This question has been answered in so many ways with a common response of “it depends.” And it’s true–it depends on how much you need to make on your product or service after all the costs have been subtracted out.
Yes ROI has been written about many times before but for a good reason. You need to know how much you should spend to secure a sale. If your product sells for $500 and you stand to make $250 after all the manufacturing and administrative cost, and you know you need to clear $150 per sale to make it worth your time, then you have $100 per sale to put into your PPC campaign.
Once you have a clear goal for your online campaign you can quickly determine if it is worth pursuing. Using basic tools you determine the available searches (Impressions), apply the expected click through rate (CTR) for your industry so you know how many clicks to expect (Total Clicks), apply the average cost per click (Avg. CPC) so you know how much you expect to pay (Total Cost), and round it out by multiplying your conversion rate (CR) by Total Clicks so you know how many customers (Total Customers) to expect.
I will plug in some example numbers for these as follows: Impressions = 10,000, CTR = 8%, Total Clicks = 800, Avg. CPC $2.50, Total Cost = $2,000, CR = 5%, Total Customers = 40.
Remember the $100 per sale that you determined you could pay for a PPC campaign. Using the above example we would divide our total cost of $2,000 by the total customers expected of 40 resulting in an expect cost per acquisition of $50. Since this $50 is below the $100 we were prepared to pay we should proceed with the campaign.
A big consideration with all of this is to be aware that a new campaign does not have history to accurately predict the performance of any of these parameters. This is not a reason to neglect going through this process. Once you have a clear goal you can monitor the progress and pull the plug or accelerate the campaign as appropriate.
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