Joe sells candy online. He needs to determine how much he is willing to spend on his Pay per click online marketing. What is the maximum PPC he can pay to break even on his sales?
The first important piece of data needed is the landing page conversion rate. This is a percentage of how many people that view his landing page make a purchase, versus those who do not. If Joe makes 2 sales for every 100 visitors to his website, then his conversion rate is 2% (this is about average).
The next consideration, is how much does the average online buyer spend on their first order? Joe sells candy for 10 cents a piece, but his average online order is $20.00. Of each $20.00 order, Joe typically spends $7 in COGS, shipping, and labor to process the order.
Joe has noticed that out of every 10 orders he takes online, 4 will come back and buy again with an average order of $20.
Joe has also observed that out of every 10 orders he takes online, 1 will come back and buy 2 more times with an average order of $20.
It is important to have a realistic idea of the return on investment of any potential PPC Campaign. By using a PPC Calculator, you are able to experiment with different scenarios to find your break even point - and what it will take to be profitable.
Don't forget the value of repeat customers. By using this PPC Calculator, you can see just how much a few repeat buyers can change your bottom line.