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August 23rd, 2006, 12:16 PM #1More money more problems?
Okay, so lets say I am selling a products which tends to go for $25.
When I start a Google AdWords campaign with $10,000 per month to promote these products, I find that after three months I have gotten an average conversion cost of $65. Too expensive.
Now here is my question: Should I be spending more or should I be spending less? On one hand, if I spend more money, I will get more #1 slots and (theoretically) sell more products. I will also get a lot more clicks.
If I spend less - perhaps reducing the maximum CPC I will allow and trimming off the "less effective" products - I may be able to make my existing campaign more efficient (in theory).
If I were to significantly increase my spending would that make my conversion costs drop? Sort of like in the same way that if I buy a whole bunch of toilet paper I will end up paying much less for each roll?
On the other hand...the much smaller amount of money I spend on Yahoo actually is prooving worthwhile...
August 23rd, 2006, 12:21 PM #2
Footnote: I am thinkin there must be some equilibirum point where the extra money you are spending is just getting flushed down the crapper.
When I use Google's traffic estimator tool, for example, I find that after a certain point, more money spent means fewer and fewer extra clicks - there exist only a discrete number of people on the entire internet who are searching for my terms on a daily basis and once I am reaching those...no amount of money is going to help me reach more.
Does anyone have any thoughts about how trustworthy Google's traffic tool is? Should I plan my whole budget around it?
August 23rd, 2006, 01:28 PM #3Originally Posted by IronChef253
Stop concentrating on what you spend and begin looking daily at what you earn. Then adjust things to a point you're comfortable with.
As you turn up your bids, your % return will lessen. Turn it up too high, and your return goes below zero - a loss. It's up to you to find the point you're comfortable with.
August 23rd, 2006, 01:58 PM #4Originally Posted by Donuts
Coke obviously doesn't care about things like developing conversions - they just want people to see their advertisements - They need to get people looking at their ads just to imprint them with the Coke brand imagery etc. so that they will go buy Coke at some later date...maybe months later.
At the moment I am dealing with this hybridized..."thing" which is part sales-based and part advertising / branding. I have no realistic way of valuating expenditures on "building a brand" with the customer. I believe it is valuable but I have no idea how valuable it is.
I have to perform two main functions:
1.) Locate new customers
2.) Help existing customers find my products
Locating new customers is the most expensive, speculative part because it involves buying high-cost "General" keywords to try to hook people who are browsing in my catagory. If I am selling XBoxes I would buy keywords like "Game Consoles" or "Video Game Machines." Expensive and general...less likely to generate an actual conversion. Later on...maybe 5 months later a customer who was researching consoles who saw my ads during that period might choose to actually make a purchase. I have no way to track that...
However, if they are searching for "buy xbox" or "order xbox" I would be much more likely to get a conversion.
(writing this is actually helping me organize my thoughts on the subject btw)
I'm thinking that maybe I should be less worried about actual conversions...in fact, I should just be trying to generate as many clicks and impressions from general sources as possible just to "Educate" new customers who may eventually make a purchase....ohhhhhh my brain!
August 23rd, 2006, 02:00 PM #5
As Donuts (love the name by the way) said, whack a timeframe into the equation (start with per day) - along with estimated conversion rate and a vague idea of profit per sale. Oh, think what you consider an acceptable profit.
The product's going for $25. Let's say you make $12.5 (i.e. half) of that in profit.
Now, consider cost per conversion. Let's say your product conversion rate is 3%. Again, a pointlessly general figure. So it's going to cost you approx. 33 clicks to earn a sale.
33 x $0.05 = $1.65 - let's say this gets you 10 clicks per day
33 x $0.15 = $4.95 - and this one gives you a nicer 35 clicks per day
33 x $0.37 = $12.2 - and this one gives you 66 clicks.
The first one means you only get 10 sales per month, costing you $16.50. You make $10.85 per sale, equalling a profit of $108.
The second one gives you approx. 33 sales, costing you $163.35. You make $7.55 per sale, equalling a profit of $249.
The last one, whilst giving you two sales per day, means you don't profit from the sale.
Since conversion rates, sale profits and of course the notorious Google estimator aren't 100% reliable, don't stick to a precise formula. Just learn from past experience and try to measure/maximise your ROI as much as possible.
(PS: I've just realised you're a 100+ poster so may know all the above. Oh well, maybe somebody will find it useful...)
EDIT: Look's like I started writing this before you posted!
Writing this has helped me organise my thoughts
About branding - if you're at that stage, you shouldn't be worried about that thing called money
August 23rd, 2006, 02:10 PM #6Originally Posted by IronChef253
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