / Affiliate
- CPC / Cost Per Click
Price Floor, network errors, internet congestion, sales cycles, timeouts and users leaving a web page before the ad is delivered to the page all contribute to why a perfect 100% sell-through rate rarely happens.
Why is Sell Through Rates Important?
As a website owner/publisher, understanding your sell-through rate can be crucial to the overall revenue success of your website. By regularly monitoring/tracking your sell-through rate on a daily, weekly, and monthly basis, you can see how well your ad stack is performing from a revenue perspective. If you constantly monitor the sell through rate of your organization then you can minimize the warehousing costs.
Those people that work in warehouses often have good idea about inventory data and shelf life of products. Warehouses take merchandising decisions after analyzing the data points of STR. Warehouse workers can write down the units received and inventory sold and then the company can calculate STR. Profit margins can also be extrapolated through this terminology because it is easy to see sales trend if you have been working in an organization since few years. If you’re a warehouse worker uou must have idea about customer demand. Therefore, demand forecasting should not be rocket science for you.
Increasing your Sell Through Rate
The most obvious way to increase your Sell Through Rate is to consider lowering your floor rate for placements. The floor rate is the minimum price that you are willing to accept for a placement of an ad on your website. By lowering your floor rate, you may be able to attract more advertisers to your website, which can in turn, increase the number of paid impressions that are sold and boost your sell-through rate. However, it’s important to keep in mind that lowering your floor rate too much could lead to lower revenue for your website.
Ecommerce platforms use this metric to forecast the demand of their sales. They often order their inventory according to this metric. They can easily forecast product sales of their online stores and then order entire product lines if they want. Organizations can estimate the market trends and then plan accordingly. It helps them in reducing the storage costs because these online stores are ordering inventory according to the estimate. This inventory strategy is not new because many organizations have been using this technique since years. Hence, this terminology is quite common in retail industry.
One suggestion that may not lead to lower revenue but an increased Sell Through Rate is to create different floor prices for different countries, ie, a lower Floor Price in India than the Floor Price in the USA.
Other Ideas to Increase your Sell Through Rate rate are ;
Optimize Placements for Viewability
Optimizing your website for viewability is another important factor that can help to increase your sell-through rate. Many buyers these days will only buy placements with a minimum of 70% Viewability, so if any of your placements are below 70% Viewability, you may struggle to get a high Sell Through Rate on these placements till they are optimized.
The sell-through rate can significantly and long-lastingly affect your company’s costs, cash flow, and, of course, turnover. Retail business gets enormous benefit from sell through rate because they can calculate the cost of inventory through this technology. Their supply chain depends on the inventory than any other business.
Use Standard IAB Sizes
Using standard IAB (Interactive Advertising Bureau) sizes such as (300×250, 728×90 or 160×600) for your placements can help to increase your sell-through rate in a few different ways. First and foremost, using standard ad sizes can make it easier for advertisers to buy your website as advertisers typically have a set of standard sizes. If your placements are only configured for non-standard sizes this will decrease your Sell Through Rate.
It might seem logical, but the more advertisers you have competing for placements on your website, the more likely you you’ll have a higher Sell Through Rate. This should not only increase your Sell Through Rate, but increase your average CPM.