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PPC Formula EVERYONE must have!?

[ Edited ]
Explorer ✭ ✭ ☆
# 1
Explorer ✭ ✭ ☆

So I was reading over some PPC blogs catching up on somethings and I came across this one of PPC Heros blog and they all hail it as the Guiding PPC Formula everyone PPC professional should bold and tape up in their cubicle.  But I am still kinda of lost on the whole formula, they never explained the benefit of the formula, what is going to do for my account, they just said, it is miracle formula that a PPC'er should NEVER live without.  Here is the formula:

 

Spend/CPC x Conv. Rate = Leads.

 

What are they trying to tell me?  I am confused?  Is this an estimation for a future account or should I take this formula and use it for my current efforts?  Any insight would be helpful.

PPCSophie
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Accepted by Theresa_Zook (Rising Star)
September 2015

Re: PPC Formula EVERYONE must have!?

Top Contributor
# 2
Top Contributor

Hi Sophie, unless I'm mistaken, that's just the number of conversions.

 

Spend/CPC is the number of clicks.  Conv. Rate is the percentage of clicks that convert, so Clicks x Conv.Rate = conversions.

 

I think it's the obvious obscured by trickery!

 

Jon

AdWords Top Contributor Google+ Profile | Partner Profile | AdWords Audits

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Marked as Best Answer.
Solution
Accepted by Theresa_Zook (Rising Star)
September 2015

Re: PPC Formula EVERYONE must have!?

Top Contributor
# 2
Top Contributor

Hi Sophie, unless I'm mistaken, that's just the number of conversions.

 

Spend/CPC is the number of clicks.  Conv. Rate is the percentage of clicks that convert, so Clicks x Conv.Rate = conversions.

 

I think it's the obvious obscured by trickery!

 

Jon

AdWords Top Contributor Google+ Profile | Partner Profile | AdWords Audits

Re: PPC Formula EVERYONE must have!?

Explorer ✭ ✭ ☆
# 3
Explorer ✭ ✭ ☆

Jon,

 

I dont know if that is what they are trying to get too, I think i am going to post in the comments to get more understanding on what they are trying to say with this miracle formula.

 

Here is the link to the blog if you want to take a look yourself:  http://www.ppchero.com/the-secret-ppc-formula-for-account-success-the-triumphant-return-of-whaddaya-...

 

Sophia

 

PPCSophie

Re: PPC Formula EVERYONE must have!?

Top Contributor
# 4
Top Contributor

Hi Sophie,

 

I completely agree with Jon on this. Much ado about very little.

 

Although it may be useful when establishing targets for new or even existing accounts, it's a lot of work on an existing account to produce the number of conversions in terms of back end analysis.

 

Pete

 

petebardo -- Deadhead doing AdWords

Re: PPC Formula EVERYONE must have!?

Explorer ✭ ✭ ☆
# 5
Explorer ✭ ✭ ☆

I Have to agree with Jon and Pete here. I'm not sure if there would ever be a time where you knew the conversion rate but not the total number of conversion.  Just seems like a lot of smoke and mirrors.

Re: PPC Formula EVERYONE must have!?

Explorer ✭ ✭ ☆
# 6
Explorer ✭ ✭ ☆
Hmm Okay. Well thanks for the input. So basically the formula has no significance.
PPCSophie

Re: PPC Formula EVERYONE must have!?

[ Edited ]
Follower ✭ ✭ ✭
# 7
Follower ✭ ✭ ✭

Hiya,

 

Maybe the formula is not completely bogus and could could be used as a benchmark?

 

Had a look at the PPC hero page and I think the keyword here is "conceptualizing" and might also be "extrapolate".

 

The formula: Spend/CPC x Conv. Rate = Leads.

 

Maybe we should try to start from the lead and its valorisation.

 

Say you are the editor of a biotech magazine and you want to increase your subscriber's base.

You see from analytics that the organic query "biotech magazine" brought you 500 visitors last month and converted 25 of them in subscribers/leads (5% conversion rate).

 

Your finance team has set the value of a subscription to $5 profit. So these 25 subscriber represent 25*5 = $125.

 

Back to the formula: 500*5% = 25 with $125 profit.

 

So one can "extrapolate" and say that to generate $125 worth of profit, you need to find 500 biotech fans...

You have some (or a lot of) internal meetings that will decide how quick you want to grow your subscriber's base, how much profit you want to make (if any), etc.

 

Say you've decided to test this on a break even model.

You are allowed to spend $125 to get 25 subscribers on AdWords...

 

So based on you hypothesis, you want to get 500 biotech fans looking for a magazine that gives them info on their favourite subject...

 

Spend / CPC = visitors

125/CPC = 500 <=> CPC = 125/500 = $0.25

 

So you could set your Max CPC to $0.25 for the keyword "biotech magazine" 

 

And now you can start "conceptualizing" and see what profitability & revenue levels you could get with different scenarios...

 

 

 

Re: PPC Formula EVERYONE must have!?

Visitor ✭ ✭ ✭
# 8
Visitor ✭ ✭ ✭

I will explain it in a easy and simple way. Yes we can get more complex and make it confusing, but keep it simple. 

 


Use this formula to determine one of 2 things:

a) Number of leads you will get
b) or How much you will need to spend.

 

The formula has 4 parts. 2 parts are known from historic performance. the other 2 is what anyone might want to know.

 

The 2 known are Conversion Rate & CPC. You know this from your existing account(s) or from industry standards.

 

For example we all know that conversion rate for phone calls is 1-3%, Lead gen (fill out form) is 1%- 6%, Online purchase is ....etc (of course if you have only good keywords trigging your ads, all the % is much higher, but when you spend $2,000,000 per month, these are the law o large PPC accounts Stats)

 

The two that you are trying to find out are:

 

a) How much will I need to spend in monthly adspend if my conversion rate is 3%, CPC $4.20 & I want to get this many Conversions?

 

b) or How many leads will i get if I spend this much amount, have 3% conversion rate and CPC is $4.20?

 

Re: PPC Formula EVERYONE must have!?

Visitor ✭ ✭ ✭
# 9
Visitor ✭ ✭ ✭
Sophie: The great thing about this formula is that everyone here is right, except for the people who say it has no significance.

The universality and simplicity of it is that if you know any 3 elements of the equation, you can solve for the others.

Here's my take on the best real world example:

Say you have a client who only wants to spend $1000 and wants 100 leads. Using the formula, you can negotiate the amount of time it will take to achieve the client's expected results within the budget.

Say average CPC in the client's industry is $5. That means your client will need a conversion rate of 50% to achieve the desired results. Can you or they get the conversion rate to 50% within the specified amount of time? If no, you should negotiate a different goal.

Alternately, let's say you know the client's conversion rate is 10%. Using the formula, you'd know the CPC will need to be $1 for you to achieve desired results. Can you get CPC down to $1 within the timeframe? Is it even possible to get CPC down to $1? If not, renegotiate your SLA.

The formula allows you to set realistic goals and expectations with your client, ultimately leading to more satisfied clients and a longer, more lucrative retainer.