Re: Online ad campaign on a small budget

From: Steve Werby <steve-lists_at_befriend.com>
Date: Thu 03 Jul 2003 16:31:51 -0500

"Mary O'Brien" <mary_at_trafficmentorseo.com> wrote:
> Obviously, if your conversion rate and profit margin are higher then you
> can afford to spend much more to attract a buyer and you will achieve
> better results.

Or if she's happy with a ROI of less than the 900% ( ( $10 - $1 ) / $1 )
cited in your example and/or the average purchase is for more than 1 item
(which would raise the ROI) she can afford to pay more per click. Building
on your example, if the average purchase was for 1.5 items the profit per
purchase would be $15 so paying 15 cents per click would be the theoretical
breakeven point.

In that case paying 10 cents per click may be acceptable, keeping in mind
that the impressions that don't result in a click still have intangible
value, a purchases may become a repeat purchaser, each purchaser may tell
others, etc. Plus, given the targeted nature of such ads, it's likely the
conversion rate would be higher for such ad campaigns as compared to those
who clicked on a run of network ad or normal search engine result listing.
I realize Mary was trying to keep her example simple, but I thought it was
worth mentioning.

Cost of 100 clicks @ $0.10 per = $10.00
1% conversion rate => 1 purchase of 1.5 items @ $10 profit each = $15.00
profit

ROI = 50% ( ( $15 - $10 ) / $10 )

If the conversion rate is really 2% because such targeted ads are more
effective at attracting potential customer, then the ROI becomes 200%.

--
Steve Werby
President, Befriend Internet Services LLC
http://www.befriend.com/






Received on Thu Jul 03 2003 - 16:31:51 CDT