Pay Per Click (PPC) affiliate marketing, do the Maths!
Pay per click marketing does not need to be a hit and miss affair, nor is it voodoo, it is all about maths. You should not be simply pouring money into Google Adwords hoping that you get great conversions and earn great commissions. You can be rather more scientific about it. Your success in your ppc affiliate marketing can be broken down in to a simple formula as follows.
If we know that:
Average basket size: £50
Average Conversion Rate = 2%
Average Sales per 100 Clicks = 2
Commission Rate = 5%
We can work out that for each basket we earn £2.50 (5% of £50)
For every 100 clicks we know on average we get 2 clicks so for 100 clicks we earn £5 (2% of clicks get a sale so 2 in every 100 generate a sale)
To break even we would be paying 5 pence a click (500 pence divided by the 100 clicks), so we should position at 3 or 4 pence per click in order to earn a profit.
Of course these are based on averages and are therefor subject to variation.
It also has to be said that these figures are often hard to come by, they are not nessisaraly obvious on the network sites, and I suspect that the merchants like to keep this information to themselves.
It is only using this sort of method that you will be sure of making a profit on your ppc project. Obviously your success also depends on your keywords, adverts, competition and many other factors, but it is a worthwhile exercise to go through in order to ascertain the maximum you should bid per click.
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