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CPC Calculator – How to make each click profitable

Google Analytics screenshot showing audience data

I made this article because the CPC calculators popping up on the first pages of Google are simplistic at best. This calculator deals with the real numbers of your business so you can determine if your CPC strategy is actually losing your business money rather than making it money.



A word of warning, the numbers that this calculator give you may be shocking. It may make you feel like you have been throwing away money for years. You may feel that there is no way CPC advertising can ever work for your business. But before rushing to judgements, I have put some tips below the calculator which may help you optimise your CPC campaigns and make them profitable.

Click here if you want more info on the CPC formula.


The CPC Calculator Results

If your max CPC bid from the CPC calculator is more than what you are paying per click at the moment, congratulations.

If the CPC calculator says you are losing money on every click you pay for ie you are paying more than the max bid number, read on (and read on if you simply what to improve the amount you can spend on CPC advertising while still being profitable)

Improving Profitability/Stopping Losses

There are two ways you can increase the profitability of CPC advertising (or eliminating your losses)

Increase Profit Per Sale

Much easier said than done. And honestly, regardless of the numbers the CPC calculator gives you, increasing profits per sale is what every business is doing, all the time. There is probably no room for maneuver here. And if there is, I do not believe you should be increasing profitability solely for the purpose of being able to spend more money on CPC advertising. In short, this option is probably a non-starter.

Option 2 – Improving Click Conversion Rate

This is an area that every business can improve upon. I believe all CPC campaigns can become meaner and leaner. The question is how? What is a good strategy to improve the click conversion rate to get more business? And in relation to this article, how can you free up more budget for the profitable campaigns and eliminate loss making campaigns.

Eliminating Loss Making Campaigns

This could be as simple as stopping advertising a specific product or service. Be realistic, is the time and effort advertising a product worthwhile? Look at your best performing products and services, the ones that have the best conversion rate at the best profit, is time better spent perfecting these?

How Can You Identify Your Best Products/Services Campaigns?

Simple. Use the CPC calculator but narrow down the numbers you put into it. For example you may have started by putting in an average profit per sale of all the products/services that you offer.

Instead, be specific. Enter the data for each specific department. If you are dealing with sports goods you can enter the data for the business as a whole to give yourself a ballpark CPC number. But if you want to identify which campaigns are losing money be specific. Put in numbers specific to that campaign. Note down the numbers and see which campaigns give you the best ROI.

How do you identify the best ROI?

Identify which campaigns have the biggest difference between what you actually pay for a click and what you could potentially pay.

If the CPC calculator gives you a 50 cent per click number but you are only paying 20 cent per click, this is a profitable campaign according to your targets. IE you believe you’re getting more money back from the campaign than you are putting in. Do this for every campaign, there is no limit to how granular you can get. Make your campaigns as specific as possible. In my experience this improves the click conversion rate and it gives more granular data which will allow you to make better CPC decisions

Ideally you would use the CPC calculator for each campaign. Find out how each campaign is performing relative to the rest.

Ideally you should run the numbers for each campaign you are running. From here you can see which campaigns are losing and which are winning.

Which To Prioritise?

Personally I am going to address the campaigns that are losing money first. Depending on the circumstances I could pause them all and then one by one, adjust each campaign to improve it’s performance.

Again, be realistic here, if you have a loss making campaign “A” which only brings 100 dollars in revenue a month. Don’t give it priority over another loss making campaign “B” which is bringing in 10,000 dollars a month in revenue. And don’t give campaign “A” priority over a profitable campaign which is bringing in 10,000 dollars a month in revenue. Focus your attention and your team’s attention on the biggest wins. Don’t get dragged into the weeds.

What Adjustments To Make?

The most obvious is reducing the bid to a level at which it is profitable. A bid which is in line with the bid amount given by the CPC calculator.

From here we can look at improving the conversion rate for that campaign. Can we do better at location targeting? Can we adjust the time of day we are advertising? Can we eliminate generalistic keywords and add more concise keywords? Are some devices performing markedly better than others?

We can also look at the landing page. Is there something different about the landing page for the bad campaign versus the landing page for the good (profitable) campaigns?

Make the adjustments and revisit in a month for example. Are things moving in the right direction on the click conversion front? If so, run the new numbers through the calculator and see if you have more money to invest in advertising ie room to increase your bids. Or perhaps you can just bank the money if you’re are happy with the results with bid levels below your max allowable bid.

Measuring Click Conversion Rate

Ultimately we want to know which keywords lead to sales of what.

Keywords and Campaigns

To give an example. You are advertising car insurance and your click conversion rate for car insurance is so low it makes bidding on the word uneconomical.

Or is it?

Use your analytics software and find out what other sales you are getting when people use “car insurance” to get to your website. Is “car insurance” driving sales of home insurance? Is it driving sales of motorbike insurance?

Don’t throw the baby out with the bath water. Looking solely at sales of car insurance is not the way to judge the click conversion rate for the “car insurance” campaign.

Sneakers

Perhaps the insurance example is a bit unrealistic.

Say you have a campaign for “Nike Sneakers Men”. It is more than likely that you will also be getting sales for other brands of trainers from your Nike Sneakers Men campaign. A good analytics program will be able to tell you the sales conversion rates for a campaign and it will include all the sales that campaign drives, not just the sales of products related to the keywords in the campaign.

Telephone Calls

Are you tracking your telephone calls and linking that data into your advertising stats? Google allows you to set up a telephone number which is used exclusively in your adverts and/or is shown to people who have visited your site via PPC campaign. You can separate you the general call data from call data which has been generated by online advertising.

What Telephone Data To Log?

The number of calls you get per day from PPC advertising. Log the nature of each call, ie what product was each call related to. You can note down the time of the calls. Record how many calls resulted in a sale (your call conversion rate). If the call resulted in a sale, maybe note down the value of the sale and/or the gross profit of the sale. This may sound like a lot of work but it isn’t. If you have a spreadsheet with prepopulated column titles, the work to log each call will take seconds. At the end of the day all the data can be combined into daily numbers (or hourly numbers, even better. You may find your call conversion rate goes through the roof when people are on lunch breaks. For example).

Store Visit Conversion Data

How many people does your campaign attract to the store in person? And what is the visitor conversion rate?

Without a doubt, much tougher to track accurately. But some tracking is better than no tracking.

Baseline Numbers & Pattern Recognition

To get a baseline number we need to separate our sales numbers into telephone sales, online sales paid, online sales organic and in store sales.

When we know our daily in store sales we can start combining it with our paid traffic numbers and our paid organic numbers and start looking for patterns.

  • Do we see more in store sales (number of sales and/or value of sales) when we get more PPC traffic?
  • Do we get more sales (number of sales and/or value of sales) with more organic traffic?
  • Do we get more in store sales (number of sales and/or value of sales) when traffic to the site is up in general?

You can do this for the business as a whole or dig down into campaign data.

(Bear in mind comparing daily data is probably not the way to go here. I think I would look at rolling two or three day totals).

If you see patterns here you can start to search for patterns with regards to device traffic. Are more sales of Nike trainers in store related to more click from tablets?

Store Traffic

We can also simply measure number of visits to the store automatically and anonymously using technologies like LIDAR. Are we getting more in store traffic for our web traffic but not in store sales?

Depending On Your Size Of Business

As you can see there can be a ton of work logging and analysing in store sales. If in store sales are a tiny part of your business then it’s probably not worth spending time on. There are bigger wins to be made elsewhere. If most of your business is in store sales and the revenue profit is large then it is probably worth tracking.

I say large sales volume because the analysis could easily absorb the time of one full time employee and the amount of work involved would not be much different between a store that sell a hundred thousand dollars a year in product versus a store that sells 10 million dollars in products a year. The same systems have to be put in place and managed.

Reducing The Workload

We can reduce the workload involved in logging in store sales if we record the sales data in the same analytics software as our online sales. And the same can be said for telephone sales.

To give an example of how to do this. We set up a “customer” account in our online shop which is used only by staff who work in the stores. We add the dimension in our analytics software to track sales from this “customer”. The sales data for this customer will then show up next to sales data from “organic site visitors”, “organic site visitors” etc etc.

This will let us compare sales data in store versus website traffic visually, making it easy to identify patterns.

CPC Calculator – Summary

Hopefully you find the calculator useful in your business. The numbers you put in and the numbers you get out are only the tip of the iceberg.

These numbers can show you where you were and where you are. The real workload comes from finding out which campaigns help you and which are hurting you. And then even more work comes from the adjustments you make to optimise the campaigns and then track the effects on your max CPC bids.

No doubt optimising profitability of CPC campaigns is a major undertaking.

Make sure you are not wasting time/man hours on campaigns which have no hope of being profitable and/or are unprofitable. Don’t get overwhelmed, make a list of tasks, prioritise the tasks/campaigns (absolutely imperative to make the right decisions here). If you have loss making tasks which are well down the list of priorities, it is probably a good idea to either drop your bid down to the maximum profitable level or stop the campaign altogether. When you have worked your way down the list and you can see yourself or your team having time to deal with the campaign in the next few weeks, then reactivate the campaign to get recent data in preparation for the day you where you will have time to optimise it.

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This page was last modified Aug 5, 2023 @ 10:33 pm

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