Recently, I came across this calculator Passive Income Machine's Max CPC. The max CPC can be obtained by using 3 variables: ROI, Revenue/conversion and Landing page Conversion %. Visitors/conversion on the other hand is automatically adjusted based on the three variables. Below is a screen cap of the calculator:
I think that this calculator may be a helpful tool for PPC, but it may be overly simplified and could use further improvement or explanation. Here's why:
1. Is ROAS or ROI more accurate in determining the max CPC? ROI is calculated as profit/cost and the cost includes overhead cost, salary and other costs. On the other hand, ROAS is simply calculated as revenue/advertising cost, directly measuring revenue generated for every $1 spent on advertising. There are different views whether to use ROI and ROAS for PPC calculation. Some argue that ROAS is only a metric of ROI. It is too broad and doesn't consider the overall cost of sale. On the other hand, others agree that ROAS is relevant for some businesses since it is simple and easy to explain. A 100% ROAS means that the campaign spending is equally balanced with the revenue earned from the campaign. Joanne, my own colleague, posted a ROAS related blog titled My ROAS is over 600% and I'm Losing Money?!! Defining the ROI is critical before using this calculator for our PPC purposes.
2. This calculator allows us to increase the values in revenue/conversion and landing page conversion% variables, but not in ROI variable which is capped at 500%. In a number of instances, we have ROIs that are greater than 500%. Is there any reason of why the ROI is capped, but not the other two variables?
3. Will this calculator be more practical for B2B or B2C clients? It is quicker for B2C clients to obtain the final sales data which enable them to calculate their max CPC based on the profit margin. For example, product X had a 10% margin and cost $34.95, meaning that the company made $3.50 in profit per sale. Just by looking at the profit and the amount of PPC competition for that product, its max CPC should not go over $3.50 or the company will lose money. Now, how about B2B clients? They have a different, more complex and longer buying cycle than B2C clients. Will this calculator be a practical tool for them to calculate the expected max CPC?
4. Max CPC based on Google's Quality Score versus max CPC from the calculator. This calculator requires 3 variables to calculate max CPC. However, as we all know, max CPC is determined by Google's Quality Score. I wonder whether the max CPC generated by the calculator is comparable to Google's.
At the present time, I believe this max CPC calculator can be used as a supplement for our PPC research. However, we may have to wait for the training video presentation that will explain the calculator and its functions in more details. I also hope that the presentation will answer the questions that I have mentioned above.