Strategies for maximum pay-per-click success

Step 2
Calculate the value of a visitor to your web site

Once, you've collected the statistics and figures you need, doing the actual calculations is the easy part. Simply plug the numbers into the following 3 simple formulas:

A. Conversion rate
Figure out how many unique visitors you need to close one sale

Unique Visitors / Total Number of Sales = Conversion Rate

Example: If over the month of November, you calculate that your web site received 4,298 unique visitors, and you sold 35 widgets, your equation would look like this:

4,298 Unique Visitors / 35 Sales = 122.8 Unique Visitors Per Sale

So in this case, your conversion rate would equal 122.8, which means that you typically close 1 sale for every 122.8 visitors to your site.

B. Net profit per sale
Figure out how much profit you earn on a single sale

Gross Revenue - Total Expenses / Total Number of Sales = Net Profit Per Sale

Example: If over the month of November, you sold 35 widgets for £97 each, your gross revenue would be £3,395 (35 X £97). And let's say you calculated your total expenses (production, packaging, web host fees, etc...) for the month of November to be £2,537.

This means that:

£3,395 Gross Revenue - £2,537 Total Expenses / 35 Sales = £24.51 Net Profit Per Sale

In this example, your Net Profit Per Sale would be £24.51. This is "in your pocket, after expenses, you can bank it" profits.

C. Visitor worth
Figure out how much a single visitor is worth to you

Net Profit Per Sale / Conversion Rate = Visitor Worth

Example: This is the easy part. Just take the Net Profit Per Sale that we calculated in part b (£24.51) and divide it by the Conversion Rate that we calculated in part a.

£24.51 Net Profit Per Sale / 122.8 Conversion Rate = £0.1995 or £0.20

So in this example, each visitor to your web site is worth £0.20. (Not to be confused with the value of a customer, which is £24.51!) This means that you can afford to pay as much as £0.20 to attract one new visitor to your web site without losing money. Remember this figure!

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