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I have been using many PPC sites for the past few months but have never calculated ROI or the others (I think they are CPC and CPM...?)
Is there a simple formula that I can follow along with maybe a rule of thumb?
What ever anyone can offer would be greatly appreciated.
Track your PPC stuff preferably using a variable like /?source=adwords or /?source=overture
Then once you have that down, compare the cost of the traffic with the amount of $$$ made through sales from that traffic.
The best way, imho, is to track by source so you can get the best ROI from each campaign.
with the amount of $$$ made through sales from that traffic.
This is hard to pinpoint using just a web log. Traffic is easy to measure, but isolating sales as a direct result from a pay-per-click engine is more difficult. How does one know if the sale is a result from a free search engine referral or a pay-per-click?
That way, you can analyze keyword(s) value as well as PPC campaign value. There are some softwares you can buy / install to make this work for you, instead of developing it yourself.
After all, depending on your budget, some keywords may or may not cost you a lot of money.
Fact is, you can measure exactly what value that money you are already spending is bringing to your business. From there, it is very simple to make the decision -> is this media buy worth it? Or not?
Any time you advertise, if you have an idea what to expect, it helps business planning immensely if you know what to expect from your purchase. Knowing what to expect can help you plan your budget, and either increase the spend (if it's working) or stop wasting money (as you could be) and look for other channels with which to generate targeted leads & sales.
Lets say you have determined a product you are bidding on a keyword for has a conversion ratio of 1%, or 1 out of 100 people buy after a clickthrough from that given keyword.
Your know your profit per item is $50.
You would break even paying 50 cents a click, because 50 cents times 100 clicks = $50.
You would be in the profit margin if you could get the keyword for below 50 cents a click.
However, say you are bidding on Overture & Adwords, as many people do. What if you budget was split evenly between them?
But, Overture drove 2 times as many sales as Adwords drove. Entirely possible, and given the different demographics of the people searching, not too far afield.
Wouldn't it be better to know that very valuable bit of information, so that you could increase your Overture budget? Or, change the keyword / copy strategy for adwords until the ROI was the same or similar? If it was even possible.
The point is, if you are spending *a lot* you can't afford to ignore the tools that are available to enhance your ROI. As ecommerce gets to be a bigger picture of the general spend in the USA, more & more companies will start to allocate their marketing budgets accordingly.
If you don't take advantage of something that will make you extra money how do you *know* your competition will NOT make that decision?
Would you bet your business on it?
I know I wouldn't.