David Fiske Affiliate marketing & web development musings from Fiske Towers

I have read a few websites about Pay Per Click advertising and I'm not convinced that it will work for my site.

Each sale of a £200 navigation system is worth around £2 (worst case) and at a click through of currently 0.25%, for every 400 visitors, I generate one sale (statistically).

Lets assume that each click on a PPC network would cost £0.03 (approximately $0.05). Using the 400 visitors required above, I would end up spending £12 to generate £2 in commission.
 
If the conversion rate were to increase to 1%, I would generate £8 of commission for £21 of expenditure. A conversion of 2% would generate 8 sales (£16 commission) which then becomes profitable.

Naturally, I am using the cheapest level of commission to demonstrate a worst case scenario.

My best case scenario is that for every 400 visitors, I would generate a profit (revenue less expenses) of around £40. But this assumes that every one of the 400 are wealthy enough to splash a few grand on a system!

Lee McCoy posted this article (Christmas, it chuffing pays the bills) on his blog and it makes for very interesting reading. He uses PPC to test and develop his Christmas strategy.

However, he has had failures in the past and does highlight these in the post. Pink iPods, for example, is a site he developed. It gets a lot of traffic but not a great conversion (similar to Compare Sat Nav). He ended up 'wasting several hundred pounds on PPC'.

I can't afford to do that! The project will undoubtedly contain an element of risk but I prefer safe risk! My maths above says that I cannot afford to run a PPC ad using individual sat nav price comparisons as landing pages.

There is an alternative. I could invest in PPC to generate newsletter subscribers. If the ads are relevant and under-promise my newsletter, I can over-deliver it and hopefully generate sales via the newsletter. Essentially, I should be treating my site as if it were a shop. In it's current form, it lacks the editorial to make it anything else.

People rarely buy things on the first visit. Apparently, people need to see an offer at least 7 times before they act upon it. That's why autoresponder courses usually last for 5 days - first visit to sign up, 5 visits to read an email and a visit to buy the product (7 visits).

Using my maths above, each 'customer' (qualified conversion) costs me £12 when I use 400 clicks and a 0.25% conversion.

I would like to assume a 10% conversion for an opt-in newsletter - perhaps higher if I offer exactly what people are looking for. Using this maths, each newsletter subscriber would cost me £0.30.

£0.30 appeals more than £12!

I have never used PPC before and so I may be a bit sceptical towards it. Perhaps for large value products (e.g. insurance, holidays, etc.) it is OK. Perhaps for large companies where one customer can lead to repeat sales, it is OK.

A bit more reading is necessary!