What is your maximum bid for your Adwords campaigns? You will be able to find out your visitor value after you have advertise for a period of time.
When you spend money on your Adwords campaigns, you drive visitors to your site. When they make a purchase, you make a profit. By knowing your visitor value, you are able to bid sensibly and set your budget.
Here is the way to calculate your visitor value for Adwords campaigns. Let’s assume that you spent $300 to get 3000 unique visitors to your website. In the process you make 30 sales. For each sale, you make a commission of $35.
1. To determine your conversion rate per visitor:
Number of sales divided by number of unique visitors = conversion rate per visitor
e.g. 30 ÷ 3000 = 1% conversion rate
2. To calculate your gross profit:
Number of sales multiply by your commission
e.g. 30 x $35 = $1,050
3. To calculate your net profit:
Gross profit - total expenses = net profit
e.g. $1,050 - $300 = $750
4. To calculate your net profit per sale:
Net profit divided by number of sales
e.g. $750 ÷ 30 = $25
5. To determine the value of each visitor to your site:
Net profit per sale multiply by conversion rate per visitor = value per visitor
e.g. $25 x 1% = $0.25 is the value per visitor
In this example, you will know that you cannot bid more than $0.25 for each keyword of your Adwords campaign. If you spend more than that, you will make a loss.
You can try to improve your conversion rate per visitor. With improvement in conversion rate, your value per visitor will increase and you can then increase your bid to get higher position if you want.
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