There are a few things every store owner needs to understand about how to use Pay-Per-Click (PPC) advertising profitably.
Firstly, learning how to setup and run a paid search account properly is hard. This is something you should probably outsource to an expert.
Google make it pretty easy to launch your own account and start spending money with them. But your interests aren’t necessarily theirs. Google are very happy for you to spend up big in AdWords, and they’ll happily give you ideas on how to spend more.
Instead, what you should be focussed on is the bottom line. If you are going to spend money on pay-per-click advertising, make sure you know your gross profit from sales and your total advertising costs.
You need to know if you are making more than you are spending – sounds obvious, but many businesses spend on AdWords without knowing this.
Here is the formula that is your secret to success:
- Total Profit – Total Advertising Costs = Net Profit (or Loss)
Lets say your WooCommerce store sells $1,000 worth of umbrellas and they have a 50% gross profit margin (so you’d make $500 in gross profit). If you can spend $200 on advertising to make $1,000 in sales, this is your net position:
- $500 – $200 = $300 net after advertising costs (great result!)
But say your total advertising costs per month were $2,000 to generate $1,000 in sales
- $500 – $2,000 = $-1,500 net after advertising costs (ouch!)
Ok, this is really obvious when you look at it this way, isn’t it? So make sure, before spending any money on AdWords, that you are be in a position to know your Total Profit from Sales and your Total Advertising Cost, every month.
Having Google Analytics set up with eCommerce tracking is a great way to see which sales have occurred via paid ads vs which have occurred via organic search or referrals.
For even better results, break down your figures by Category (some product categories may generate higher profits than others) and focus on your most profitable categories first.