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Pay-Per-Click Advertising

(cont'd)

Making it Work: Conversions, Not clicks

How do you engineer a successful pay-per-click advertising campaign? By paying more attention to conversion, and less to clicks. Keep five rules in mind:

Track Conversions

If you want to stay on budget, you have to track conversions. What's a 'conversion'? It's any time a visitor to your web site takes a desired action. Examples of conversions might be:

  • Visitor makes a purchase

  • Visitor completes a sales inquiry form

  • Visitor downloads a white paper and registers

A conversion doesn't have to be a sale. But a conversion has to be worth something to you. If you can't think of any measurable, useful outcome of a visit to your site, do not spend money on pay-per-click advertising - there's no point.

Google and Overture provide conversion tracking - most other pay-per-click services do not, so you'll need to look at third party tools such as Urchin, which is also an outstanding site traffic reporting tool, or GoToast, or my own firm's Xed.

If the pay-per-click service you're using doesn't offer a conversion tracker, and you can't afford to pay for a third-party tool, try something more basic: In a spreadsheet, track the number of conversions, total, per day. Do the conversions increase after you start your campaign? If so, you're likely on the right track. If not, then there's very little chance that your pay-per-click investment is working.

Set a Sensible Budget

A lot of folks ask me how much I typically spend on clients' PPC campaigns. My answer is always 'just a bit less than too much'.

A little glib, I know, but the there is no 'right' amount. It all depends on your circumstances. A good formula, though, is:

cost per click is less than:
conversion rate * total clicks * profit per conversion

In other words, the amount you spend per click should always be less than the total profit earned per click. Let's say, for example, that I'm spending $1.00 per click to bring customers to my (totally fictitious) bicycle shop web site. I know that 2% of those visitors contact me regarding products, and that 30% of those potential customers actually purchase something. I also know that I average $10.00 profit on those purchases. Finally, I also know that I get 200 clicks per month. That puts my pay-per-click campaign in this light:

.6% * 200 * $10.00 = $12.00

So, I'm only earning $12.00 per month on my PPC campaign, but it's costing me $200.00. I need to reduce my cost per click, a lot, or cancel the campaign altogether.
 

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