A PPC ad campaign can be a huge boon to the success of your business – but when it comes to PPC, one thing that tends to give a lot of people fits is trying to figure out exactly how much they should be willing to pay per click.
When you set up a PPC campaign, you will determine your own per-click bid, and this is the price you will pay per click – regardless of whether you make a sale as a result of that click or not. With a higher bid, your ad is more likely to be shown more often – being given precedence over ads with lower bids. But if you make your bid too high, you may end up losing money in the long run, as the profits you make as a result of the ad campaign may not match up with the cost of the ad campaign itself!
In order to properly set your PPC budget, there are three things you will need to know.
1. How much money do you make per sale?
If you sell only one product or service on your website – with one price across the board – this will be an easy answer to find. If on the other hand, you sell various products or provide various services – all of which are listed at various prices – you will want to determine what your average profit is for each sale you make. For instance, if you have sold 50, variously-priced products over the last two weeks, and the total profit from these 50 products was $500, you would say that your average profit per sale was $10.
2. How much are you willing to spend per sale?
If you have determined that you average about $10 per sale, it is unlikely that you will want to spend $8 on advertising for each of these sales! By knowing how much profit you generate on a per-sale basis, you will be able to say how much you are willing to spend in order to make each sale. For instance, if you make $10 per sale, you might decide that $3 is a price you feel comfortable spending for each sale.
3. What is your conversion rate?
Your conversion rate is the percentage of sales you make per number of clicks your ad receives. Of course, in order to determine your conversion rate, you will have to run the ad campaign for a week or two and assess the results. The best way to do this is to run the ad with a moderate price per click bid – one that will not cost you too much money, but that will give you a fair amount of information with which you can work. After a couple weeks have passed, determine what your conversion rate is. For instance: If your ad has received 250 clicks, and you have made 50 sales as a direct result of these 250 clicks, your conversion rate would be 20 percent.
Following the course laid out by the above examples, we are looking at a situation where our three pieces of information are as follows:
Profit per sale: $10
Willing to spend per sale: $3
Conversion rate: 20%
In order to determine how much you should bid per click, you need simply to multiply the last two numbers.
$3 x 20% = $0.60
Sixty cents per click would be your bid per click. And from there, you can determine how many sales you feel you can handle per day (realizing that every $3 in clicks equals, on average, one sale), which will enable you to determine how much you should budget per day on the ad campaign as a whole.
Soon, you will have a successful PPC campaign up and running, and will be reaping all the benefits that come as a result.