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Conversion Rates

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# 1
Visitor ✭ ✭ ✭

I read a thread here where contributor Cobnut made this declaration:

 

Conversion rates vary from business to business, Account to Account and it's not uncommon to find rates below 1%.  If this is typical for your market it may well be that you'll need over 100 clicks, or 200, for each sale.

 

Quite frankly, this both amazed and terrified me. I'm selling cabinet hardware on my site and typical GROSS profit on a sale is expected to be about $60 - $80.

 

Granted, my ad hasn't even run yet, but Google is telling me that I'd need to pay $1.25 per click just to get the key words "cabinet pulls" to appear on page 1. Using the above math, it could cost me $250 in advertising to generate a $60 profit (and that's not even accounting for overhead etc!).

 

Hey, I'll stick it out and use up Google's free $100 worth of advertising, but does anyone actually make money using adwords?

3 Expert replyverified_user

Re: Conversion Rates

Top Contributor
# 2
Top Contributor
Yes, lots of people do because they see it at a deeper level than that.

They work on improving their conversion rates. Just imagine if you could get your conversion rate up to 5%? Or even 10%? Would it be worth it then? It certainly would. and you could bid more per click and get more traffic and more sales.

conversion rate optimization is your friend here. Look into this before writing off AdWords completely.

Re: Conversion Rates

Visitor ✭ ✭ ✭
# 3
Visitor ✭ ✭ ✭

Not sure if "depth" is all that necessary when the numbers are pretty stark. Let's assume the following...

 

NET profit on a sale is $40

$1.25 per click to get on page one

5% conversion rate

At that rate, I'd need 20 visits to my site to make a single sale.

 

That means after spending $22.50 in advertising, I walk away with $17.50. Great for Google. Not so great for me.

 

Seems like getting that conversion rate in the 10% or better area is a must if adwords is to be profitable. Either that or redesign the site such that individual sales are a lot higher.

 

Like I said. I'll stick it out for the time being, but I can't help but to feel the odds are stacked against me.

Re: Conversion Rates

Top Contributor
# 4
Top Contributor

Hi there;

In the following link you can find several case studies, in which we tried to work with several real businesses on improving campaign conversions;

https://www.en.adwords-community.com/t5/User-Articles/AdWords-Case-Studies-Community-Account-Optimiz...

Moshe, AdWords Top Contributor , Twitter | Linkedin | Community Profile | Ad-Globe
Did you find any helpful responses or answers to your query? If yes, please mark it as the ‘Best Answer’

Re: Conversion Rates

Top Contributor
# 5
Top Contributor

Hi Michael D,

 

Yes, people do have success with AdWords, otherwise Google would be losing a lot of money. My products are specialty niche with a high ticket average. I mostly break even on the first sale, but those customers come back, and soon, to make repeat purchases from us. That's where our profits come from through AdWords. We realized the average AdWords source customer is good for up to 3 times the original purchase.

 

In many businesses. repeat customers will be the key. If AdWords can establish a relationship for you with cabinet makers who need your supplies--which you provide at a competitive price with excellent customer service--you will have that customer for some time to come. This is an important part of evaluation of any advertising campaign. If you are looking at a single purchase, with an average margin of $40, it will be tough to do. Let's say you make $17.50 on the initial purchase, then that customer orders again within 30 days (multiple conversion per click), you now have made $57.50 from the ad conversion. After 30 days, it's more difficult to analyze, as the AdWords cookie expires and no longer tracks conversions. When I was able to tag customers with AdWords source and follow the performance for a longer period of time, my analysis of my campaign went from "break-even" to "very profitable".

 

Using your numbers, $22.50 would be your cost of acquisition for new customers. Look at the average lifetime spend of a new customer, then compare that with the project lifetime spend of a new AdWords customer. That's what will make AdWords profitable for you.

 

It doesn't work for everyone. You need a little patience and skill to run a successful campaign. My advice is to start small, do not budget more than you are willing to lose. Tweak and tune your campaign(s) until they are working well. Then increase your daily budget slowly to find the most profitable level of spend on AdWords.

 

And do not neglect your other channels of business. I would never recommend using AdWords as your sole method of advertising.

 

Best of Luck!

 

Pete

 

petebardo -- Deadhead doing AdWords