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a..Keyword phrase
w..searches last month for that phrase on overture
y..cost for spot in top 3 (in us cents ex 22, 173)
x..likeliness of sale from keyword (1-10)
z..rank for my best ROI (looking for this)
this may be an odd request and maybe im gettin too fancy here, but.. does anyone have any idea what a good formula would be (ex y/x+w=z) that would come up for a good number for z?? i wanna gauge what words will do best for me in a way like this..
again sorry if this is just overkill but i thot it may bring up some interesting talk..
Thanks
How you work the formula is going to depend a bit on how established your site is and how much previous info you have.
The big question mark I see is 'X'... do you know what your conversion rate (sales per 100 visitors) is at the moment, and do you know how those visitors reached you? If so, then ranking them should be pretty easy.... if not then it's going to be a degree of guesswork, and I would tend to change the range to 1-3 instead of 1-10
So maybe your spreadsheet ends up looking more like:
a..Keyword phrase: widgets
b..searches: [50,000] per month
c..clickthrough rate (say 10%) [50,000 x 10% = 5,000] per month
d..cost for spot in top 3 (say 17 cents) [5,000 x .17 = $850] per month
x..conversion rate (say 1%) [5,000 x 1% = 50 units sold] per month
z..Overture cost per unit sold [$850 / 50 units = $17.00] per unit
You need to be sure your item pricing allows for this $17.00 cost per unit sold (and maybe quite a bit more than $17.00 if you’re not fairly sure of your costs).
Disclaimer: I've no idea what your clickthrough rate might be. 10% is a total guess; but it doesn't affect the calculation per unit itself. It might however indicate the volume/scale you could be expected to deal with if you're a success OR the horrendous advertising bill you could end up with if your keywords don't accurately reflect what the customer finds on your site and 'click but don't buy'.
Ditto conversion rate.
There’s more elegant ways of arranging the spreadsheet... but hey, it’s 6 pm on a Friday and I’m going beer hunting. :)
What you need to know is, "How much is the average new visitor worth in terms of new profits?" Calculate this from how many visitors it takes to make a sale, on average, and what your profit margin is on the average sale.
Example: suppose that it usually takes about a hundred visitors to make $20 worth of profit (NOT sales!). Grade-school math will tell you that each visitor is "worth" 20¢. As long as you set your bidding limits somewhere under that amount, your new traffic will put new money in your pocket. I like to limit my bids to about half the "visitor value" that I calculate.
Keep your focus on cost effectiveness, and don't succumb to "auction fever" -- bidding too high is a guaranteed way to drain your wallet. The "automatic #1" feature that many PPC engines offer is practically a suicide button. Set your limits at a price that makes sense for you, and don't be swayed by what the other fellow is doing. That way whatever new traffic comes from your PPC bids will be profitable, and sustainable.
If your business has the potential for repeat sales, it might make sense to push closer to your breakeven point and pay more to establish that first contact. Other things can make it worthwhile to bid more, such as seasonal purchasing patterns, or fine-tuning your site so it closes sales more effectively. As well, traffic from some PPC search engines seems to convert better than others.
Start conservatively, track your stats carefully, and you'll get a feel for what works.
1) they are a good match for what you're promoting, and
2) they reflect the mind of your target audience.
Example: if you were a horse breeder promoting this year's crop of foals, someone who searched for something like "warmblood cross" or "overo stallion" would definitely be someone you'd want to talk to. On the other hand, a term like "horse pictures" would probably generate junk traffic (junk for you, that is).
Give careful thought to your title and description. I'd advise avoiding teaser descriptions that lead to "curiosity clicks." In my experience PPC listings work best if the descriptions make it absolutely clear what is being offered. An effective PPC description will be attractive and informative for your best prospects without drawing too many off-target visitors. Easier to say than to do!
My question is I'm a real estate agent can someone please explain to me how i'd calculate roi?
For instance if I spend 12,000 for the year on Overture and I net except for my Overture expense $200,000 in sales income does that mean I have an roi of $16.67 per dollar spent? Are there other ways of looking at these numbers? Would it make sense to spend more. I know as we spend more we are dealing with the principle of diminishing returns. How can one like me calculate this?
How about this based on your answer Buckworks, am I right if i have 3,000 clickthroughs on overture per month 36,000 per year divided into 200,000 net income not counting the cost of advertising and it equals 5.55. Does that mean that I could spend that much per click and make sense.
I have been managing my accounts for several years now ... it used to be a no brainer to advertise with them. Now it's getting more expensive.
If I'm understanding you correctly, that the $200,000 is new commissions that can be attributed to your Overture listings, then yes, your math would be correct and your average visitor would be worth $5.55. That's an impressive number! Is it based on testing or just a hypothetical calculation?
It would be a judgment call on your part how big a portion of it you were willing to spend to get the click. There are quite a few things to balance, including your ability to serve a greater number of customers.
It will take good targeting to get traffic of that quality. If you haven't already, do some brainstorming with Overture's search term suggestion tool (WordTracker is even better) to get a feel for the search terms and variations people use when they're searching for what you offer.
Example: I just checked, and #1 rank for terms like "real estate agent" and "realtor" was in the $1 - $1.15 range; "houses for sale" was .25; "Philadelphia realtor" was 8¢ and "house for sale Philadelphia" was 5¢. In my experience it is well worth spending some time to sniff out lots of "little" search terms like the latter. They'll only deliver a few visitors each, but get enough of them and things can add up nicely.
Fewer clicks, and a lot nicer conversion rate per term to go with it....unless you're a multinational giant who actually _can_ find someone a two bedroom bungalow in outer Uzbekistan. :)
Although buckworks in correct in saying that your Overture ranking has no bearing on ROI, remember that many SEs have Overture partnerships. If certain phrases are generating a fair amount of converting traffic from one or more of the Overture partners, it may be worth considering taking a top 3 spot in Overture to maximise your exposure.
Conversely, if Overture traffic shows up a few high performance phrases, rework your sites free listings for those phrases
That is true, as long as your bids don't rise beyond the amount that the traffic is actually worth to you.
Sometimes it's definitely worthwhile to churn more traffic at smaller margins, while other times there's no improvement. This would need to be tested and tracked on a case-by-case basis, to find the most profitable balance.
What am I to understand you to be saying here? Sorry I don't get it.
BuckWorks, Let's just say that the 5.55 per click is a very feasible number. Real estate is a locational business ... one does not sell homes in Anchorage Alaska if you live and work in Miami.
How about this question? When we are talking a number such as $5.55 per click we really are talking average click cost, correct. and so if average cost for a clicks is lets say .15cents then that's even better. Finally that means I could bid twice that much, lets say $11.10 on a few competitive terms if I have lots of terms that are much cheaper. Is my math crunching make sense?
>> What am I to understand you to be saying here? Sorry I don't get it
Overture can provide very good ROI data. You know how much you pay per click, and how many clicks/term you get.
If your site was about apples, and you have set up your GG/FAST/Ink pages to rank for "apple pie", "apple cores" and "apple picking", thats where you'll get the SE referrals from.
Your analysis of Overture traffic may show that "apple peel" is producing a better conversion rate than one of your original targetted terms. Thus even though it may attract less traffic overall, it could produce more sales. So you rejig your "free" SE pages to rank for "apple pie", "apple cores" and "apple peel".
This should have the effect of improving your margins (better converting traffic, that you don't pay for by the click). A sales driven site would usually rather have a few hundred visitors a day that convert at 10%, than a few thousand that convert at 1%. A paid ad campaign can help you collect good info on which are those "hot phrases", which enables you to target them on the SEs, knowing that the term should produce good sales
