“What Conversion Ratio should I be getting?”

“What is a good CPC?”

Tough questions… but they are very important questions that can make or break your online selling venture.  It’s important to have the answers, so you can create attainable goals.  Whether you’re selling your own products, or doing affiliate marketing I have developed a tool that can help you answer these questions using a very simple formula.  I’ll start by explaining the basics, then give you some real life examples of how you can use this profit calculator to help you set realistic goals for your campaigns.

When you are running traffic to an offer through PPC there are basically three very important factors.  Everyone’s case is different, but you will typically have varying degrees of control over each of these deciding factors.  The way you adjust them, will determine if you make money or not. The Three important numbers are: Cost Per Click (CPC), the Conversion Ratio, and the Payout/Product price.

Using simple math, you can quickly see if your campaign will be profitable.  You need to make sure you get back at least as much money as you put in.  At the least you must break even, anything above and beyond is profit.  You’re shooting for a positive return on investment (ROI).  As I mentioned before, everyone’s product, landing pages, and situation is different so I’ll just get right into some examples.

This first example is grossly simplified to show the concept, then I’ll get into some real world examples.

Suppose you have a product you’re selling and you make $50 when someone buys.  Imagine your landing page has a 1% conversion ratio, 1 in 100 visits will produce a buyer.  For the traffic assume your CPC is 50 cents.  The math is pretty easy here.  You’re only going to break even in this situation if the numbers hold.  You’ll spend $50 to get 100 visitors ($.50 CPC * 100 Visitors=$50 Spent), and you’ll make $50 based on your one percent conversion ratio.  Not so great, but at least you’re not losing money.  1% conversions, and 50 cent CPC is your bare minimum goal on this campaign to ensure you’re not throwing away money.

So that is a very simple example which doesn’t even require a calculator to figure out, and you should get the picture.  Now lets talk about two real examples of people who have come to me with questions about their campaigns CPC and product pricing, and how my profit calculator gave them insight into the harsh realities they were facing, as well as offered suggestions to how they can get these campaigns making money instead of losing it.

Real World Example #1

First example is a client who has an ebook which sells for $10, and planned on getting traffic through PPC.  Some of you may already see the issue here.  At $10 a sale, and PPC costing what it does these days, its going to be an uphill battle unless the conversion ratio is phenomenal.  This client has another ebook, and it converts at about 1 in 150 visitors (fortunately this ebook is getting organic traffic).  So Im using that as a baseline estimate for conversions. Through research I’ve found I can get clicks for around 30 cents.

Things are not looking good.  I throw the three numbers (CPC, Conversion Ratio, Price) into the calculator. Ouch, the calculator tells me the ROI will be -77%.  To get a $500 gross return, this landing page will need about 7500 vistitors, which will cost approximately $2250.  Thats $1700 down the tubes.  Its not looking good for this ebook.

I suggest to the client get a professional LP made with dynamic optimization to squeeze the best possible conversion ratio.  In addition the ebook needs to be redone, and more value added, so perhaps $19 would make more sense as a price point.  Before those two things happen, the only hope for this ebook is to find an SEO who can get some organic traffic flowing, or broker a deal for some much cheaper traffic and hope it converts.  Good thing they didn’t just jump in and start spending money on traffic before thinking it through and running the numbers.  Sadly they did already invest a good amount of time and money on the ebook and platform to sell it on.  Live and learn.

Real World Example #2

A friend came to me about an adwords search campaign he had been running already for almost a week.  Looking for suggestions on how to improve things.  So I ask for the all important details.  He gets about $75 a sale for his service offering.  He doesn’t really know his conversion ratio, he hasn’t sold anything yet.  And the whopper, his CPC is $4. Holy crap…  this guy is in trouble.  I give him the benefit of the doubt, and just guess for a 1 in 50 conversion ratio.

I enter the numbers into the calculator.  The news is not good, the ROI will be about -62%, and that is with a 1 in 50 conversion ratio which is probably wishful thinking.  For a $500 gross return, he’s going to need to make seven sales.  That will take 330 visitors at a cost of about $1320, he’ll lose about eight hundred dollars.

Bottom line here, he’s going to need to get that CPC down, a LOT.  I suggest trying the content network, with some creative placements, or moving to a platform where he can get some decent traffic for cheaper.  He’s gonna have to ramp up the volume, and see how it converts before any real conclusions can be drawn as to whether his model is going to be profitable.

Conclusion

Remember the three magic numbers: Cost Per Click, Conversion Ratio, and Payout/Price.  Then plug the numbers from your own products and campaigns into the profit calculator.  Use the results to set a baseline goal for your campaigns.  Conversion Ratio is usually where people get tripped up.  If you haven’t already run the traffic its probably safe to assume around 1%, 1 in 100.  Thats pretty average for most products online.  You can also go by the word of your affiliate network, they aren’t always correct because its just an average typically, but its a good place to start.

I’ll teach you what you need to know to setup your Google checkout account.  The settings you’ll want to modify on your account preferences.  A basic rundown of how the buttons work. I’ll show what encryption is used on the XML so you can generate your own buttons on the fly.  You’ll learn to use Instant Notification with Google checkout.  And I’ll give you my free script that does all of the above.  It will allow you to integrate Google Checkout dynamically, without needing to use the checkout API.

There are a few benefits you get by using Google checkout.  My personal favorite, is the Google Checkout badge being displayed on your Adwords ads.  This is almost guaranteed to increase your ads Click Through Rate, even if your customers aren’t primarily using Google Checkout.  The badge just makes your ad stand out more and it gets looked at more often.  Better CTR’s save and make you loads of money.

At the time of this writing, you also get free transactions, with no fees, up to 10 times your monthly AdWords spend.  Standard rates are comparable to Paypal and other online payment processors.  Bottom line is, its easy to add, and you will likely get a couple extra sales out adding Google because there is a growing number of people using Google checkout instead of Paypal.

Once you are approved for an account, add and verify your bank account.  This is how you get paid.  The money goes into your bank account shortly after the purchase goes through on Google Checkout.  Google doesn’t yet offer a debit card like Paypal does, hopefully as it gains traction this will happen.  There is a setting in the preferences that keeps the order from being processed and the funds being captured immediately.  In some cases this is what you want, but if you’re automating your order process, you should probably set this to automatically approve orders.

Like Paypal, you can generate buttons, using Google’s interface.  Their buttons are encrypted though, so its not as easy as just editing items on an html form.  Google uses encrypted XML data via POST, rather than just sending the info plaintext in the form values.  Typically if you want to integrate with a database or a do a cart system, you would need to integrate with the API, unless you can emulate googles encryption.

It is possible, though somewhat of a pain to generate your own buttons without using the API. The formatting of the XML is very picky.  Also the HMAC SHA1 encryption used doesn’t have a built in implementation in PHP nor on most other common scripting languages either.  Its too much to explain here, keep going to the bottom and you’ll see the links to the free google checkout script.  You can see how the HMAC SHA1, XML and encryption is all put together to make buttons.

You can do most things you can with Paypal on your Google checkout buttons.  You can setup a return URL or thank you page.  This page is not guaranteed to fire.  The customer has to click through from Google after purchasing to see this page, which may or may not happen.  If you have a task necessary for your order process, handle it via instant notifications, not the thank you page.  Use the thanks page to give confirmation info, and inform the customer of the next steps to get their product.

Google has Instant Payment Notification (IPN) similar to Paypal, they just call it something different.  In the settings look for API Callback URL.  Set it to a URL where the IPN script resides on your server, and it will pass data when an order is completed. In fact, Google actually gives more notifications than just when an order is completed, unlike paypal.  It will send data from failed orders among other cases to your notification page.  In the free Google Checkout script available below, you can see a sample IPN script which will catch the data which gets sent back from Google and show you how to handle it.

Download my free Google Checkout button PHP script

Download google checkout button script here. Easy to use php script creates google checkout buttons in just 1 line of code.  For integration with a database driven dynamic site, or good for stand alone sales pages with only a few products.   No API integration required, this is the easiest way to integrate Google Checkout.

Its easy to extend the script to support additional google checkout button features. Comes with simple copy and paste examples. IPN and Return URL sample scripts are also included.

If you’re just here for the paypal php code you can download the script near the bottom of the post.

I’ll explain the different ways you can take payments with Paypal. How to make Paypal buttons with basic options, this is how you get paid. And show you where to find all the options for Paypal buttons. You’ll learn distinction between Instant Payment Notification (IPN) and a Return URL, and what you should be doing with them respectively.

Paypal’s different payment choices

At the time of this writing, there are actually three separate payment methods available from Paypal. Website payments standard, is the one I’ll be going over. It is the most basic simple account they offer for taking money online. You can hook your checking or savings bank account to Paypal, using the routing and account number printed on your checks. This allows you to transfer money to and from your Paypal account to your bank, where you can get the money. And after a while, you can request a debit card that is directly hooked to your Paypal money.

The other two methods offered cost money. First, Website Payments Pro with Express Checkout is considered the “mid level”. It lets you accept credit cards directly on your site. They won’t have to leave your page, and go to paypal to pay. You’ll need an SSL certificate so you can take credit card data over HTTPS, that’s the page with the lock icon showing. Website payments pro allows you to integrate express Paypal checkout into the same process for using credit cards directly on the site. This is slightly different than just standard payment buttons. It provides for a tighter integration when paying with Paypal. Which will ultimately increase your overall conversions.

Finally there is also PayFlowPro formerly a Verisgn product, recently aquired by Paypal. This is a full blown merchant account, with virtual terminal. Which like most others requires application fees and a more formal sign up process. With PayFlow You need to do a full API integration to accept credit cards directly on your site and have the money deposited straight into your business bank account. There are no buy it now buttons with this “grown up” solution.

Standard Paypal Payment Buttons

Making a button payment button is pretty easy. You use HTML code to make a form on your page . The form contains fields containing the required values. Such as the price, who’s account the money should go to, the name of the product, and more which I’ll show you in a code sample below.

The submit button for the form is the buy now or pay now button. You can use your own custom graphic, or one of the default paypal buttons.

When the customer clicks pay now or buy now, they are taken to Paypal’s page. Shown a summary of the order with price and other info. And instructions for them to make a payment by credit card or login using their existing user name and password to pay with funds in Paypal.

There are many possible parameters for creating Paypal buttons. In my sample I’m going to give the required options, and a few of the most commonly used options. In my free button script download, there are more examples of options you can use. This is an example of a Paypal button with the most basic options:

You can take this, and paste it onto your site, change the info to reflect your product, and you’ll have a payment button.  The “name” value in the example, are common fields Paypal will use on the button. The names are pretty self explanatory.  If you need detailed explanations, or want to see all the button options and parameters visit this Paypal document.

Integrate with your product database

If you have a lot of products, to put this pay button on all of your pages would be tedious.  That is if you are copying and having to update that code manually. If you make a PHP function to ‘echo’ the paypal form, you can use variables from the database to fill the name value fields. Dynamically setting price, item name, and other values. This will save you lots of time as the Paypal form will be in one place, getting reused over and over with different database values injected.

IPN vs Return URL

Ok, both of these things happen after a payment is made. IPN is behind the scenes, meaning the customer doesn’t see it happen. The IPN is a call from paypals servers which sends customer and order data to a page you specify. The return URL is where the customer will be taken, if they click through, after paying. They may never make it to the return URL if they don’t click on the link on the paypal confirmation page.

What to do on the IPN page

If you have gone into the Paypal preferences, and set your IPN URL to the page you created on your server.  When an order is completed it will send user and order information to that URL. There are a few things you’ll normally want to do on the instant notification page.

If you have an orders database, you will likely insert a row into an orders table. Or perhaps mark an unfinished order with the status finished. You may want to send a thank you and instructions email to your customer. Important steps in the order process that need to happen on every order, should be done on the IPN page not on the return url. The return url is not is not reliable and may not fire every time.

Make Use of the return URL page

When you create your buy it now buttons, you can set what page the customer can return to after the purchase is made. This page is usually called the thankyou page or thanks page. If you sell a digital product, give the download link or instructions here.

This is also a great place to upsell an additional offer to your customer. I like to use something like greybox for a nice clean popup to present the offer. Make it a one time thing, only available here, on the thanks page. If you’re comfortable, and you should be, put an exit pop on the thanks page if they didnt take the upsell, try another offer, or add more value the one they declined.

Download my free Paypal button PHP script

Download the paypal button script here. Its got an easy to use php function to make buttons with multiple item capability, and all basic options. For single button “one pagers”, like sales letters, or use on dynamic database driven multi product sites.

Easily extendable to support any paypal button features. Easy to follow, copy and paste code samples. Clean and clear examples. Return URL and IPN sample scripts included.

Well they didn’t have access to the right tools. The first free tool up for grabs on profitphp.com is a keyword grouper.  With it you can group thousands of keywords in an instant.  You’ll find patterns and groups you never knew existed as you adjust the sensitivity settings and your keywords start to clump differently.

In this article I’ll tell you what the keyword grouper does.  I’ll explain a little bit of how it works.  Show you how to use the grouper on your own keywords. Plus ways to use the grouper to increase profits.

I know now… that there are quite a few keyword groupers out there. Trying to think of a name and searching for “keyword grouper”, I found out a few already existed. The one google offers is not very good, I tried it. It doesn’t have much in the way of settings and makes small groups hinged around the highest volume keywords. It is was one of the only free ones though. A few of the bigger keyword research tools have keyword groupers bundled in. I haven’t used any of those, because I don’t own any of those programs and therefor can’t comment.

What is the Keyword Grouper?

The grouper does exactly what it sounds like it does, you feed it a list of keywords and keyword phrases, and it allows you to adjust sensitivity settings and filters, and you wind up with really nice tight groups, really fast.

This is not some piece of crap, that sorts the list alphabetically, or matches exact words. You could do that with excel, and I wouldn’t waste your time like that. Its got a somewhat complicated algorithm that uses metaphones, soundex, levenshtein distance, along with a few other tricks to do the grouping. It will chew through your keyword phrase list and even spit out text you can paste right into adwords to create keywords with bids.

Try Free Grouper

You can find the “grouper” here and give it your own keywords or use the sample data set from a live site. Hopefully its better than the other offerings out there, and if its not, I’ll make it better… let me know. It probably could use a real name too, any thoughts?

The “grouper” tool was originally developed for onsite SEO research and its just as powerful a tool in that realm. Care to speculate on other uses for this type of tool… Leave a comment