TEST and CONTROL your sales, thereby allowing you to optimize them
It allows you to see what works and doesn't work with your sales copy, description of websites and day-to-day variation of sales items. Once you see what works you can then streadmline your efforts to do MORE of that. This will literally explode your sales!
For example, let's say that you're selling specialty gourmet baked new york cheescakes from your website 'La Cheesecake' (none of these widget-selling examples please, those are so overdone).
Each cheesecake sells for $35 plus shipping. You estimate that it only costs you $10 to make and so your net profit is $25 per cheesecake.
Now let's also say that you know that approximately 5% of your visitors buy a cheesecake (you've got a great website that sells AND since your site is highly specialized, your hit-to-sales ratio will probably be higher than the more general sites that sell, for example, books)
That means that for every 100 hits you'll sell approximately 5 cheesecakes for a net profit of $125.00. ($125.00 for every 100 hits)
Now to optimize your net profit you must figure out your top price per keyword (this is your break-even price, where you don't make or lose money).
This is your keyword price ceiling (or the highest price you should ever pay per keyword). From there you try to get the lowest keyword price that you can to maximize your profit.
For example let's say the keyword 'online cheesecake' is pretty cheap at $0.05 per hit for the top position on the pay per click search engine you use. That means that you're going to pay $5.00 for every 100 hits.
So you pay $5.00 and make $125.00 per 100 hits. Your net profit is then $125.00 - $5.00 = $120.00. Not bad right?
Using this example, our break-even price for a keyword is $1.25. This means that the price of $1.25 per click will bring you in 100 visitors (and you'll pay $125.00). Since you'll be making $125.00 in sales (recall your 5% hit-to-sales ratio) you'll be breaking even. That's your top price per keyword.
Now you will almost NEVER pay that much for a keyword. Chances are you'll pay $0.05-$0.25 per keyword, but it gives you a good idea of your ceiling price and what kind of net profit you'll be making per keyword price.
To optimise your sales and decrease your expenditures you want to get the lowest price per click that you can.
So for example if you're spending $0.50 for the word 'Online Cheesecake' you'll want to decrease that if you can (and still retain top or close-to-top position).
Another way you might do this is to bid on common mis-spellings of your keyworld ("online cheescake" for example). Misspellings will almost always cost you less per click which will again reduce your expenditure while optimizing your sales revenue.
So now, to increase your profit:
Using the example above let's say you want to make approximately $1250.00 net profit in a week (not including pay per click charges). This means you'll have to get approx. 1000 hits to your website (1000 hits x 5% = 50 sales x $25 per sale = $1250 net profit).
Assuming that your average keyword is $0.05, you'll have to pay $50.00 to generate this kind of revenue ($0.05 x 1000 clicks = $50.00). Thus to reach your goal (using PPC alone) you have to spend approximately $50.00 on pay per click advertising. If you want to make more or less than $1250 you'll have to adjust your numbers accordingly.
Now pay per click advertising is actually a little more complicated than that. There are different implications of having the top bid verses the second, third and fourth top bid, etc.
There are also different keywords that tend to pull in more sales than others when searched for. There are even different descriptions that also tend to get more click-throughs than others. (the keyword here is test test TEST!)
But that at least gives you some idea of how you can use pay per click to rank highly on the search engines and optimize your sales revenue from there.
To optimise your pay per click campaign itself we've listed our top 5 pay per click tips to keep in mind when starting your pay per click campaign. Good luck!
-------
Was this article helpful? This article on Pay Per Click Optimisation is one of several articles to be found in our Pay Per Click Tips Section
Copyright 2005 Pay Per Click Advertising All Rights Reserved
