|Do my numbers definitely say NO to PPC?|
Revenue-per-sale: $45 ¦ Conversion rate: 0.7% ¦ CPC: $0.5
| 7:53 pm on Sep 30, 2009 (gmt 0)|
My revenue per sale is $45.
The conversion rate is 0.7%, which is 1 in every 143 clicks.
To get 143 clicks, I have to pay $71.5 (143 * $0.5). So, $45 - $71.5 = $26.5 in the hole.
Does that mean as far as PPC I'm SOL until I increase the conversion rate, or is there another way to look at this?
| 8:36 pm on Sep 30, 2009 (gmt 0)|
IMO, you need to look at profit, not revenue:
$45 revenue per sale @ 10% margin = $4.50.
$71.5 (143 * $0.5). So, $4.50 - $71.5 = $67 in the hole
What is the lifetime value of your customer?
| 8:46 pm on Sep 30, 2009 (gmt 0)|
Sorry. Actually $45 is almost all profit not revenue. Before PayPal's fees, the revenue is $47.
I make one sale to these users, which is the $47 package. I don't sell them any other stuff after that. So, the lifetime value is $45.
| 8:47 pm on Sep 30, 2009 (gmt 0)|
Lower your bids while you work on improving conversion. It will reduce your traffic, but you need to get your CPC in line with your visitor value, otherwise you'll just drain your wallet.
Conversion improvement can be tackled from several directions. Polishing the sales process on your site, better targeting of your ad placements, ads that discourage curiosity clicks, and so on.
Another factor is developing "backend" followup. If you sell a person one thing, do you have systems in place to sell them something else later on? If yes, you could afford to pay more for that first click.