Home – New Forums Tech talk Is pay per click worth for some store selling relatively cheap product?

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  • #988210
    Anonymous
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    Hi,

    I have been see a lot of people paying hundred of dollar a month but only get 1 -2 sales in return, so start wondering how pay per click campaign can generate good revenue for a store..

    If you are selling some stuff like cheap jewellery for around $30, you get around $15 profit from it.

    Just say your conversion rate is 1% and average sale order is $50.

    If you are paying $0.6 per click, which means you will need to spend $60 for a $50 sales (your profit is only $25)

    Even if a customer becomes a repeat customer, you are still not able to cover the ppc cost until she make the third returning purchase….and what if you have a lower conversion and average order amount…

    are my assumptions reasonable? or should people target a at least 5% conversion rate to make it a good campaign?

    #1166174
    JohnW
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    Hi Kieth,
    I’d say your example is spot on in terms of calculating the return on investment (ROI) of an online ad campaign.

    Anyone undertaking a campaign should be assessing the parameters you discuss.

    Every online store will have its unique set of ingredients in this mix, so I can’t comment on your example.

    However, there will be other attributes of ad campaigns that are common to all and which should be considered.

    • The audience
    • The price
    • The offer
    • The message

    1. Audience
    Many advertisers waste their ad costs on the wrong audience. This can happen in two ways. Their ad targets the wrong audience and/or their ads do not target the most cost effective audience.

    Eg:
    Wrong audience: A maker of expensive, made to order surf boards spent 25% of his ad budget on search phrases that included the words, “cheap”, “used” and “2nd hand” surf boards.

    Over price ads: A supplier of pool pumps was paying three-times the CPC for generic searches like “pool pumps” than specific searches like (brand name) + pool pumps

    Location is another important attribute of cost effectively audience targeting.

    2. Price
    The price includes the product and its distribution costs.

    Distribution costs are the Achilles Heel of many e-commerce sites. Targeting your ads to where your distribution costs are lowest may make a big difference to conversion rates.

    3. Offer
    The offer may include incentives to buy but other attributes can be important like delivery time, damage/loss in transit claims, warranties and after sales service.

    4. Message
    This is how you express your offer in your ads and on your web pages that the ads link to. When you see ad campaigns that link every ad to the advertiser’s home page, you know there is a problem.

    Too often I get asked to evaluate campaigns where little thought is given to these crucial aspects of an ad program.

    These factors will all impact on conversion rates and ROI.

    Hope this helps.

    Regs,
    JohnW

    #1166175
    affgar
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    That is a pretty good sum up.

    A lot of people waste huge amounts of money on Adwords & Facebook marketing. It seems some people don’t calculate how well it’s working?

    There are loads of things that can be done to increase exposure before throwing money away.

    But when you compare a cost per click targeted campaign with other forms that people waste heaps on…. it doesn’t seem to bad.

    #1166176
    Aidan
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    I have this conversation all the time as I’m a Google AdWords Partner and very much agree with what JohnW says. If you are trying to make a business out of one-off sales then AdWords is unlikely to be suitable for you unless the sale value is maybe even hundreds of dollars depending on your margin.

    On the other hand if you are in a business where the average customer lifetime value is measured in small amounts but over a long term then it almost doesn’t matter what you spend on acquiring the customer as the cost v lifetime value becomes small!

    That’s how insurance brokers and hosting companies approach it. Their customer lifetime value can be considerable.

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