The PPC Critical Factor

Posted by Steven Wagenheim on August 08, 2010 in General, Marketing Articles, PPC Advertising

I wish I had a nickel for every ebook on PPC that’s been published in the last 7 years. Some have been good and some, well, not so good. And make no mistake about it…everybody has their own theory, tips, tricks and methods for making a PPC campaign profitable. But you know what? None of that means a hill of beans if you don’t pay attention to what I call “The Critical Factor.” Because you see, when all is said and done, it is this critical factor that determines whether or not you’re going to have a profitable campaign, everything else being as optimized as possible. This article is going to explain just what that critical factor is.

It is pure basic and simple math that in order to run a profitable business, you have to take in more money than you spend…at least in the long run. Sure, you can operate at a loss for a while as long as you have the cash flow or funds to get you through the initial rough patches. But eventually, you have GOT to turn a profit. And that means making more money than you spend. I think we can agree on that much.

Well, one of the BIGGEST mistakes that PPC marketers make is looking at the cost of their keywords at the exclusion of all else. In other words, they decide that they are ONLY going to spend so much per click and no more. Let me explain why this is faulty logic.

First, I need to explain a basic fundamental of PPC advertising. Your profit is going to be your income from sales minus the cost of your campaign. It is best if you can, to a relative degree, predict what that profit is going to be BEFORE you even run the campaign. And yes, you CAN do this.

You first need to figure out what your monthly costs are going to be. This is easy enough. Look at your CPC (cost per click) and multiply that by how many clicks you’re looking to get per month. You can control the max on this by setting a daily budget. Naturally, if there isn’t enough traffic, you won’t even spend this much, but you won’t go over.

So let’s for argument sake say that your keywords cost, on average, 10 cents per click and you decide you don’t want to spend more than $10 per day. That means you’re looking for no more than 100 clicks per day. That comes out to $300 a month for a 30 day calendar month…max. It may be less.

Next, you have to look at the product you’re selling…two things in particular.

1. How much you earn per sale.
2. The conversion rate of the sales page.

Let’s say the conversion rate is 2% and the product pays you $25 per say. That means for every 100 clicks, you’re making $50.

Now let’s go back to our monthly budget. You’re spending $300 at 10 cents per click. That means you’re getting 3,000 clicks for the month. At 2% conversion, that’s 60 sales for the month. At $25 per sale, that’s $1,500 per month. That’s a $1,200 profit.

That is a profitable PPC campaign.

But what if the sales page converted at only 2 tenths of a percent? That would bring you only 6 sales per month. At $25 per sale, that’s $150 per month. With a $300 expense, that’s a loss of $150 each month.

That is NOT a profitable PPC campaign…on the surface.

We then have to look at any backend sales from the page.

Are there any?

What is the conversion on those?

How much does each one pay?

Add that income to the above to determine if your campaign can become profitable on the backend.

This process is what I call the critical factor. And too many marketers fail to do this. They simply look at costs and run campaigns based solely on those.

I’d rather run a campaign at $1 per click, at 100 clicks per day ($100 per day, $3,000 per month) on a product that pays me $297 per sale and converts at 3% than run a campaign that costs 5 cents per click, at 100 clicks per day ($5 per day, $150 per month) on a product that pays just $7 per sale and converts at a paltry one tenth of a percent.

Do the math.

It’s not all about costs. It’s about ROI.

It’s the critical factor that way too many people ignore.

Don’t you be one of them.

To YOUR Success,

Steven Wagenheim
Tired of spinning your wheels trying to get your marketing off the ground? Haven’t got a clue what you’re doing and sick of being dead broke? Why not get some solid mentoring from somebody who has been EXACTLY where you are today? Check out my mentoring program at http://www.stevewagenheim.com/mentoring/mentoring.html and finally get yourself the one on one education that can FINALLY give you the success that you’ve been looking for.