In this blog, we take a brief look at how much it is to advertise on Google. I’ll chat through:
The average benchmarks by industry and cost per click to see what a suggested budget could be. Wordstream Article Here
Second, we will look at conversion rates to see how many new customers you can expect to acquire.
The average price you would expect to pay a freelancer or agency to manage your Google advertising.
Briefly look at the lifetime value of your customers to investigate the return on ad spend.
Client: Local Gym (Health & Medical Industry) Average CPC is $2.62 USD or $3.63 AUD Say the client wants to receive 200 clicks to their website per month.
Simple Math: $3.63 x 200 clicks = $726 (recommended budget)
Conversion rate (CVR) is the number of conversions divided by the total number of visitors. For example, if our local gym receives 200 visitors in a month and has 50 sign-ups, the conversion rate would be 50 divided by 200, or 25%.
Average Conversion Rate 3.36% Simple Math: 3.36 / 100 to get rid of the %. = 0.0336 0.0336 x 200 visitors = 6.72 visitors will convert (always round down 6 visitors will convert.)
Cost per acquisition (CPA) is the cost it takes to get a customer to complete a desired action, which usually refers to a conversion (someone making a phone call, filling out a form etc).
Simple Math: $726 media spend / 6 expected conversions = $121 CPA
In my experience, you will likely pay an agency a combination of a base price per month + a percentage of the media spend. Let’s say for our scenario that our freelancer charges us $500 base per month and 20% of our total adspend.
Simple Math: $500 base + $145.20 (.20 x $726) = $645.20 paid to the google ads specialist.
Taking the amount you paid directly to Google $726.00 + freelancer fees $645.20 gives us a total monthly investment of $1,371.20.
Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment. To calculate ROI, divide the revenue of an investment (gym memberships) divided by the total costs.
For this part, you’ll need the average lifetime value or average customer value to find your return on investment. Let’s say that at our gym each person that signs up for a membership generally remains a member for 3 months at $60 per month. This would give us a value per customer of $180.
Simple Math: $180 (each) x 6 (people that converted through our Google Ads) = $1,080.00 revenue.
Simple Math: $1,080.00 (profit) – $1,372.20 (cost) / $1,372.20 (cost) x 100 = – 21.29%
In this case, there was a (-) negative 21.29% return on investment because the costs were higher than the revenue received.