Advanced PPC: Optimizing for Per Visit Value
April 23, 2012
You likely have keywords that spend money, get conversions, but convert at well below CPA/CPL goal. While these keywords are frustrating, the real sneaky profit killer keywords are those that spend money, get conversions but hide underneath good performance.
Good performance often means good CPA/CPL. So a keyword that has a goal of a $30 CPA and that is at $28 is a good performer. You optimize that keyword by giving it budgets, working on ads to increase clicks from it, and so on.
Advanced PPC goes beyond CPA though and maybe more importantly going beyond averages. There are a myriad of other metrics that dig below the surface. But for this post we are going to focus on per visit value.
Simply put this is revenue generated / clicks = PVV
This calculation tells you how much revenue a click for a keyword, ad group or campaign generates. Then, using this information, you can determine if based on your CPC those keywords, ad groups or campaigns are actually profitable.
To look at this number in Analytics go to conversions => ecommerce => overview => source/medium => view full report. Then go to any secondary you want (campaign, keyword, etc.)
You may see something like this:
To determine your ideal PVV divide 1 by your average conversion rate. This will get you the number of clicks you need to get one sale. Then divide your average sale price, or ideal sale price, by the number of clicks it typically takes to get one close.
Goal CPA: $30
Average CR = 1.25%
Number of clicks need to get 1 sale: 1 / CR (1/.0125= 80)
Average Sale: $200
Goal PVV: Average sale / clicks (200/80=2.5)
So in this example, every click should generate $2.5 in revenue. If it is not, even if it is at CPA goal, it is not as profitable to you as other keywords, ad groups or campaigns.
Now that you know your ideal PVV, you can create custom CPA goals based on it. This allows you to optimize for bottom line profitability by bidding lower on keywords that achieve your CPA goal, but that drive less revenue (either due to a lower conversion rate, higher CPC or lower average revenue.) To optimize for PVV first find all keywords below your goal PVV. Then multiply your goal CPA by the percentage your per visit value is under your ideal PVV. This will give you a lower bid amount than you have used, and thus should lower your CPA.
Building on our earlier example, let’s say you have a keyword that generates a PVV of $2.00 instead of the ideal $2.50. The CPA of this keyword is actually right at the goal of $30. To figure out what the real CPA needs to be based on the fact that the keyword is less valuable than others is to multiply the goal CPL by the percentage difference the PVV is away from ideal.
First, determine the difference in PVV
(2.00-2.50)/2.50 = -20%
So we need to lower the CPA goal by 20%. Or put another way, the goal of this keyword will be 80% that off the average goal.
Then multiply that difference by average goal CPA:
The new goal CPA for this specific keyword is $24. If you can keep CPA for this keyword to $24 (by bidding lower) then you can keep running on the keyword even though it generates a lower PVV for you. In the end, your profit margins on it will be the same as the profit margin on a keyword that has a CPA of $30 but delivers $2.50 PVV.
In this example we were optimizing by lowering CPA goals and thus bids. But sometimes you’ll have all-stars where you will want to actually increase CPA because average transaction value will be so high that it doesn’t make sense to treat them as average performers.
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