Hi, I own a company that sells magazine subscriptions and we have a relatively low profit margin on our sales. I was wondering what kind of conversion rate do most companies get? What percentage of clickers generally actually purchase a product (I realize this varies by products, but any examples?). Also, what is a normal amount on a CPC basis for clicks? Thanks so much - Cole
You are right- there is a wide ly varrying rate of conversion. Industry wide 1% is considered normal, 2 percent exceptional. However I am in the real estatate business and we have a much much higher conversion rate so with good smart work, increasing the conversion rate is not only possible, it is probable.
You are asking the right question though and you need to work out the formula which tells you exactly what you can pay on a per clik basis- and make money. the million dollar question with small GP's.
What Porchguy reports for the industry standard is interesting.
I have also been pondering this question and approached my estimate from a different angle. I know what CPC is required to get a postion in the top 5 of a number of my industries keywords. In fact somewhere (I wish I could remember where) I found a way to get information on what CPC the top ad on Google (for a particular search word) was paying.
If you look at the CPC and then infer some different conversion rates (like in one instance a $2.75 CPC for top position) then a 10% conversion would mean each successful order would cost $27 dollars. I know the company that has this position and I know they might be paying $27 dollars per order but they sure can't be paying more than that (becuase I have a sense for the profit margins in my product).
Bottom line is that these people have got to be doing better than 10% in the top 5 positions in my industry.
The figure that Porchguy quoted in my industry where it takes $1 CPC to get in the top five spots would mean businesses would have to pay $100 per order at a conversion rate of 1% and $50 at 2%. Both are impossible.
Bottom line, it isn't just the conversion cost but how that compares to the price of the product you are selling, the CPC and your margin.
In my business with a $125 purchase item and a 35% margin, I have got to do better than 10% conversion rate.
First thing I said was the response widely varries, but industry averages are around 1%, are known and published if you look around, this is verifiable by the pro's who spend millions on Adworks and other similar Internet advertising.
2nd-- how do you know top position is best? or what people are paying for it? Do Not trust the Google estimates. Just go try it for an afternoon, raise your CPC until you get top position and you'll know what you have to bid- no inferences or specualtion required. The second half of this is that Google themselves and others have found there is an awful lot of casual unqualified clicking in the first box. I do every bit as swell 4 or 5th, as long as I am on top half.
3 rd- It is the entire equation that counts, and this is why it is tricky. In your example of your business above you can not conlcude that you need a greater that 10% conversion rate with the info you provided. What about the cost per clik? Some industries you can buy 100 cliks for $35-- at that rate a 1% conversion breaks you even . Purhcase price means nothing-- it is your GP in dollars, your CPC in dollars, and then your conversion rate... you do better if you lower your CPC, increse your conversion, or ideally both.
Like I think these guys say, the CTR and conversion will depend on tons of stuff! Poor ad copy and ad position will obviously lower your CTR. Mine are anywhere from 1.6% to 5.1%. Then, once you get a valid prospect to your site, it comes down to your sales pitch AND your product pricing (as compared to competing offers in that market) to determine how well your conversion will be. Each time I double my product price, my conversion splits in half! The lower I set my price, the higher my conversion. I have one that was converting at 15%!
At the end of the day, my profits stay about the same. Only difference is the volume of sales. Each time I cut my price in half, my volume doubles. I prefer higher volume at a lower price because those are leads that I can use again later. :)
I usually end up paying Google 50% of my profits for the clicks. But something bad that I'm starting to see is the quality of traffic seems to get really bad and runs up my costs. Sometimes, on days where I started out with those great conversions up until noon, I'll increase my daily budget for those keywords and somehow, by the end of the day, I end up owing Google MORE than I made! What's up with that?! :(
I have keywords that draw only 1 click per 3,000 adviews (0.03%) with post-click conversions below 1%.
I have other keywords that consistently draw 10% or higher clickthrough rates, with post-click conversion rates of 20% or more.
I have many keywords bid at 3 or 4 cents per click (usually showing as the only ad, or in first position).
I have quite a few keywords at 50 cents or more (often appearing in position #7 or worse).
I have never found a positive ROI at bid rates above 70 cents, but others certainly have.
I have had keywords that went from 10% clickthrough and 10% conversion one month, to 1% clickthrough and 1% conversion a month or two later, with not much change in search volume. (I generally delete keywords with consistently low CTR and conversion, so I don't get to see those keywords improve over time.)
There is no "normal." There are norms, averages, highs, lows, and so on. There is no "normal."
About 90% of my "work" in this business is really just doing elementary-school math.
