What is your site's conversion rate?
Posted: Mon Apr 21, 2025 10:47 am
If you have an average conversion rate of 2% and an average CPC of €1, it will take you 50 clicks to achieve a conversion that will cost €50. Your AdWords cost per conversion is €50.
Now that you know your CPA, you need to calculate your total margin per customer for the product you want to promote through AdWords. To do this, you need to know (internal company information):
-medium basket
-annual purchase frequency
-year of life of a customer
-gross margin rate of the product
2. Here is the calculation method to use to obtain your total margin per customer :
One customer = €100 average basket X 4 annual purchases X 2 years X 50% (margin rate) = €400 margin/customer.
3. Now that you have your CPA and thailand mobile database margin per customer you can calculate the ROI of your Adwords campaigns :
Your total margin per customer (€400) / customer CPA (€50) X 100 = 800% ROI via Adwords.
Every € invested in Adwords earns you €8!
To go further:
This calculation is accurate but too simplistic, it actually represents the direct ROI of Adwords and only takes into account conversions directly attributable to Adwords. It is now well known that each source/action/campaign also has an indirect return which requires a more complex calculation and deserves an article in its own right. Just remember that it can happen that the ROI of Adwords is negative in direct terms (directly identifiable and attributable to Adwords) while it becomes positive (and sometimes hyper positive) when taking into account the indirect return (which to be identifiable and attributable requires a more in-depth tracking system and analysis often unknown to advertisers).
Now that you know your CPA, you need to calculate your total margin per customer for the product you want to promote through AdWords. To do this, you need to know (internal company information):
-medium basket
-annual purchase frequency
-year of life of a customer
-gross margin rate of the product
2. Here is the calculation method to use to obtain your total margin per customer :
One customer = €100 average basket X 4 annual purchases X 2 years X 50% (margin rate) = €400 margin/customer.
3. Now that you have your CPA and thailand mobile database margin per customer you can calculate the ROI of your Adwords campaigns :
Your total margin per customer (€400) / customer CPA (€50) X 100 = 800% ROI via Adwords.
Every € invested in Adwords earns you €8!
To go further:
This calculation is accurate but too simplistic, it actually represents the direct ROI of Adwords and only takes into account conversions directly attributable to Adwords. It is now well known that each source/action/campaign also has an indirect return which requires a more complex calculation and deserves an article in its own right. Just remember that it can happen that the ROI of Adwords is negative in direct terms (directly identifiable and attributable to Adwords) while it becomes positive (and sometimes hyper positive) when taking into account the indirect return (which to be identifiable and attributable requires a more in-depth tracking system and analysis often unknown to advertisers).