Don’t Keep Losing Your Shirt!
It’s all about the numbers, so here’s the down and dirty. It sounds harder than it is. Follow this step-by-step and you’ll go from losing money to making money.
When people search for your chosen keyword, Google, Yahoo! and Facebook display your ad that contains a link to your site. The keywords you choose are critical to the success of your campaign. First, decide how much you’re willing to spend on the campaign AND what returns will make that campaign profitable.
Ad campaigns use a pay-per-click (PPC) model. With PPC, you only pay when someone clicks on your ad. Facebook also offers a cost-per-impressions ad model, or CPM. With CPM, you pay per thousand impressions, whether they click or not.
Calculate the Payback
Start by calculating your conversion ratio: Divide your monthly click-throughs by your monthly sales revenue from those click-throughs. Then, to convert that number into a percentage, simply multiply it by 100. For instance, if you get 10,000 click-throughs and sell 250 products, your conversion ratio is (250/10,000) x 100 = 2.5%. Or, for every 100 click-throughs, you sell 2.5 products.
You charge $125 for the product, so for forecasting purposes, your revenue from that ad should be $125 x 2.5 = $312.50 for every 100 click-throughs.
To determine how much you can bid on a keyword in the campaign, divide your revenue per 100 click-throughs by 100 ($312.50 / 100 = $3.12) and this is your breakeven bid – $3.12. This is the most you are willing to pay for that keyword, anticipating breaking even. If you paid more, you would anticipate losing money.
Increase Your Ad Profits
When you use longer tail keywords that are less expensive and your click-throughs remain high, your profitability increases. Experiment and tweak the ad, sales page, or call to action to increase the click-throughs, thus further increasing profitability.
Each of the advertising programs works a bit differently, and it’s quite important to spend time learning the ins and outs before you dive in. If you don’t, you could waste a lot of time and money. Each of them offers instruction, but the real tips are often available in forums, articles or blog posts on specific topics. Search Google for information like, “How does Google AdWords work?” or “How does Yahoo! Search Marketing work?” for consumers’ explanation of their experiences and insider tips.
Do you have success stories or tips for profitable ad campaigns?
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For more resources, see our Library topics Marketing and Social Networking.
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ABOUT Lisa M. Chapman:
Ms. Chapman’s new book has a name change! The Net-Powered Entrepreneur – A Step-by-Step Guide will be available very soon. With offices in Nashville Tennessee, but working virtually with international clients, Lisa M. Chapman serves her clients as a business and marketing coach, business planning consultant and social media consultant. As a Founder of iBrand Masters, a social media consulting firm, Lisa Chapman helps clients to establish and enhance their online brand, attract their target market, engage them in meaningful social media conversations, and convert online traffic into revenues. Email: Lisa @ LisaChapman.com