Search Engine Marketing – Profits Start From Understanding Your Numbers

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Search engine marketing (SEM) is really a game of math. That is the reason why understanding your numbers is so crucial to your success. Not understanding your numbers can be really painful for your wallet.

Most people only know about how much they are paying in a single month & many people know exactly how much they are paying per click. It is good to know both, however, to stand head & shoulders about your competitors, you must do better than that.

Conversion Rate

For lead generation, you must know how much clicks brings you how many leads. Number of leads divided by number of clicks is your lead conversion rate. For sales, you must know how much clicks brings you how many sales. Number of leads divided by number of clicks is your sales conversion rate.

Cost Per Lead/Sale

You want to look at how much money you spent in order to get X number of leads. The number of leads divided by total cost is your cost per lead. You may also want to look at how much money you spent in order to get X number of sales. The number of sales divided by total cost is your cost per sale.

Ensure Your Profits

For sales, when your cost per sale is lower than your net profit per sale, then you are making profits, very simple. If it is the other way round, you just made some losses.

If your business model generates lead before making a sale, the calculation is slightly different. Based on your new leads, look at the total amount of sales you got, then divide your total sales amount by the number of new leads & you would get the value per lead.

As long as your cost per lead is lower than your value per lead, you are making profits. If it is the other way round, you just made some losses.

Tracking By Source

Remember to always separate your traffic sources & track them individually because not all sources are created equal & the returns on each source will vary.

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