PPC Profitability Formulas

PPC Formulas #1: Determining cost per click (CPC) bid. How to hit your targeted cost per action (CPA)

CPA = Cost / Conversions
CPA = (clicks x CPC) / (clicks x conversion rate)
How to use the formula:  Let’s say our traffic converts at 2%. We want our cost per action at $25. Then we need to bid at .50 CPC.

PPC Formulas #2: Targeting Return on Ad Sales (ROAS). Determining what our return would be on our advertising costs.

Terms: AOV (Average Order Value)

ROAS = (Conversions x AOV) / (click x cpc)
ROAS = (clicks x conversion rate x aov) / (clicks x CPC)
ROAS = (Conversion Rate x AOV) / CPC

PPC Formulas #3: Determining your maximum CPC

MAX CPC = Conversion Rate x AOV

Let’s say you convert traffic at 2%. Average sales are at $150, that means your campaigns are most profitable at $3 CPC. Less than $3 CPC and we’re making more profit per each sale, but making fewer sales.

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