Cost Per What?, Part 2

By Wendy Montes de Oca
Marketing your product or online newsletter may be your number one priority. But if you've got a bunch of ads set up all over the Internet and no way to track how effective they are, you might as well be throwing money into the trash. You need to measure just how well your ads are performing - and to do so, you need to keep track of some critical marketing metrics.

Yesterday, I told you about CPA (Cost Per Acquisition) and CPL (Cost Per Lead) - two metrics that can help you determine whether your ads are hitting or missing with your potential customers. Here are two more crucial performance indicators:

• CPC (Cost Per Click) - the cost of your marketing effort divided by the number of times people click on your online ads. 

This calculation will help you determine how much you're paying for each click (or action of interest) your ad garners - the lower the CPC, the better. This pricing model is typical with pay-per-click (i.e. Google, Yahoo) and other search engines. Most CPCs, depending on keyword popularity, range between $0.10 and $1. I try to keep my CPCs under $0.99.

If your CPC isn't as low as you'd like it to be, consider picking keywords or key phrases that are relevant but aren't in high demand. (The higher the demand, the higher the cost.) Keyword suggestion tools like freekeywords.wordtracker.com, adwords.google.com/select/KeywordToolExternal, or tools.seobook.com/general/keyword/ will show you how popular a keyword/phrase is with people doing online searches and give you alternate suggestions. 

• CPM (Cost Per Thousand impressions) - the cost of your marketing effort divided by the number of eyeballs, measured in thousands, that viewed your advertising message on a website or in an e-mail. 

This calculation will help you determine how much money you're spending on online ads. Websites, blogs (which use banner or display ads), and e-mail list rentals typically use this pricing model. A typical online ad can range from $.50 to $125 CPM, depending on various factors (such as website traffic, list size, ad placement, ad unit size, the time of year, etc.).

Here is a great tool to help calculate your CPM:

http://www.clickz.com/static/cpm-calculator.

If your CPM isn't in a range your budget can handle, consider focusing your advertising efforts on the more cost-effective blogs or blog networks (which typically have lower CPM rates than mainstream websites). Or, you may want to switch your pricing model to CPA, where you know you're only paying for names you actually acquire... not just for the number of people who viewed your ad. CPA rates may be higher than CPM rates - but you're getting guaranteed leads.

[Ed. Note: Wendy Montes de Oca has led the marketing efforts for several global leaders, including Chase Manhattan Bank, General Electric, ADP, and Salomon Smith Barney/CitiGroup, as well as consulted for entrepreneurial companies.] __________________________________________________
This article appears courtesy of Early to Rise [Issue #2169, 10-10-07], the Internet's most popular health, wealth, and success e-zine. For a complimentary subscription, visit http://www.earlytorise.com/.