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Online Direct Response Metrics

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Andy Black

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Watch this 6 minute video if you do any paid advertising, or are considering it.

View: https://youtu.be/of3JgwUCxqU



EXAMPLE

You're spending $100 a day for 100 clicks, and making $50 revenue from 2 sales.

Metrics:
Cost = $100
Clicks = 100
Sales = 2
Revenue (Earnings) = $50

Calculated metrics:
Profit = -$50

cost-per-sale = $50
revenue-per-sale = $25

Or another way:
cost-per-click (CPC) = $1.00
earning-per-click (EPC) = $0.50

You're losing money. So drop bids until your CPC is $0.50. Then you're running breakeven. (This assumes the traffic quality remains constant and doesn't get worse.)

You'll lose ad position, and your Impression Share and ad CTR will both drop.

I'd guess you'd end up with a quarter to an eighth the volume of inbound clicks. So about 12 to 25 clicks.

So you're break-even, but have lost volume.

Now get into a continuous cycle of fixing leaks in your funnel, and increasing visitor life-time-value (LTV) so that your EPC increases. Each time you do that, you can increase your bids and drive more volume.



Apart from the initial budget to buy data and determine your EPC, there really is no reason to lose any money.

You just keep dropping bids till you're break-even or are profitable.

You may have to drop them so low you get no volume... in which case you get no clicks, and therefore have no costs anyway.
 

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Andy Black

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Why are you not a voice over? Awesome video, very easy to understand.

Thanks man. I'm getting better at these videos. I'm way better in front of a flipchart bouncing around. It's hard to get the passion into my voice when I'm sat down, reading my script, and trying to keep quiet for fear of waking the kids!
 

DaRK9

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Thanks man. I'm getting better at these videos. I'm way better in front of a flipchart bouncing around. It's hard to get the passion into my voice when I'm sat down, reading my script, and trying to keep quiet for fear of waking the kids!
I can relate to that. I've learned to stand up and spread my papers over my desk when making calls.

So do you have an AdWords eBook or video guide out yet? I've honestly never understood AdWords until I started reading your threads.
 
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Andy Black

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So do you have an AdWords eBook or video guide out yet? I've honestly never understood AdWords until I started reading your threads.

Interesting feedback. Maybe I'm onto something! :)

I'm testing the waters with content and monetisation at the moment. I'll hopefully have something soon that I can direct cold traffic to so that I can apply my own skills to my own business. In the meantime I've a small paid forum while I work out what I'm doing.
 
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Andy Black

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Stop worrying about Key Performance Indicators (KPIs).

Worry about Performance instead.
 

PedroG

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It's harder to figure out your RPC when you're offering a 30 day trial. I'm curious as to how people deal with this. You won't know for 30 days whether or not those who signed up for the trial will actually subscribe.

In this case, is the option here to keep track of the percentage of users that eventually do subscribe after the trial, and just use this to figure out RPC (using the expected lifetime value, of course)?

Also, in this 30-day trial scenario, should we keep track of which keyword resulted in a user actually subscribing after the 30-day trial has passed? Or is it enough to keep track of the users who just signed up for the trial, because we're assuming if they signed up for the trial, that the product was a good fit for what they were searching for, and anything after that isn't related to the keywords themselves, but maybe they just didn't like the product or the price? Does my question make sense?
 
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Andy Black

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It's harder to figure out your RPC when you're offering a 30 day trial. I'm curious as to how people deal with this. You won't know for 30 days whether or not those who signed up for the trial will actually subscribe.

In this case, is the option here to keep track of the percentage of users that eventually do subscribe after the trial, and just use this to figure out RPC (using the expected lifetime value, of course)?

Also, in this 30-day trial scenario, should we keep track of which keyword resulted in a user actually subscribing after the 30-day trial has passed? Or is it enough to keep track of the users who just signed up for the trial, because we're assuming if they signed up for the trial, that the product was a good fit for what they were searching for, and anything after that isn't related to the keywords themselves, but maybe they just didn't like the product or the price? Does my question make sense?
Yes, if you can roll the LTV into the RPC (EPC) then that's preferable. Getting it down to the keyword level would be nice, but will need a lot of (accurate) data. Most businesses I've worked with don't have their data that granular, or that accurate anyway.

I've worked with some businesses that model using a 1 year LTV and then with a 2 year LTV. Their finance department sometimes told me to run with the 2 year LTV, and then sometimes with the 1 year LTV. Lots of bid adjustments going on when they switch...
 
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Andy Black

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So do you have an AdWords eBook or video guide out yet? I've honestly never understood AdWords until I started reading your threads.
Dayum. This was posted 08-Jun-2014.

I only just brought out a video course in Feb-2017.

(Face-palm...)
 

Locomote

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Watch this 6 minute video if you do any paid advertising, or are considering it.



EXAMPLE

You're spending $100 a day for 100 clicks, and making $50 revenue from 2 sales.

Metrics:
Cost = $100
Clicks = 100
Sales = 2
Revenue (Earnings) = $50

Calculated metrics:
Profit = -$50

cost-per-sale = $50
revenue-per-sale = $25

Or another way:
cost-per-click (CPC) = $1.00
earning-per-click (EPC) = $0.50

You're losing money. So drop bids until your CPC is $0.50. Then you're running breakeven. (This assumes the traffic quality remains constant and doesn't get worse.)

You'll lose ad position, and your Impression Share and ad CTR will both drop.

I'd guess you'd end up with a quarter to an eighth the volume of inbound clicks. So about 12 to 25 clicks.

So you're break-even, but have lost volume.

Now get into a continuous cycle of fixing leaks in your funnel, and increasing visitor life-time-value (LTV) so that your EPC increases. Each time you do that, you can increase your bids and drive more volume.



Apart from the initial budget to buy data and determine your EPC, there really is no reason to lose any money.

You just keep dropping bids till you're break-even or are profitable.

You may have to drop them so low you get no volume... in which case you get no clicks, and therefore have no costs anyway.

This is gold @Andy Black you should add this video to your Adwords course.
 

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Andy Black

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This is gold @Andy Black you should add this video to your Adwords course.
Thanks @Locomote

I think it should be part of a free course to get people's head in the right place.
I'm tentatively thinking it should be called "The AdWords Mindset" to go along with "The AdWords Jumpstart".
Maybe some 5-10 part daily email course or something.
 

NMdad

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Such a concise, well-explained video.

Increasing RPC by focusing on LTV reminds me of Jay Abraham (Getting Everything You Can Out Of All You've Got).
 

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