What is Your Maximum Pay-Per-Click Bid?

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Pay-per-click advertising can help businesses rank for keyword terms that they may not be able to organically; it is often used in conjunction with SEO techniques, and while you’re waiting for those efforts to “kick in” and start producing results, PPC can provide a stream of revenue faster. You can geo-target your audience, and you can boost the efficacy of both paid and organic search marketing. The benefits of PPC are many, and it remains a relevant and effective tool for businesses. One of the keys is making sure your managing costs. Calculating your maximum bid is important and can help give you an edge.

Your PPC bid depends on a variety of factors. Obviously, for more popular, competitive keywords, the bid needs to be higher. Knowing the maximum price you’re willing to pay will help you keep costs in check.

  • Track how many customers you acquire via PPC, what product category they purchase, and how much they spend. So say you have acquired 300 new football shoe customers and they collectively spent £39,440. The average spending is £132.
  • Next, find the average profit per football shoe customer. If, for instance, your profit margin is 10 percent for shoes, you simply multiple £132 (your average spend) x .10(the profit margin). The average profit is £13.2.
  • Now, track how many clicks it took to acquire your 300 new customers. Let’s say it took 6000 clicks. We divide 6000 by 300. This results in 20. So it takes 20 clicks per month to generate one conversion.
  • One customer is worth £13.2 over 12 months. Divide £13.2 by the number of clicks required for a conversion, or 20. This is £0.66.

£0.66 is your maximum bid. When you can secure keywords at a lower rate, you can make a profit. These numbers are completely arbitrary and serve only to walk you through the calculation. Plug in your own figures and see what you can come up with to guide your bidding decisions.

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