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# Demand factor - Website development

14.12.2014

Website rating by analogy with product quality estimation is also estimated not by fixed number of stars (1, 2, 3, 4, 5), but numerically. But in contrast to the product quality estimation, sheet “W” with original data for management report does not contain such information.

Website rating

Website rating (number of stars) depends only on investments in website development, other factors do not affect or their influence is insignificant. Searching exact formula for calculating the number of stars from investments failed, but it is not the key to understand website development. Optimal investment strategy for the website development can be easily found by tests.

Minimums for website ratings starts

Each website rating level requires exact investments in website development to maintain achieved website level. In other words, there is a minimum of investment. For example, if we have 5* website and invest in next periods 20 or 30, then website level will fall to 4*, etc. Minimums (may vary by +/- 1 for particular scenario):

1. 1* - 1
2. 2* - 2
3. 3* - 6
4. 4* - 15
5. 5* - 40

Elasticity of demand from website development in 1 period

Website development affects only on sales in Internet. Effect comes in the current period. Influence on demand from website development is presented on graph, like a power function. Growth of demand practically ceases after 35-40 and further increasing of website development practically has no effect on demand. Number of stars of website does not influence on demand and serves only as an indicator of website development spent in previous periods.

Bonus

Investments plan for website on scenario 12C1 (investment 39 is for holding 5* website only on scenario 12C1, for remaining scenarios is 40):

1. 1 period - 57 (5*), from 2 to 5 period - 39 (5*) = 213 for 5 periods

2. 1 period - 44 (4*), 2 period - 44 (5*), from 3 to 5 period - 39 (5*) = 205 for 5 periods

Hints

1. Dependence of demand on website development is expressed by a power function
2. Effect on demand from website development only on the Internet is equal for all products
3. Dependence of demand on website development is not influenced by competitors in the group

Automatic demand forecast based on website development is built into the Calculation model, which can be purchased in our store.