What is a Click Worth?

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As a marketer, you should know how much you spend to get each click on one of your ads. That basic cost per click (CPC) metric is at the core of digital advertising.

The lower the cost per click, the better, because it means that you’re driving more traffic to your website at a lower total advertising cost.

But if you really want to understand how your CPC relates to business success, the other thing you should work to understand is what a click is worth. Once you know what each click is worth, or a “revenue per click”, then you know how effective you are at turning those clicks into customers.

Calculating Click Value

To calculate the value in revenue dollars per click, you need to work backwards from revenue.

Let’s say a particular marketing campaign produced 1,000 sales at $100 per sale, that’s $100,000 in revenue. Then let’s say your conversion rate (defined here as the percentage of visitors that ended up buying from you) is 1.00%. That means you get 1 sale for every 100 people who visit your website. And if each sale was worth $100, then you make $100 in revenue for every 100 people who visit your website.

All that means that each click (which brings a potential customer to your website) is worth $1 to your business. This is your click value, or revenue per click.

What Can You Afford to Pay?

Once you know your click value, you know what you can afford to pay for each click.

Using the example above, where each click on your ad is worth $1, you can better judge your cost per click. If the CPC is $2, you know you’re losing $1 with each click. If this is the case, you are going to go out of business.

If the CPC is $0.50, you’re making $0.50 after marketing costs for each click. This is a more sustainable model.

Knowing what you can afford to pay for each click not only lets you judge current performance, if gives you a roadmap for future optimization of the campaign.

Bottom Line vs. Top Line Growth

Growth is growth, until it’s not. When people talk about growth as it relates to companies, they could be talking about two distinctly different things.

  1. They could be talking about top line growth, or growing revenue. The company made $1 million in sales this year compared to $500,000 last year.
  2. They could be talking about bottom line growth, or growing profits. The company had profits of $100,000 this year compared to $75,000 last year.

Either way, the company is growing. And sometimes, companies do both at the same time.

But the distinction is important, because strategies for top line and bottom line growth are often different. And when it is your job to grow the company, it is important to know what type of growth you are after.

Growing Revenue

When your goal is growing the top line, you want to drive more sales and revenue per sale. You might do this with more advertising, discounts and promotions, new pricing, loyalty programs that encourage follow up sales, etc.

You might not worry here so much about your profits. Lower prices might eat into your margins, but they also might attract new customers and take some market share away from your competition.

You can also grow revenue with new products. Introducing new products gives your current customers more to buy from you and draws in new customers that were not as interested in your other offerings.

Growing Profit

When your goal is growing the bottom line, you have to focus on profit margins. You can do this in a number of ways.

First, you might optimize your marketing spend to lower the dollar amount you are spending to drive each sale. This might mean eliminating unprofitable spend or reallocating dollars from one channel to another.

You also might cut products from your portfolio that do not add much to the bottom line. They might be popular, but if they’re not making money, they are hurting your margins overall.

Next, you might look to cut other costs from your operations. How can you streamline sales, customer service, R&D, etc. to get more value?

Finally, you can play with pricing. If you can afford a price increase without losing customers, it’s a quick way to improving your profit margins. A 1% increase in price can drive huge profit increases.

Conclusion

Some of the strategies that you select to pursue might have a positive impact on both the top and the bottom line. But growing revenue might hurt profitability. And growing profitability might hurt revenue, at least in the short term. So it’s important to know the difference.

How to Lose Respect and Alienate Customers

Want to lose your customers’ respect, refund lots of purchases, gain a negative reputation on blogs and social networks? It’s easy to do, a lot easier than you might think.

Here’s how: Don’t keep your promises.

The disconnect between marketing and every other division within your organization needs to stop. And it needs to stop yesterday.

Marketers have a job to do, drive sales. Whatever you’re responsibility is, whether it’s brand building, email, lead generation, website design, etc., the end goal is driving sales. You’re only as good as the business you bring in.

Because that is the case, marketers tend to over-promise. We make claims that our company does not support. We lie.

But in today’s world, those lies will come back to hurt your business in a bigger way than before. Negative reviews spread like wildfire. Unhappy customers are handed megaphones.

The rest of your company needs to know what marketing is saying, and marketing needs to know what the rest of the company is actually doing. When both sides are on the same page, sales will lead to happy/satisfied customers who will help you market your company instead of inhibit it.