Will the Real ROI Please Stand Up? - ROI meets CPC
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I know what you’re thinking, “Hey, this is cool and all, but this is a search engine optimization site! How do I use this in my search engine marketing?” Thank you for your patience, the time is now, the place is here.
So, in all its glory, below is the expanded ROI equation that takes into account the Cost per Click metric used in Pay For Performance search engine advertising.
(Where C = Clicks, CR = Conversion Rate, AS = Average Sale, PM= Profit Margin, and CPC = Cost per Click).
Before we get too deep into this equation, a few important notes about the ROI equation in this form are in order. For starters, remember that this equation refers to the Average Sale value based on all the Sales made during the campaign and the average Cost per Click value used in the campaign. Also, it needs to be said that the bottom half of this equation is missing a lot of pieces of the total Invested Capital that was used in the campaign. However, as long as this form is only used in comparing similar advertising campaigns, the results are going to be closer to reality than using nothing at all. Finally, going back to our friend Mr. Algebra, note that it is safe to remove the “Clicks” variable from the top and bottom of the equation as long as you continue to use the Average Sale and Cost per Click values properly.
Next: How to Wreck a Perfectly Good Equation >>
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