25th Post
Posted 4th March 2009 at 03:41 PM by Zale
Newest approach to adjusting my costs for each keyword.
I am now getting into it!!
I have set a ROI return that I want to get me started.
I have started with 50%. This means that I need to get a 50% return on a keyword. Therefore for every $100 I spend, I need a $50 profit. I have just chosen the amount randomly since its in keeping with the typical Retail standard of 50% margins.
Anyways - that means I can now start looking at the number of clicks I get for a keyword and decide if the price is too high.
For example - if my keyword costs me $.50 and my sale is $15.00 - the 75% means that I must make 5% CTR on every click.
ie: 5 out of every 100 clicks must generate a sale.
100 * $.5 = $50 Costs
5*$15.00 = $75.00 Revenue
Profit = $75 - $50 = $25
$25/$50 = 50% ROI.
Therefore - I can look at the cost of any click - and know how many clicks I need to make my margins.
If the click was $1.00
100 * 1.00 = $100 costs
At 50% margin I need to generate $150 in sales.
Therefore CTR needed at 1.00 a click is 10% (10 clicks out of 100 = $150 in revenue - $100 equal $50 in profit.
Therefore if after 11 clicks I don't make any money - the price of the keyword needs to drop.
I can keep adjusting each keyword based on the number of clicks it gets.
My approach to pricing the keywords:
I use all the data from the beginning of the campaign.
1) Keywords in position 0-3 - drop by .10 - goal is to decrease my cost with no effect on results (save some money)
2) Keywords greater than position 8 - increase by .20 - goal get the click.
3) Keywords with click to sale ratio lower than profit target - drop to price where if the next click came it would be profitable.
Does this make sense or is am totally going down the wrong path?
Zale
I am now getting into it!!
I have set a ROI return that I want to get me started.
I have started with 50%. This means that I need to get a 50% return on a keyword. Therefore for every $100 I spend, I need a $50 profit. I have just chosen the amount randomly since its in keeping with the typical Retail standard of 50% margins.
Anyways - that means I can now start looking at the number of clicks I get for a keyword and decide if the price is too high.
For example - if my keyword costs me $.50 and my sale is $15.00 - the 75% means that I must make 5% CTR on every click.
ie: 5 out of every 100 clicks must generate a sale.
100 * $.5 = $50 Costs
5*$15.00 = $75.00 Revenue
Profit = $75 - $50 = $25
$25/$50 = 50% ROI.
Therefore - I can look at the cost of any click - and know how many clicks I need to make my margins.
If the click was $1.00
100 * 1.00 = $100 costs
At 50% margin I need to generate $150 in sales.
Therefore CTR needed at 1.00 a click is 10% (10 clicks out of 100 = $150 in revenue - $100 equal $50 in profit.
Therefore if after 11 clicks I don't make any money - the price of the keyword needs to drop.
I can keep adjusting each keyword based on the number of clicks it gets.
My approach to pricing the keywords:
I use all the data from the beginning of the campaign.
1) Keywords in position 0-3 - drop by .10 - goal is to decrease my cost with no effect on results (save some money)
2) Keywords greater than position 8 - increase by .20 - goal get the click.
3) Keywords with click to sale ratio lower than profit target - drop to price where if the next click came it would be profitable.
Does this make sense or is am totally going down the wrong path?
Zale
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