Bidding in Google Ads can easily lose you a ton of money. Use this simple formula to find your max CPC bid.
The formula is
Adwords Bid = Revenue x Website Conversion Rate x Percentage of Revenue You Want To Spend on PPC Advertising
You may be bidding far too much if you do not use this formula.
You need to know the following three things before you can calculate your max CPC bid.
1. Average revenue per sale for each brand/product line you are advertising.
2. Your website’s conversion rate
3. How much of your revenue per brand/product line you want to spend on advertising.
Going into more detail.
1. Revenue – You will be advertising by a brand or product line on Ads. You need to know your average revenue per sale from these products.
2. Website Conversion Rate. Out of 100 visits (paid and organic combined) to your website for the product/service you are advertising (at campaign level), how many result in a sale? For example if for every hundred people to the soap section on your website two people buy, your click conversion rate is 2%.
3. Revenue Spent On Advertising. For every dollar of revenue from ACME soap you want to spend ten cents on advertising. This equates to spending 10% of revenue on advertising.
Bolting all of this together into a simple example.
-You sell a soap package for 100 dollars.
-You want to spend 10% of revenue from this soap package on advertising.
-Your website section/category has a conversion rate of 2%.
Putting these numbers into the formula it looks like this.
Google Adwords Bid For Soap = 100 x 0.1 x 0.02
Your Google Ads max CPC bid = 20 cents.
This figure might be a lot lower than you imagined.
It is important to be realistic with your max CPC bid on Ads.
Visit the CPC calculator page for more in-depth information on optimising campaigns, recording sales data and improving your ads.