| CPC | Cost-per-Click | Cost to an advertiser for each click on a
promotional link by a site visitor or newsletter reader |
| | Cost-per-Conversion | The cost of acquiring a customer, typically calculated by dividing the total cost of an advertising campaign by the number of conversions. The definition of "conversion" varies depending upon the situation; it is sometimes considered to be a lead, a sale, or a purchase.
Cost-per-Conversion = (Total Cost of Campaign/Number of Conversions)
I.e.: Cost-per-Conversion = ((CPC * Clicks)/Number of Conversions))
Cost-per-Conversion = (($1.00 * 42)/12))
Cost-per-Conversion = (($42.00)/12))
Cost-per-Conversion = $3.50
Suppose the Target Cost-per-Conversion is $2.75 & and our maximum budget is $120.00 is met at 100 clicks.
How many conversions are required to meet our target?
Cost-per-Conversion = ((CPC * Clicks)/Number of Conversions))
$2.75 = (($1.20 * 100)/x))
$2.75 = (($120.00/x))
43.63 = x
43.63 = Number of Conversions
Approximately 44 Conversions are required to meet the Target Cost-per-Conversion of $2.75 at maximum spending.
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| CR | Conversion Rate | Percentage of respondents to an ad, or re
aders of a sales message that complete the action desired |
| CTR | Click-through Rate | Percentage of website visitors or new
sletter readers who click on a particular link |
| DMA | Designated Marketing Areas | A region where the population
can receive the same (or similar) television and radio station offerings |
| PPC | Pay-per-Click | A set amount is paid for each click on a promotional link by a consumer |
| PPI | Pay-per-Impression | An advertiser pays for each display (impression) of their advertisement |
| ROAS | Return on Advertising Spend | Profit made after advertisi
ng costs only have been subtracted |
| ROI | Return on Investment | Profit made after advertising and other costs have been subtracted
I.e.: ROI = ($50.00 - $1.35)/$1.35
ROI = 36.04%
Where:
$50.00 = Gross amount of sale generated from click-through to ad landing page
$ 1.35 = Cost of click
Suppose 4 sales via our ad generated $645.00 in sales:
ROI = ($645.00 - $5.40)/$5.40
ROI = 118%
Or, 4 sales generated $20.00 in sales:
ROI = ($20.00 - $5.40)/$5.40
ROI = 2.7%
What if I need to achieve a minimum 8% ROI and my CPC is $1.35?
8.0 = (x - 1.35)/1.35
10.8 = (x - 1.35)
12.15 = x
Let's reverse it to check our numbers for a single sale:
ROI = (12.15 - 1.35)/1.35
ROI = 8%
Therefore, my average amount per sale at a cost of $1.35 per
ad must $12.15 in order to achieve an ROI of 8%.
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