Pay per Click (PPC) search engine submission is undeniably the most straightforward and convenient way for your site to have a safe and profitable position on search engines. It is the arena where you outbid your competitors for keywords or phrases.
But after knowing the proper terms to bid for using KeywordSpy and before bidding on a PPC, you need to be practical and proficient by setting your bidding budget. You don’t want to find out that you lost earnings at the end of the month because you bid too high, do you?
You need not be an accountant or a math expert to find out how much you can afford to pay for an online visitor. The formula for this is net profit per sale x conversion rate.
(Computing for the net profit per sale) product price per piece x number of sales = gross profit gross profit – total expenses = net profit net profit / number of sales = net profit per sale
(Computing for the conversion rate) Number of sales / unique visitors = conversion rate
Continue reading and let’s do a simple math for your PPC bidding using this example:
Let’s us say that in December, you had 10, 000 unique visitors and sold 100 products at $90 per piece.
During the same month, you made $90 per piece x 100 sales = $ 9000.00 (gross profit)
Your expenses for December (cost of the products, bank fees, delivery fees, etc.) is, let’s say, $1,200
You keep $9000.00 - $1200 = $7800 (net profit)
For each sale, you have earned: $7800.00 / 100 sales = $78 (net profit per sale)
Your conversion rate (visitors to sales ratio) is 100 sales / 10, 000 unique visitors = .01
You have actually made: $78 net profit per sale x .01 conversion rate = 0.78 per visitor to your website.
This means if you bid 78 cents on a PPC with search engines, you break even.
Here is an important point when you do the math, “unique visitors” is NOT identical to “hits” and “visits.”
For example, I visited your website at 8, 11, and 3p.m. on the same day and viewed 10 different pages. The statistics for that is that you had 1 unique visitor, 10 hits and 3 visits.
There may be a slight difference between statistics software, but be sure to consider and count unique visitors for you to properly determine how much you can afford to bid.
You have to keep in mind that competitors’ profitable keywords from KeywordSpy plus proper budgeting is the real formula to PPC success and earnings.