Estimating pay-per-click costs for your ad campaign:
While calculating pay-per-click cost for an ad campaign, we have to think over certain things like:
Other important factors having a direct impact on your PPC ad campaign are:
Knowing monthly search volume:
To know monthly search volume, we can use Google Keyword Tool. Just go to there and in the word or phrase box, enter keywords / phrases that you think your customers will use while searching.
On the other hand, you can enter your website into this tool and let Google show you relevant keywords regarding your site.
Even you can enter competitors website to see what keywords they are using and which Google feels relevant. You will see extent of competition, Global monthly searches & local monthly searches.
Ascertain estimated CPC of your keywords:
To know average cost-per-click, enter your keyword / phrase in Google Keyword Tool. Now click the columns button just above your results on the right side and choose competition, Global monthly searches & local monthly searches, approximate CPC. Now click on Apply.
Calculating your current conversion rate:
Knowing and calculating your current conversion rate is very important. You can see this data from your site analytics tools like Google analytics. You can ascertain it from you sales team. Also take into consideration, how many of your leads / free trials etc. turn into a buying customer.
Ascertain average value of a new customer:
The concept “Value of a new customer” closely related to your conversion rate. To know we should think over points like:
What is the value of initial purchase? It is possible that many customers will make a small initial purchase to know how your products work. If they satisfied, they will come to you again to buy products of higher value. Factoring this into your calculation will help you to reach break even more quickly.
Another point is to consider lifetime value of customer.
Now a simple calculation: This is just a back of the paper calculation, which will give us initial estimated budget for a PPC ad campaign.
Monthly search volume for a particular keyword / phrase X 2 % CTR*
= No of estimated clicks
Now, No. of estimated clicks X Average CPC
= Your estimated CPC campaign cost
So here is your initial estimated PPC budget.
* Why we have taken 2 % CTR in above calculation?
For people who starts their PPC ad campaign for first time, initial CTR on many occasions will be on lower side. As you improve your ad copy and bid aggressively for your keywords, your CTR will start improving. It will steadily go upwards to 3%, 4%, and 5 % or even six -7 %,
it also depends on how attractively you craft your offer and type of industry / sector in which you are operating. Apart from this, some testing is also required to see which ad copy receives more response. With trial and error or A/B testing methods, we can have a required data so we could finalize our ad copy and start our PPC ad campaign on a larger scale.
Why bid aggressively for your keywords / phrase?
Ad networks conducts bidding process for CPC ads. You have to participate in their bidding process. Those who bid higher for a particular keyword than others will be eligible to place their ad. So if you bid aggressively, ad networks can place your ad in prominent places on their website network and on related search result pages. So your ad will naturally attract more attention of viewers / prospective. This will increase your PPC cost but will help to achieve desired results.
Some popular and trusted ad networks: Google Adwords I Bidvertiser.