Tuesday, July 7, 2009

How to set up PPC budget for a New Product?

If you're planning to launch the new marketing campaign, but you don't have any data about your KPIs? How do you set up the budget for you? You will have no idea what is Average Order Value(AOV), Close Rate(CR) Google Adwords just given you the bids and daily budget, but these are only guesses. In order to set up initiatl campaign budget for PPC , you need to calculate your Cost per lead (CPL), like this

1. Estimate the amount of revenue you expect to make in one month. You need to use minimum amount of revenue that you can stay in the business. Worst case scenario of estimation!
2. Guess at your close rate, for every 100 leads , how much you thinks that you can convert them into customers or transaction. 10% is quite fairly conservative. You will get better of number when you run a new product for a while.
3. Use your estimate close rate to estimate how many leads that you need to be breakeven or reach the minimum number of sales.
4. Calculate your target CPL . I think you talk with other people to get feedback and some comment what your thought.
5. Multiply the number of leads by the Target CPL . You will get how much you will have to spend per month to buy the leads you need.

For example, you want to sell 100 transaction per month. You have 50% close rate, you need 200 leds to sell 100 transactions. If the target CPL is $10 and you need 200 leads, you will need to spent about $2000 per month. Now, you got the idea what is PPC Budget for your new product.

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