Know-How Exchange : Research/Metrics

Thanks for the response, Peter.

Yes, I was using the word "conversion" purely in the sense of a straightforward sales conversion, rather than a lead (sign up for newsletter or whatever).

Perhaps claiming that "we have a good idea" on the data was a bit strong; I shall rephrase.

We have a fair idea on the kinds of conversion rates experienced on Google PPC, thanks to available (but, limited) data from sources such as Hochman. If you haven’t come across this report yet then I recommend it as a ‘good pointer’, rather than strong, platform-wide and in any way official data on overall Google performance.

link
https://www.hochmanconsultants.com/articles/je-hochman-benchmark.shtml


I would be keen to hear of any other data that may support or conflict the Hochman Report?

On top of this, we also have data from Optima Worldwide on activity and CPC’s.

Anyway, the question I was asking was, does anyone have any data pointing to – NOT the average COST of conversion, but the relationship of that cost to the transaction? The cost as a percentage of the transaction, in other words.

e.g Suppose I had an Ad campaign and I decided that I would only promote my product through PPC (I wouldn’t, but for simplicities sake).

If my cost of conversion for that campaign worked out at $20 and the product I was selling sold at $100, my cost as a percentage of the transaction would be 20%. I would, of course, also have needed to calculate my conversion RATE along the way, but fine-tuning the data to establish the cost would lead me to the percentage of revenue, if you like?

In case anyone else in interested in this subject, I also found this useful article, suggesting that, in one case (yes, very much a "straw poll", but hey?) , the cost as a percentage worked out at 10.35% if my math is correct?

link https://searchengineland.com/when-a-0001-conversion-rate-means-branding-suc...

Any further help from anyone out there would be gratefully received. If not, I hope what I've provided may help some others as, from my point of view, this kind of data is at the very crux of evaluating true costs of conversion.

Thanks again Peter.

I am about to close the question, with thanks to Peter for replying. Unfortunately on this occasion, my question was not answered successfully.

One final attempt before points are awarded;

Anyone have any data STRICTLY relating to ROI (Sorry about the cap's/shouting but no underline or bold to accentuate)

ROI (return on investment) = revenues generated from a sale divided by ad spend

Ultimately, that info should be available as (when Peter refers to the number of "touches") a sale is either generated - at some point - or it isn't. And how would one discern the viability of a campaign unless there was ROI calculated at the end?

I would like to point to my earlier example of a %age of the sale price for clarification. If not, thanks anyway and the question will be closed.

Thanks mgoodman for your response.

Yes, I'm aware of that, thanks anyway. Profit margins will differ from product to product and from industry to industry (not to mention size of the company/buying power, etc.).

I'm trying to ascertain whether there's any available data relating strictly to

1) the cost of a PPC campaign (not an entire campaign that would, in reality, include PPC along with many other forms of Marketing, as Peter pointed out)

and

2) the revenue generated from that PPC campaign.

Having asked contacts of mine, results vary (albeit anecdotal), from 5% to 17% - both actually representing good value.

Example. Suppose these were for $100 products; for one contact of mine, the campaign cost $5 per conversion (i.e. "Sale") and for another, also selling a $100 product, the campaign cost $17 per sale.

Interesting benchmarking, don't you agree?

Interesting, perhaps. Useful, not so much. In fact, it may even be misleading.

If a campaign isn't generating enough incremental profit from sales to pay for the campaign costs, the marketer will probably discontinue the campaign. So all that's left to analyze are profitable campaigns.

And the relationship between cost per conversion and gross revenue is likely to be a factor of many other things that are even more important than the cost per conversion or the selling price. So looking for a correlation between those two factors is likely to be a waste of time. ("I wonder if there's a correlation between popcorn sales and the number of words in a movie's title.")

Automobiles sell for more than CDs, but the cost per conversion for the two is probably not in proportion to the gross revenue generated by PPC advertising. Further, the copy and offer are likely to have a greater effect on conversion than the price, so you would have to somehow control for those too, if you want a valid comparison.


P.S. In your example, the one with the $17 cost per conversion might not be so good if the variable profit is just $12. And the one with the $5 cost per conversion might not be so great if the variable profit is $4. Not sure how you concluded that the advertising is a "good value."

The rule is probably that a marketer will spend up to the variable profit amount to generate a conversion/sale. Spending more than that would result in a loss from each sale.

So you'd have to know both the selling price and the variable profit margin to determine how much to spend to generate a sale (i.e., cost per conversion).