Hi, it’s James Yuille checking in with another video in the series Unlocking AdWords.
Today I want to talk about one of the most commonly asked questions we get in this industry and that is how much should I pay per click.
This is a really relevant question but it’s actually the wrong question. I like to explain why because you’re thinking why is this the wrong question?
Here’s the thing; we’re not looking at what it cost you per click because what happens is that your budget is determined by how many clicks you’re prepared to pay for instead of looking at how much you’re prepared to pay to generate the client.
Let’s take a hypothetical case where what you’re selling is worth thousand odds and you decide that you can afford 10% of that to get the client.
10% of thousand dollars is a hundred dollars which we can now break down into clicks, enquiries and sales.
Let’s assume that we know that for every five people who visit your site, one enquires. From every four people who enquire, one buys.
This means one in 20 visitors becomes a customer. Working backwards, if 1 in 20 buys, you could pay up to $5 per click.
The next equation then, is how many new customers can you manage over a month. If it’s 10, you should be budgeting $1,000 per month.
If you also have an upsell or repeat business model, the lifetime value of the client may be several times more – in which case, you may well be prepared to pay more than our original $100.
Knowing the maths when set the KPIs we have the objective of getting the inquiry at a predetermined price. Then it’s simply a matter of saying how many inquiries you want for the month or for the year and we said the budget accordingly!
Now you see why asking, “how much should I pay per click?” is the wrong question. What we should be looking at is how much can I afford to pay to generate a new customer.
Contact us on 1300 884 757 to discuss the cost of client aquisition for your business.