Should Your Cost-Per-Click ALWAYS Be Less Than Your Visitor Value?

By Anna Johnson

When it comes to pay-per-click advertising (PPC), you've probably heard - and hopefully applied - the "rule" that you should never buy a click that costs more than your value per visitor (or VPV) (the average net profit you make per visitor).

If you don't know your VPV, it's simply the average net profit per sale x your conversion rate. (Your conversion rate is the percentage of visitors that convert into customers).

In most cases, if your CPC is NOT less than your VPV, you are losing money on the PPC campaign... and maybe in your business as a whole.

But is that always so? Does this "rule" always apply?

The answer is no and no!

There are at least two situations where you CAN afford to pay more than your VPV for a click:

1. Where you KNOW that you'll make more money on back end sales. In other words, you can afford to lose money on the first product you sell to a customer, because, on average, they'll buy plenty of products from you later on - and ultimately be profitable for you.

2. Where you KNOW that a particular keyword (or keyphrase) has an exceptional conversion rate - i.e. your testing and tracking shows that a certain keyword attracts visitors who buy much, more than those generated by any of your other keywords. You'll need to do some math, but you may find that you can afford to pay quite a bit more than your VPV on this particular keyword and still come out ahead.

Bottom line: know your metrics. You can then take advantage of "little" opportunities that lead to big increases in your profits.