Sometimes, marketing agencies forget the point of marketing – to make money – and, as many of us know, marketing at a loss can kill your business, especially when finances are already tight. It goes without saying, but it’s vital to know exactly how to make money with pay per click advertising.
That said, I have great news: Every business can make money with Pay Per Click (PPC) advertising. All you have to do is keep costs lower than the returns they generate.
Keeping costs lower than returns sounds hard, but it’s actually relatively simple. All you have to do is follow this simple formula:
If you’re a service-based company, the formula is slightly longer, but no less easy to use:
You’ll likely need to collaborate with an agency to determine the projected conversion rate for your ads. However, the rest of the numbers you may already know.
Sally from Sally’s Structural Engineering already knows her average project price is $10,000 and it costs her $9,000 to do the work. She also knows her close rate from a lead to a client is 10%. She worked with Steadfast Results to determine her projected conversion rate is 5%. From there, she can do the math to discover her Average CPC has to be below $5 for her to break even.
Important Note: Agency fees should be included in your production costs to ensure profitability.
You know what you can afford to pay for a click. Now, it’s decision time.
The first thing to consider is whether you can be competitive in the Pay Per Click advertising space. If your necessary CPC is $5 and your competitors are paying $100, it might be best to find a different way to promote your business.
If, at first glance, paid media doesn’t appear to make sense, you might consider customer lifetime value instead of a single purchase price. If lifetime value is too long-term an investment for your business, i may be best to look into “free” channels such as SEO, local directory listings, and email marketing.
To learn more about how you can make money with Pay Per Click advertising or, possibly, another channel, schedule a consultation with one of our performance media experts.