For any business utilizing PPC, the main concern is to calculate the Return on Investment (ROI). After all, evaluating ROI is the main concern behind any PPC campaign. However, despite this, many advertisers fail to understand its essence and ignore it. They optimize their campaigns solely based upon the cost per conversion factor while sidelining ads and keywords possessing the best metric. This is going to help you out only when you require some leads and not sales.
If you are looking forward to find some ways for calculating the PPC through ROI, you must first get acquainted with ROI. ROI can be calculated precisely using the formula:
(Profit – Cost) / Cost
ROAS (Return Over Ad Spent)
ROAS is the best option to start calculating the ROI for PPC. In most cases, the advertisers when talking about ROI is actually evaluating the return on ad spend (ROAS). This is calculated using the formula:
(PPC revenue – PPC cost)/ PPC cost
What makes ROAS an effective means is the fact that it is very easy to calculate. The PPC managers do not require following any hardcore mechanism. The calculations are so simple that they can simply do them in their heads. This will ease out the optimization process.
ROI (Return on Investment)
From the formulas suggested above, it s quite clear that ROI and ROAS bear a striking similarity. The definition states them as profit minus cost, divided by cost. However, the difference lies in how the cost will be calculated.
For PPC campaign, your focus should not be confined till PPC click costs.
In case of ecommerce, one needs to consider several costs including the production costs, order fulfillment price, credit card processing charges and cost for returned goods. Other costs would include the staff salaries.
In case of lead generation where you are not selling any physical products, there are still some costs. This includes expenses such as costs for keeping your website running and other expenses such as servers, equipment, and technicians.
The point is that while considering the cost of advertising, you need to take in account the factors and attached costs, not just the click fees.
Profit Per Impression & Profit Per Click
Even when you are including all the costs for selling products and generating leads, there are chances for you to still miss some important factors. PPC is something associated to maximizing the profit while increasing the visitor count and overall sales. This is why we suggest you to opt for profit per impression and profit per click.
As compared to ROI and ROAS, Profit per impression/click is a little difficult to calculate. However, once the PPC managers get the right knowledge about the process, they can generate the stats easily.
What all you will need for the process includes info for impressions, total clicks, total cost, and overall sales figures. The profit can be calculated by subtracting using the formula below:
Profit = total sales value – total cost
Next step is to calculate the profit per impression using the formula suggested below:
Profit per Impression = Profit/Impressions
Profit per Click = Profit/clicks
Using these stats, it gets easier to decide the keywords that have the best profit-per click/impression.
With so many things teamed up under PPC, there is no way you could settle for a single practice for evaluating the money you are making through PPC.
What matters here is that you are making the right calculation without flipping back and forth between metrics; else the calculations are going to turn messy.
To know more about the PPC marketing campaigns, have a look at the info graphics suggested below.