Its The ROI STUPID.....

[shonc2000]

Okay so you just launched your new ebook on "How To Train Your Pet Rat To Do Backflips" and you're publishing it through Clickbank."

You can't wait to see if this whole Internet Marketing baloney really works.

You sign up with Google Adwords,set-up a few ad groups, bid .30 per click & off you go.

You start driving some traffic via Google Adwords & after a few days of receiving clicks you get an email notification from Clickbank notifying that you received 1 sale.

You get super excited and run around the room jumping for joy.

Next day you get 2 more sales. Day after that you get 4 sales. You're absolutely pumped.

You log into your Google Adwords account and see that your reports show you've generated a total of 500 clicks.

So......you have a 1.4% conversion rate. But herein lies the rub.

You come to the dramatic realization that although you've made sales, you've lost money.

See... you priced your ebook at $19.97 a pop. You sold 7 copies.

Before Clickbank fees here is what the math looks like.......

$19.97 ebook x 7 sales = $139.79

$19.97 x 1.4% conversion rate = .28 epc

BUT, you bidded .30 per click. You've lost money.

Now, come on....this is hypothetical, i'd hope that 'Rat Training' keyword bids would be much lower but who knows, we are talking about Google here.

You throw your hands up in total frustration....how could this be. Damn you Perry Marshall

This Internet Marketing stuff SUCKS. NO YOU SUCK!....just kidding.

Anyway, here is why you should turn that frown upside down.

Rewind a bit....You should be ABSOLUTELY STOKED & heres why.

For one, you just proved that beyond a shadow of doubt that there is a market for a "Rat Backflips" ebook. You just proved it. That alone should get you excited.

Okay heres how you fix the leak....


First realize this. You can't have Conversions without Traffic & you can't have ROI without Conversions.

Now that doesn't mean run out and start driving more traffic. It means that you
should work on TESTING & IMPROVING Conversions.

But Shon you said its the ROI stupid ....and it is. But if you only focus on conversions you could lose money all day long just being happy that you're getting sales.

What you want, is to focus on having a positive ROI as a result of having TESTED & IMPROVED (increased) your conversions.

Okay, you think i'm full of crap........So lets see. Using the same scenario but having increased conversions.

$19.97 ebook x 10 sales = $199.70

$19.97 x 2.00% new conversion rate = .40 epc

You still bidded .30 per click

You're now earning .10 per click....SWEET i'll take it.

Its the ROI Stupid. ITS THE ROI. Test & Improve.

Test Headlines
Test Prices
Test Offers
Test Call-to-Actions etc....

I'm out

Shon C.

[John Ritz]

Absolutely! Here's an article about ROI I wrote on my blog a while back:

ROI: The Cinderella of Stats? | A Prescription in Marketing

We forget that traffic and conversion by themselves can mean very little.

John

[LB]

Actually, let's take it a step further. It's not the ROI- it's one thing only...

PROFIT.

I see people talking about the "incredible ROI" they're getting on their ad campaigns where they spend $200 and make $400. Hey, that is awesome.

But instead, I'll take the campaigns where I spend $1500 and make $2000. Sure, it's not a "double my money" scenario but it IS $500 profit compared to $200.

Essentially I'm agreeing with your post, just reminding everyone that there is a tier above ROI and there are even tiers above profit too...if you can think of them.

[shonc2000]

Great Article John.

We're on the same page.

Shon C.

[DonDavis]

19.97 x 10 sales (2% conversion on 500 clicks) = 199.70 / 500 clicks = .40 a click.

Big 10-4 on your post LB. It's all about the bottom line when the day is over.

[shonc2000]

Originally Posted by DonDavis

19.97 x 10 sales (2% conversion on 500 clicks) = 199.70 / 500 clicks = .40 a click.

Big 10-4 on your post LB. It's all about the bottom line when the day is over.

Thanks John, I copied & pasted the numbers from the top of the post. Thats why the numbers were wrong.

Just fixed it.

Shon C.

[giveusallfreedom]

Shon - Seriously where can I get that "How To Train Your Pet Rat To Do Backflips." I've been trying to train this freaking rat to do backflips for the last six months and all he does roll on his freaking back and lay there until I give him some of my fruit roll up. How's he ever going to join the circus and make me my billions if keeps pulling this crap. Lazy Rat!

Anyway...

OK LB I'll bite. The teir above profit. Scalability. This is why ROI is important. I'd take a campaign that I pay $1 for and get $2 over your $2000 campaign any day of the week assuming that my campaign and your campaign are both scalalble. For anyone that doesn't know, scalability means that everything essentially stays the same no matter how big it gets.

Scalability is awesome because that's where the real profit is. This is where the difference between say a freelance writer and an internet marketer come in. Both examples can only make more money by charging more or selling more. The problem is that a freelance writer can only sell more up to a certain point. There are only so many hours in a day. The internet marketer on the other hand can sell 1 or 100 or 1000 digital products and it doesn't change anything for him.

[DonDavis]

Shon- I didn't think the numbers were wrong, I just thought it might be a little difficult to follow for our newest members, so I clarified it a bit is all.

John Ritz- top shelf blog post...