What should you pay in terms of PPC advertising in order to acquire a customer? That’s the magic question, and the answer depends on what you’re selling.
Let’s say you’re a musician selling CDs. Your profit per CD sale is $6. If you can advertise using key phrases with a $0.60 cost-per-click, then 1 out of every 10 clickthroughs needs to make a purchase – just to break even.
But, if you sell speedboats and make $6,000 on each sale, if you can advertise using relevant key phrases that cost you $3.00 per click, then if you can convert one of every 100 clickthroughs, that’s a 2,000% ROI ($6,000/$300 clickthrough on your online advertising dollar.
Make sense? Ok, well let’s look further than that. Because what if you’re a Starbucks? What if you’re a customer for 20 years and buy once a week. Then make sure you’re incorporating that lifetime value to your acquisition costs.