When you’re making decisions on different marketing or advertising channels, a big question is how much can you afford to pay for each visitor or sales lead. This can help you make informed and profitable decisions. All it takes is gathering the right information and some simple math.
If you’re selling things online, you can use an online tool to track how many visitors you’re getting. Say on average you get 5000 different people visiting each per month. From your sales statistics, you had 250 customers last month with an average profit of $15. Then you can estimate that 5% of your visitors turn into customers, so each visitor will contribute on average 5% of $15, or $0.75 to your sales. This is just a quick estimate – it doesn’t account for things like repeat purchases or the chance that they’ll tell their friends – but it’ll serve as a starting point.
So now you can use this as a quick test to figure out whether you should use certain forms of advertising. If you pay 50 cents per click for a sponsored search result on Google Adwords, you’re still earning an average profit of 25 cents each time someone clicks, so you should do as much of this as you can. On the other hand, if you’re paying $200 a month for a banner ad that brings in 100 visitors, you’re paying $2 per visitor, which probably means you’re losing money, unless visitors from that banner are particularly likely to buy.
You can use a similar analysis to find out how much a retail window shopper or sales lead is worth to you. But after you make your marketing decisions, go back to treating your visitors as human beings, not dollar signs. This’ll be both more enjoyable and profitable in the long run.