Website Analytics February 29th, 2008
Here are two popular methods of revenue generation that have important performance indicators:
To see how your CPC is really performing. I like to take the top-line approach. You can start by a comparison of CPC sources. Glance over reports and look for sore spots (poor performers). Use Google Analytics and AdWords in harmony to focus in on Ad group performances.
Now we can focus in on CPC Only
We can see the statistics for Google, Yahoo, and FaceBook in this campaign. If we are going to zoom in on results that matter we will pay close attention to goal conversions.
1) To calculate the total number of conversions, multiply the visits by the conversion rate. E.g. (above) Google Visits are 4694 X .023% (Goal Conversion Rate) = 10.79 conversions.
2) To calculate the revenue you have generated multiply the number of visits by the per visit goal value. E.g. (above) Google Visits are 4694 X $0= $0
Google Analytics provides you the information you need to quickly implement actions. The three important areas to look at under the goal conversions tab are Visits, Goal Conversion rate and per visit Goal Value. In the example above the client has opted out of providing a goal value. It is critically important to your PPC efforts to have a goal value.
Here is where we can see if your CPC exceeds the cost of a goal. With a little bit of calculating on your part a realistic goal value can be assessed. In the case of a lead form let’s suppose it took out of 1000 lead conversions you got 100 leads. Out of those leads you closed 10 deals @ $200 ea. So your total gross revenue was $2000. Your cost to generate these sales was $1000. Are you with me?
Our gross profit was $1000/ 10 (conversions) = $100 per lead goal value
This is the simple formula but not always the most accurate. Let’s suppose the above formula applies to a closing conversion that has reoccurring billing. For example we have a client that does Liposuction (Lipoplasty) Cosmetic Surgery Procedures. We know that there will be 3 visits over 3 years @ $5000 each and we also know that the surgery is $14,000. The question here is what is the value of a long term relationship? Based on this case here’s how goal value is assessed.
(Based on 10 Sales)
|Description||One Client||10 Clients|
|Profit||14,000||140,000/ 10 leads|
This formula is intended to illustrate the value of a long-term client relationship. Other, more distant data may also be considered such as word of mouth or client referrals.
For ecommerce goal analysis the method of calculation is similar. The biggest difference in the Ecommerce data is that it’s real and accurate compared to a lead form’s estimated goal value.
In Adwords, we can look at the money we spent to reach our goals in the same time frame. Compare that with the purchases made through CPC and we have a precise number we can confidently call ROI.
So here is how we calculate ROI for PPC
Total revenue from PPC– $1794.66
Raw Cost– 850.00
CPC from Feb 11 to Feb 29, 2008– 250.00
Total Profit– $694.66