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Tuesday, July 22, 2008

Analyzing PPC with Tableau, Part 2

A big part of knowing if the phrases you are buying are a good value or not is knowing how much they cost per click. While this seems like a no-brainer, it is not always. Rank is an important influencer on cost per click. While Google has added all sorts of variables to how cost per click is figured out, rank and CPC are still roughly related (it is possible to less for higher positions if you have a very high quality score, unlike the pure pay for placement model that other services, such as business.com, use).

One part of running a PPC campaign is to determine how much you can spend per click, on average. A simple way to do this is to do the math backwards based on the average value of a sale and your website PPC conversion rate. In this example, if you sell pillows and have an average online sale of $50, you can normally spend up to $2.50 per visitor (assuming visitors:clicks = 1:1, which they never are). So, you need to set spending caps on your PPC keywords to keep your campaign profitable.

Average Sale Value $50
Sales 1
Conversion Rate 5%
Visitors Needed 20
Max CPC $2.50

This is a very broad and simple way of looking at costs. In reality, your CPC is going to be all over the place and it's not good enough just to let it run and think everything is fine. Periodically (every 2 to 4 weeks) you should review your CPC and placements to look for ways to bring costs down and increase profits. One way that I like to look at the information, is to use Tableau to compare Cost by Rank. In this way, I can see what placments are more or less expensive, then I can investigate the expensive ones to see if their conversion rates justify their expense.

By using size and color, I can very quickly spot where the budget is going and if anything is far out of bounds. You can also eyeball what is "normal". The closer those big red spots get to the 95 percentile mark, the more attention they need. If you know your Max CPC, you can add that as a reference line also. All in all, this is one way to get a sense of where your PPC campaign is at. It offers a quick way to see where trouble may be brewing and can give you some direction on where to start investigating your campaign performance for optimization.

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