We then went to Google Adwords to do a quick check on traffic and costs:
Click to enlarge
When looking at the clicks per day generated, we see that, as a group, motorcycle rentals dont have a lot of traffic, quickly leveling off at around 10 to 12 clicks per day maximum.
Armed with our previous model, we would like to pay around $0.26 per click until we know more about conversions from the site.
At that level, we wouldnt get a lot of clicks:
Click to enlarge
Indeed, we can create a larger model that would show several assumptions and Google estimates at the same time.
1. Google click estimates and conversion ratio assumptions:
Click to enlarge
Google estimates that one would get from 3.8 to 8.5 clicks per day paying anywhere from $0.52 to $2 per click. However, to do that, we need to add our own conversion ratio to estimate the number of sales we would get per day. So, for example, if we were to bid $1, and got 5.78 clicks per day, a 1 percent conversion ratio would only give us 0.06 sales per day.
2. How many clicks for one rental?
Click to enlarge
If we get, for example, 5.78 clicks per day and we estimate a 1 percent conversion ratio, we would need about 17.3 clicks to achieve one rental (1/.06).
3. And the cost/sale is
Click to enlarge
If we pay $1 per click, the cost/sale will be around $17.30, which is well under the $26 we estimated we could spend.
So now we have a model that would do three things:
- Give us a guide as to what information we need to collect: clicks, sales, costs, average sales
- Give us a negotiating tool that allows us to sit down with someone and negotiate costs/click (CPC) by revealing some of the conversion assumptions
- Give us an objective closing ratio (CR). If we see a CR of 0.7 percent
We can also run similar models to test assumptions for websites that we might need to buy on a CPM basis:
Click to enlarge
So, for example, if Im going to get only a 0.1 percent (or 1/10th of 1 percent) and I only convert 0.5 percent (or a half of 1 percent), Im really converting a half of 1/10th of 1 percent, which isnt much.
This is where the creative execution earns its keep: If you can increase your conversion ratio AND your click-through rate, your cost/sale falls dramatically:
Click to enlarge
Next page: Online Marketing is multi-dimensional
