At Fountain, we have worked with a large number of clients who have either dabbled in paid search in the past and given up, or who are running a paid campaign but not seeing the results they were expecting. This is down to one reason:
Not knowing the three most important numbers in PPC
When it comes to any form of pay-per-click advertising, there are three essential numbers you need to know before embarking on a campaign:
- Cost per Click (CPC)
- Cost-per-acquisition (CPA)
- Conversion rate required (CRR)
Let me tell you a story to explain.
We received a call from a very frustrated business owner last year. He has invested £30,000 in an e-commerce project and it had lost money. He’d been through two agencies to run his Google AdWords, but kept making a loss.
When he called us, we asked him two simple questions. Based on his answers we had to let him know that, sadly, he did not have a viable business.
We asked him what his cost-per-acquisition was, in other words, what the most he could spend online to sell an average order.
He replied £5.00
We then asked him to log into his AdWords account and let us know what the average cost-per-click (CPC) was.
He said £1.72.
At this point, are any alarm bells are ringing in your head? Because they were for us!
If you’re not sure what the issue is here, just take a moment to think about the final thing we need to find out (as mentioned above).
Conversion rate required
He would need a conversion rate of 34.4%, that around one in 3 people buying. This is unheard of in ecommerce (well, excluding Amazon and ebay!).
We asked him what his conversion rate actually was, it was 4%.
We then calculated what his max CPC can be, £0.20.
Sadly this was not enough for first page bids on Google AdWords.
By knowing these three numbers for each service or product, you can ensure you always run profitable campaigns.
CPC – £1
CPA – £10
CRR – 10%
Every PPC campaign you run needs to ensure these three numbers stack up correctly. If they don’t, and many campaigns suffer from this, rather than giving up, make a plan to increase your conversion rate or lower your CPC.
The truth is, there’s never a case where PPC ‘does not work’. It’s often that your conversion rate is too low.