News Source: http://www.searchenginejournal.com
Published: Jun 09, 2009 - 01:41 am
Story Found By: joshwilliams8525 1078 Days ago
Category: PPC
-If you haven’t started PPC yet, you can forecast your ROI.
-If you’re already running PPC, you can play with the metrics and see how you might increase ROI.
9 Comments
Comments
Having a slight server problem (caching)- if you got an error on the calculator, try again in 15 mins. Thanks!
(All fixed now):-)
Well, this isn’t so much forecasting as doing a calculation with your assumptions. The hard part is coming up with good estimates of the number of clicks you’ll get, avg cost per click, and conversion rate if you have no historical data. And the real hard part for most businesses, even with historical data, is the contribution margin on the average sale. This calculator webpage says value per conversion = revenue per conversion, which for most businesses isn’t true. There’s usually some variable cost with the sale, and knowing the contribution margin on each sale is difficult for most companies. The contribution margin is needed to calculate the ROI, if you define ROI as gross profit/cost which is how that website defines it. ROAS is much easier to calculate but less useful. Also, that calculator seems to think ROI = ROAS – 100%, which is wrong. In any case, a good PPC manager will attempt to break down the data into more detail: by keyword or creative or type of product sold or a number of other factors, and to look at ROI or ROAS for each. An on-line calculator is interesting, but nothing you couldn’t put together in 3 minutes on a spreadsheet program.
Sorry, when I was referring to "value/conversion" I was talking about what AdWords calls revenue per sale inside their interface. I didn’t mean a more abstract value.You’re right- we started this as an excel spreadsheet. Thought it would be useful for people who don’t have the time to do that.We’ve found that showing clients how changes in the component metrics affects ROI helps them understand what we need to do to succeed.What is your ROI calculation?Thanks!Brian
Also, the post explains how to estimate your CPC and CR... did you read it? LOL
Useful enuff’. I can’t ask for the world from a free tool :P We’ve been working on a predictive model over at my office so this’ll tie in with that.
I created a similar calculator a few months back. It works similarly except it accounts for offline sales instead of online sales. So requires the user to know a bit about the rest of their sales cycle. I find it very useful when trying to propose an adwords campaign to our clients. Take a look:http://www.bluewatermedia.com/tools/roi-calculator.html
I have to agree with cromsongirl on this one. Unless you have an input field that considers products margins or COGS, you can’t really call your output ROI. For fun, I did a test with some historical data:Spend - $396.62Conversion Rate - 8.67CPC - $0.25Average Sale - $80.28The calculator gives me the following (compared to actual):Estimated clicks per month - 1,586 (Actual - 1,614)Estimated Total Sales - 138 (Actual - 140)Estimated CPA - $2.88 (Actual - $2.83)Estimated Total Revenue - $11,078.64 (Actual - $11,239)Estimated ROAS - 2,793.26% (Actual - 2,833.69%)Estimated ROI - 2,684.11% (Actual - 750.11%)My ROI calculation isn’t perfect because it only considers engine spend and cost to acquire the product (overhead costs are ignored) but 750% is definitely more realistic than 2,684% as far as ROI is concerned.What is the logic behind this calculator in determining estimated ROI?
you are correct, it does not include your COGS