So the first thing that you need to do when you begin considering PPC strategies is to determine
how much each web-site visitor is worth to you. It’s important to know this number, because otherwise
you could find yourself paying far too much for keyword advertising that doesn’t bring the traffic
or conversions that you’d expect. For example, if it costs you $25 to gain a conversion (or sale)
but the value of that conversion is only $15, then you’re losing a lot of money. You can’t afford that
kind of expenditure for very long.
To determine the value of each web-site visitor, you’ll need to have some historical data about the
number of visitors to your site in a given amount of time (say a month) and the actual sales numbers
(or profit) for that same time period. This is where it’s good to have some kind of web metrics
program to keep track of your site statistics. Divide the profit by the number of visitors for the same
time frame, and the result should tell you (approximately) what each visitor is worth.
Say that during December, your site cleared $2,500. (In this admittedly simplified example, we’re
ignoring various things you might have to figure into an actual profit and loss statement.) Let’s also
say that during the same month, 15,000 visitors came to your site. Note that this number is for all
the visitors to your site, not just the ones who made a purchase. You divide your $2,500 profit by
all visitors, purchasers or not, because this gives you an accurate average value of every visitor to
your site. Not every visitor is going to make a purchase, but you have to go through a number of
non-purchasing visitors to get to those who will purchase.
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