There are dozens of companies that spend billions of dollars on ads every year, but not all of us have that luxury. Given that most of those brands begin with a head start, they don’t have to fret when calculating their return on ad spends. They can spend as much as they please and benefit from the fact of just being out there.
Since you don’t have that luxury, here are 3 ways to calculate the real return on investment for your pay-per-click ad spending.
1. Returns only On Ad Spend
When you’re talking about ROI, most people are talking about simply the return on how much they pent on the ad. Once you have the revenue you got from a PPC deployment minus how much it cost, then divided by that same cost. That’s a percentage to determine your return.
If you got $1000 but the PPC deployment cost $750, then you’d put that figure ($250) over the $750 and you’d have 1/3 or 33%. That means your Ad didn’t do super well in that you only made 33% over what you spent.
It’s a simple calculation that might sound good at a board meeting, but it’s only the starting point of understanding the true return.
2. Include Return on Investment
This is a little bit different than your return on your ad spend. It’s calculated by all of the elements that make up your PPC campaign.
When you work in e-commerce, you have production costs and labor costs when you’re fulfilling orders. You have to factor in returned goods, credit card processing, and every other element. The customer service costs should be considered in this figure as well.
When you’re working on lead generation and not selling physical products, you’re still racking up costs. The fixed costs to keep your website up and running, server maintenance, and hosting all cost money. You even have to consider paying the people to follow up on your leads.
The cost of advertising isn’t just in your click fees. It’s in the whole boatload of in-house things that go along with those campaigns.
3. Consider Profit Per Impression
Once you’ve come up with all the costs to sell products and generate leads, you’re not necessarily thinking about how much each impression brings to you.
The whole view of the search process needs to come into account. When your potential buyers are using the right keyword to see your ads, then turn into buyers, you need to know that their clicks come at a good cost.
If you’re getting a click on every impression or you’re being shown to 10,000 people before you get a click, that could make a difference. You can better understand what keywords and what kind of impressions actually lead to sales, rather than simply looking at a single number based on an ad spend.
Return on Ad Spend Isn’t All That Simple
Calculating the return that you get on your ad spending takes a great deal of effort. You need to be able to understand the meaning of all of the data that comes in from each PPC campaign. However, once you start to get a grasp, you can make good decisions about your next campaign.
If you’re curious whether or not you need to hire someone to manage your PPC campaigns, check out our guide.