Make the Most of PPC Spending Through Conversion Optimization

There are times when your client or your boss will ask you to increase your PPC budget to get more sales. This may seem like a logical decision, but there are other ways in which to get more bang for your buck. One way is landing page optimization.  That is, to make the page that you are sending your PPC traffic to more effective at turning a visitor into a customer.

After all, a landing page with a conversion rate of 5%, will still have a 5% conversion rate after increasing your PPC budget. The ROI will not improve.  On the other hand, if you invest some money into landing page optimization and increase your PPC budget subsequently, your returns will be far greater.

Here is a simplified model to give you an idea of how much landing page optimization can improve your ROI compared to increasing your PPC spending: 

Month1:  Only paying for traffic

PPC Budget: $5,000/month

Cost per visitor: $5

Visitors: 1,000

Conversion rate: 6%

Value of each conversion: $100

Result: 60 conversions

Cost: $5,000

Profit: $1,000

% Profit: 20%

Month 2: Paying for traffic and landing page optimization

Let’s say your boss wanted to increase your PPC budget by $2,000/month. Rather than do that, let’s say you put that money toward conversion optimization in the first month. If done correctly, you should not have too much trouble raising your conversion rate by 2%. Let’s see what effect that has on your ROI:

PPC Budget: $5,000/month

Cost per visitor: $5

Visitors: 1,000

Conversion Optimization Cost: $2,000

Conversion rate: 8%

Value of each conversion: $100

Result: 80 conversions

Cost: $7,000

Profit: $1,000

% Profit: 20%

In month one you will most likely get more conversions while your profit may stay the same or decrease.

Month 3: Paying for only traffic again

You successfully increased your conversion rate by 2% last month and are now going to sit back and see if your conversion rate holds steady before increasing your PPC budget. Let’s see what your ROI is this month:

PPC Budget: $5,000/month

Cost per visitor: $5

Visitors: 1,000

Conversion Optimization Cost: $0

Conversion rate: 8%

Value of each conversion: $100

Result: 80 conversions

Cost: $5,000

Profit: $3,000

% Profit: 60%

Since the cost of conversion optimization was already paid for, now you can see the full effect of your optimization investment. The profit from PPC increases by 200% as does the percentage profit, resulting in 40% more ROI.

Month 4: Increasing your PPC budget after optimization

Say you wanted to increase your PPC budget, now that you have a firm handle on your conversion rate. Your boss’ proposed budget was an additional $2,000/month. Let’s make it happen:

PPC Budget: $7,000/month

Cost per visitor: $5

Visitors: 1,400

Conversion Optimization Cost: $0

Conversion rate: 8%

Value of each conversion: $100

Result: 112 conversions

Cost: $7,000

Profit: $4,200

% Profit: 60%

In this model, you were able to increase profit by 320% while increasing monthly costs by 40%. Without the investment into optimization, profits would have only increased by 40%.

Conclusion: When you want more sales and a better ROI, don’t just think about increasing traffic. Make better use of that traffic and your investment through conversion optimization. Ideally, you should be contributing part of your monthly budget to optimization every month so that your profitability is continually improving.

Author: Alhan Keser, CMO at Blue Fountain Media