These days, all website owners are to a great extent dependent on PPC campaigns to maximize their ROI within a short span of time. The costs of each click is decided by an auction. Since the number of advertising slots in Google are limited, advertisers who want to buy a greater number of clicks place higher CPC bids for outbidding their competitors. Here are some tips which you can follow to make profits from pay per click advertising:-
When you spend too much
ROI is dependent on CPC since higher cost per click means higher conversion cost. So, every change of bids changes ROI and elasticity. As CPC grows, ROI as well as elasticity will decrease and quickly ROI can become smaller than 1/E.
PPC optimization in e-commerce normally means maximizing the revenue as per the targeted ROI which has been set by the management of your company. But the ROI>1/E formula has shown that this approach can turn out to be counterproductive. If you intend to maximize profit through PPC marketing, then the target ROI should not just be the arbiter decision of some decision-makers within your company. The optimum ROI to a great extent depends entirely on the elasticity curve’s shape.
The consequences of a profit-driven approach are occasionally counterproductive. Rather than moving budgets from campaigns which have lower ROI to those which have higher profitability, you need to consider increasing bids for keywords which have a lower ROI but have higher elasticity.
You should also consider increasing bids for keywords which have lower ROI but higher elasticity. Thereafter, you can decrease bids for the keywords with best conversions with lower elasticity. For instance, keywords which have a very high impression share and average position close to first position on the top of search results page.
The elasticity needs to be measured and monitored. By using the native features such as AdWords, like A/B experiments and help in acquiring the required data for estimating elasticity.
Click value and price optimization
Apart from PPC optimization, advertisers normally try to increase their rate of conversion through better web visibility, site speed, retargeting and cross-selling. They do all these to increase the chances of a visitor becoming the client. One point which is often forgotten is the product price.
Occasionally, advertisers provide discounts to encourage visitors to finalize a transaction. For the majority of products, the lower the price quoted, the simpler it is to sell products. Discounts normally increase the rate of conversion.
It is also worth noting that there is a difference between margin and revenue. Revenue is the total price which a customer pays. However, it is not synonymous with profit. The goods sold need to be created or buyed first. So, the margin of revenue is deducted from cost of materials, packaging, transport, production etc. Therefore all the direct costs need to deliver the product to the customer. You should always compare your PPC conversion cost not to your revenue but to margin per transaction (M/conv).