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In this edition of Web Enlightenment we'll be talking about how cost per click management has flavors.

This newsletter focuses on giving you practical, interesting insights into how to successfully use technology as a tool to improve the way you do business. Bridging the gap between knowledge and understanding that all entrepreneurs have will help you make money online.

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All the best,

CPC Management has flavors - Meh, Good, Excellent

This time of year Cost Per Click campaigns (no idea what CPC is? Click here) are raging at full speed and that got me thinking about management.

Good CPC management is essential to have a solid return on investment and the best CPC managers can in fact charge lots of money for their services which essentially cost you "nothing" as their skills more than pay the bills.

Let's back out for a second here and review some basics. Every website has a conversion rate , which varies dramatically by industry and product but it is usually around 2%. That means it take 50 visitors to make one sale (two percent of fifty is one).

Websites also have an Average Order Profit (AOP) which can be just a few dollars if you sell T-shirts or tens of thousands of dollars if you sell real estate.

These two numbers allow you to calculate the end all be all number of all Internet Marketing - the BECAC. That stands for Break Even Customer Acquisition cost, in plain English that's known as what you can afford to pay to get a visitor to come to your website.

So suppose you had a 2% conversion rate and you profited $20 when people made a purchase. That would give you a BECAC of forty cents - it takes 50 visitors to make a sale (2% conversion) and then you profit $20, and 20 divided by 50 is forty cents.

So one of the big reasons people love cost per click advertising is that it increases conversion rates, which makes all the sense in the world if you think about it. All you get via this advertising method are highly targeted buyers, folks who (theoretically) have specifically searched for what you have for sale before they get to your web site.

So that leads us to the three flavors of CPC management - meh, good, and excellent - and what you can expect from them.

The first flavor is Meh , a bit of street slang that I think is popular due to The Simpsons. With meh CPC management you'll get straight (what you normally get) conversion rate to about straight and a half. So if your "normal" conversion was 2% you'd see rates of 2-3% via your CPC campaign if it had meh management. This is the level that most inexperienced folks achieve on their own by simply going to the click engine and making their own purchases without any help.

The next flavor is good CPC management and it is characterized by conversion rates of straight and a half to triple straight. So if your "normal" conversion rate was 2%, you'd see rates of 3-6% with good CPC management. This is the performance level of most professionals and individuals on their own have a really hard time achieving this.

The last flavor of CPC management is Excellent and it is characterized by triple straight conversion to ten times straight. So starting from your normal 2% you'd see rates of 6-20% with excellent management. This is the land of professional only, you never see individuals achieve these sorts of rates over time.

Recently I was looking at a website that has a 1.5% conversion rate and an average order profit of nine dollars, that makes their BECAC 13.6 cents.
(1.5% conversion means it takes 66 visitors to make a sale and nine dollars divided by 66 is thirteen point six cents)

So let's take a look at what the different flavors of CPC management might do for this website and what it would do to their bottom line profits when selling products via CPC.

We're going to make a silly assumption, that all clicks cost ten cents, to improve the clarity of the example here. Actual click costs vary dramatically and are often based upon an auction system but we'll just ignore that for right now.

So suppose our friends with the 1.5% conversion rate and the $9 average order profit wanted to sell 1,000 "Widgets" (A fictional product). To do that they'd need 66,000 visitors to their website. If those folks cost a dime each that'd be $6,600 and as they would have profited $9,000 on those sales the net profit would be $2,400. Pretty good but hardly great. So let's see what would happen if they had a different flavor of CPC management

So if a professional offered the high end of "good" CPC management they could charge a $2,000 fee for their efforts and you'd come out way ahead of what you could do on your own. The click cost of $2,222 plus their fee of 2K is $4,444 - about a third less than you'd have paid on a straight conversion rate. Your bottom line profit here would be $4,556

A mid range "excellent" CPC professional could charge you $2,500 and in fact be a better deal than the person who wanted $2,000. The click cost would be $1,444 and the $2,500 fee would mean you'd have bottom line profit of $5,056 ($9,000 gross profit minus total costs of $3,944).

So here is the bottom line: as an Internet Entrepreneur you need to consider the total cost of your sales efforts - it important to realize that in the land of CPC that really "Expensive" professional may in fact be the most profitable option of all.

Merry New Year...

So this is my last issue of the year - we'll be skipping a week and the next Web Enlightenment you'll receive will arrive on January 6th, 2009. One year of Web Enlightenment has now been published and early next year I'll be organizing the archives.

I've had a great year and would like to express my thanks to all of my wonderful clients. You folks make me happy and for that I thank you.

I'll be attending a meditation retreat from 12/29/08 through 1//1/09 with my friends at the Milarepa Tibetan Buddhist Center in Vermont.