Estimating the marketing investment you need to achieve optimal results depends on knowing the right formulas and applying them with common sense . So that you get your next budget right, today I want to share with you the advice of Brett Farmiloe at Forbes to determine your correct advertising investment in CPC (Cost per Click). Let’s go step by step…
Step 1: How to calculate the leads and traffic you need
As is logical, the main objective of the investment in CPC marketing is to achieve a business objective, generally linked to sales . Therefore, to know how much we should invest, the first thing is to calculate the traffic we need to achieve this goal.
The formulas are very simple:
- (Desired revenue / Sales period) / Average sale = Number of customers
- Number of customers / Conversion rate = Number of leads
- Number of leads / Conversion ratio with respect to visits = Number of visits
Let’s see it with an example. Let’s say that your annual revenue goal is one million euros, and that the sales period is one month, that is, there are 12 sales periods per year. The average sale is 1000 euros. So:
- (€1,000,000 / 12) / €1,000 = 83.33 customers per month
To get a million euros of annual income, you need about 84 clients per month. Now, let’s assume that your sales team manages to convert 20% of leads into customers.
- 83.33 clients / 20% = 416.66 leads per month
And now, for the last step, we are going to assume that 5% of the visits to your website through cost-per-click ads turn into leads, for example, by filling out a form to leave your contact information. This means that:
- 416.66 leads / 5% = 8,333.33 visits per month
That is, in this example your monthly goal would be to generate 8,334 visits, of which 417 would become leads and 84 would become customers, giving rise to an income of one million euros per year.
The numbers add up, right? But we are still missing some South Africa Email List important data, so let’s see the next step.
Step 2: CPC advertising investment within your overall strategy
To determine the right ad spend for cost-per-click ads, you need to consider how they work within your digital marketing ecosystem . And it is that most brands use a variety of channels and strategies to attract traffic and generate conversions .
For simplicity, let’s think of CPC as a way to fill in the “gaps” in your current digital marketing. That is, we will use paid advertising to generate traffic that we have not achieved through other channels such as search engine optimization , email marketing , content marketing , social networks , etc.
Therefore, you need to sit down and analyze the results you are achieving with all these channels and how they contribute to your overall objectives.
For example, let’s assume that you achieve 75% of your revenue goal through SEO, email marketing, content marketing, and social media. This means that you have 25% left to cover.
According to the calculations we have made in the previous TR Numbers section, 25% of your goal is 250,000 euros per year. To achieve this, you need to generate about 2,084 visits per month, which translates into 105 leads and 21 customers. We’re getting close to the magic ad spend number, but there’s still more to consider.
