CPC Bid and Profit
Every advertiser wants to maximize his profit and sets the most beneficial CPC bid. Revenue is the product of your clicks, conversion rate, and average order value (if there is sufficiuent data to know these variables).
Spend is the product of clicks and CPC.
This assumes your products are free to produce and ship; if you have additional costs to produce and ship your product, we need to add them.
Revenue is the product of your clicks, conversion rate, and average order value.
Spend is the product of clicks and CPC. If we use derivative of profit with respect to the number of clicks our ads are getting.
Now, let’s solve for the maximum profit. Setting this derivative to 0 will ensure that we’re finding the maximum amount of profit we could potentially drive from our campaign:
max CPC bid that maximizes our profit, which is:
Setting your CPC bids to maximize profit is just that simple. All you need is the product of your conversion rate and your average order value.
So if you converted traffic at 2% and your average sale was £150, that means your campaigns are most profitable at £3 CPC. Less than £3 CPC and we’re making more profit per each sale, but making fewer sales. More than that and we’re making more sales but losing profit on each additional one.
If you need any help with increasing your search performance or on how to make more opportunities for your business, then please get in contact with us here at Network Intellect. Please get in contact with us here at Network Intellect.