AdWords Big Mistake NO 1…

It’s easy to start a new AdWords campaign before you have actually mapped out a plan of what you hope to achieve for that campaign isn’t it?

Let’s face it, we have all done it.

For example, your campaign  may be designed to sell your or an affiliate’s product or service, gather names and email addresses, or generate adsense revenue or  cost per action (CPA) offers etc.
Each requires a different approach if you are to maximize your return on investment (ROI).

As soon as possible, it’s strongly suggested you calculate the value of each visitor to your site.
Your goal in business is to achieve a good ‘value per visitor’, or high visitor value.

How do you calculate visitor value? Simple:
(bear in mind, math was never my strong point..and still isn’t).

Step 1.  Figure out your visitor-to-sale “conversion” rate:

First, you need to find out the number of visitors you need to close one sale. To do this you divide the number of unique visitors to your web site by your total number of sales.

So, for example, if you make one sale from every 200 unique visitors to your site, your conversion rate will be 1 in 200, or 0.5%.

So we have a conversion rate of 0.5%.

OK.. I know, not rocket science.

Step 2. Determine your net profit on each sale:

This is the amount you get to keep after all expenses are covered.

First, calculate your gross revenue. If you had 25 sales at $20 each during the month of May, your gross revenue for the month is $500 (25 x $20).

Then deduct your expenses.
Let’s say it cost $240 to produce those 25 sales.

$500 gross revenue – $240 expenses / 25 sales
= $10.40 net profit per sale

  Step 3. Calculate your “value per visitor”.

Stay with me on this, if it all seems to hard, I promise it will all make sense in a minute.

This time, you need to divide your net profit per sale by the number of visitors you need to get one sale:

$10.40 net profit per sale / 100 visitors = $0.104 per visitor

That means each visitor to your web site is worth 10 cents. This is the maximum amount you can afford to pay to attract one visitor to your web site — and should be your maximum bid for PPC advertising.

Of course, when we factor in upsells, and backend sales, we may be prepared to ‘lose’ to get customers or prospects to out lists, but that will depend on your overall campaign goals.

Why the heck go to all this trouble with all these numbers?

Well, interestingly, this is where the money is made and lost in AdWords.

Unless, you know the value of every visitor or action for a particular campaign, you won’t know the maximum bid cost, and can easily start losing money unless you are extremely careful.

Until nerxt time.

regards,

 

Anthony