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Understanding cost per click
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Understanding Cost Per Click 1801 Market St, Suite 290 Philadelphia, PA 19103 T 215-568-2525 [email protected] www.devinepowers.com
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Transcript of Understanding cost per click
Understanding Cost Per Click
1801 Market St, Suite 290 Philadelphia, PA 19103 T 215-568-2525 [email protected]
www.devinepowers.com
Understanding Cost Per ClickCost per click advertising online works by charging you a certain amount of money for each click on your advertisement. Googleʼs Adwords is the most popular platform for this type of advertising. Many people can understand the benefit of using Search Engine Marketing but few seem to be able to understand how much they should be paying per click. Hereʼs how...
ConversionsThe first thing to cover is what a conversion is. A conversion can mean virtually anything, but it defines an action. A conversion could be that someone submits an RFP, downloads a White Paper or buys a 10 pack of socks. The Conversion defines what the outcome you’re hoping for is. If you can assign a dollar value to that action, you can determine what you should be willing to pay.
The Two Main FactorsTo determine the ROI of a cost per click campaign is simple, provided that you have two pieces of informations.
1) What is your conversion rate? How may leads do you need to close on piece of business? How many visitors will take the action you want? Do you close once every ten leads? Is it more like one out of every hundred?
2) What is the value of a conversion. Is a conversion worth $10, $100, $10,000?
If you possess these two pieces of information, you can determine how much you should be willing to pay for every click.
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The FormulaCost per click is often determined by the following formula.
v = Value of Conversion - how much is each person who takes an action worth to you?
r = Conversion Rate - how many clicks do you need to convert?
c = Cost per Click = the price you'd pay per click to break even
v / r = cIf a conversion is worth $100 (v)
It takes 10 clicks to convert (r)
$100/10 = $10You can pay up to $10 per click. Anything less is profit, anything more is a loss.
There you go. That’s the easiest way to think of it.
Devine + Powers
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