Calculating the correct cost per click is essential. Using a Cost Per Click that feels right or CPC estimating is not the way to have a profitable campaign. This article shows you how to calculate CPC for your ads. We give you a cost per click formula and a cost per click calculator.
Cost Per Click Calculator – Essential Data
Before you can calculate your CPC you need to know some key data about your business and specifically the product or service you are selling.
- Net Profit
- Conversion Rate
- Google advertising budget
Click here for more information on calculating your conversion rates
I think it’s easier to explain the process if we use a hypothetical example.
Going through each point on by one.
For every one hundred visits to your website, five result in a sale on one ACME widget. Your website conversion rate is 5% (NOTE: We we say conversion rate, we mean % of visits that result in a sale, nothing less).
Google Advertising Budget
You want to spend 1% of your revenue on Google Advertising
Cost Per Click Calculator – The Formula/Calculation
Each ACME widget costs 100 Dollars/Euros/Pounds
You want to spend a maximum of 1 Dollar/Euro/Pound to get one sale
Your sales conversion rate is 5%.
To get one sale you need to get twenty visits to your website.
So one Dollar/Euro/Pound needs to be enough to get twenty visits(clicks)
Already Using Google Ads?
If you are already using Google Ads this number might be a lot lower than the price you are paying at the moment.
When trying to justify a bigger CPC it is easy to see patterns and conversion rates which simply aren’t there. It is almost always better to be conservative with your CPC budgets rather than reaching for a budget that may or may not achieve your profitability targets.– StrikeEngine.com
I won’t get any clicks!
You might say “but if I only spent 0.05 per click I wouldn’t get any clicks”
You might be right but this price is the reality (in this example).
There are many businesses losing money with their Google advertising because they are paying too much for clicks, their cost per click calculations are wrong, optimistic (probably the easiest trap to fall in to) or simply have not been done. Unfortunately most businesses advertising on Google Ads will be competing for the same customers.
This is the reality and the correct thing is not to use the same strategies that are losing money, for your business.
This is where StrikeEngine comes in as your Google advertising agency.
We can’t guarantee we will bring you more visitors but that is not our priority. Our priority is to bring you as many profitable visitors as possible.
Whether you are advertising on Google already or you want to start advertising on Google, ask us for a quote now.