Do you have Money to Burn?
It never ceases to amaze us how many AdWords customers start spending money
without calculating the ROI they expect...
...here are some examples of ROI metrics to get you started on the road to profitable AdWords...
Before you even think about creating your first
AdWords campaign,
sit down and work out your basic
Pay-Per-Click (PPC) conversion metric. Here's a sample template for a product or service that
retails at £30.00.
| Impress |
CTR |
Visits |
Rate |
Sales |
Revenue |
Profit |
GPM |
| 1000 |
1% |
100 |
2% |
2 |
£60.00 |
£10.00 |
16.6% |
| Max CPC |
|
£0.50 |
|
|
|
|
|
| Total Cost |
|
£50.00 |
|
£25.00 |
|
|
|
The Click-Through-Rate (CTR) of your ads will become a factor over
|
|
time. Increasing your CTR though optimisation will improve your Quality Score, reducing the average
Cost-Per-Click (CPC) paid for each visit. However, your initial metric should employ the maximum CPC
you're prepared to pay.
Unless you have data to justify a higher figure, assume a conversion rate of between
1% and 2%.
Using these assumptions yields a Gross Profit of £10.00 per 100 paid-search visitors, and a
Gross Profit Margin (GPM) of 16.6%.
If you're new to online marketing, these margins may appear very slim, however, the upside becomes
apparent when you consider even a small change in either the cost of acquisition or conversion rate.
Below is the same metric, but with an Average CPC of £0.30p rather than the maximum of £0.50p.
| Impress |
CTR |
Visits |
Rate |
Sales |
Revenue |
Profit |
GPM |
| 1000 |
1% |
100 |
2% |
2 |
£60.00 |
£30.00 |
50.0% |
| Avg CPC |
|
£0.30 |
|
|
|
|
|
| Total Cost |
|
£30.00 |
|
£15.00 |
|
|
|
|
