Should You Be Taking a Loss on Your Paid Search Campaign?
Posted in Earn Online, Pay Per Click | 8 views
by Anna Johnson
The general rule of thumb in pay per click (PPC) advertising is that you should never spend more money on a ‘click’ than the value per visitor (VPV) derived from the sale of the product or service you’re advertising.
Your value-per-visitor is the result of taking the average of your net profit per sale and multiplying it by the conversion rate (where the conversion rate is the percentage of web visitors that become customers).
Conventional thinking suggests that if your cost per click (CPC) is greater than your value per visitor, you are losing money and need to abort your PPC campaign. But, this is not always so.
Before commencing your PPC campaign, you are well advised to research your target market to discover the purchasing patterns of your customer base. It also pays to observe what your competitors are doing in their PPC efforts.
Once you have a solid understanding of your customer and competitive dynamics – and are clear about your own sales, marketing and business objectives – you’re in a position to establish the aim or aims of your PPC campaign.
For example, is the chief goal of your PPC campaign to build brand awareness, generate leads, or make sales? If the main aim is to build brand awareness or generate leads, for instance, you may be able to afford to pay more per click than is warranted based on your visitor value.
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Let’s say your business is such that you typically make the most money on back end sales i.e. products or services you sell to customers after they’ve initially bought from you.
In other words, since you know that the average person who takes advantage of your front end or advertised offer will also purchase plenty of products later, you can afford to lose money on acquiring the initial sale. Indeed, you might calculate that it’s worth paying a cost per click that exceeds your visitor value (i.e. the visitor value based on front-end product sales).
Another clue that you might benefit from paying a seemingly excessive CPC is what your competitors are doing. Are they paying more in clicks than would seem logical? If so, do they have a back end you don’t know about?
Alternatively, if your competitors appear to be paying a CPC below their visitor value, can you seize premium search listings by paying more for your clicks because you know you’ll make up the difference (and more) in back-end sales?
Ultimately, it pays to know your metrics. By understanding these – as well as the buying behavior of your customers and the strategies and tactics of your competitors – you’ll be in a good position to optimize your PPC advertising efforts.
About the author: Anna Johnson publishes Internet marketing newsletter, Kikabink News. Get a FREE subscription to Kikabink News as well as a FREE copy of Anna’s ebook, Killer Internet Marketing Tips, plus four FREE killer 60+ minute audio interviews with top Internet marketers: Killer Internet marketing tips
Courtesy: IdeaMarketers
photo credit: Cayusa
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