I've been running my Shopify site for a few months now, and have a few stats I can use to calculate my revenue x sessions x ads average order value x conversion rate.
I'm just wanting to run my calculations past some members and see if they are right.
Using some example figures below just to illustrate how my spreadsheet is working:
Assuming a .87% conversion rate and an average order value of $120:
If I receive 8 orders per month and ~680 sessions per month, the average per session value is $1.40
So, assuming the majority of my traffic is paid, the net revenue per click/session for Google is .13cents and Facebook $1.22
I feel like I'm making a miscalculation or not factoring something in, or I am completely mis-calculating things!? Basically, I'm wanting to try and work out how much paid traffic I would need to generate the revenue I want to achieve. With a .87% conversion rate, if I wanted to achieve $5000 revenue per month for example, and 70% of my traffic is paid, what is my ad spend versus revenue? How much traffic to I need to generate?
Can anyone provide a basic formula or provide links to any online calculators/spreadsheets?
Thanks so much!!
I would recommend tracking Cost per Purchase and breaking it down per marketing channel instead of focusing on CPC.
Cost Per Purchase (Total): $80
- Google: $100
- Facebook: $60
Required purchases for $5000 revenue: 5000 / 120 = 42
Cost for generating $5000 revenue on both platforms: 42 * 80 = $3360
Cost for generating $5000 revenue on Google: 42 * 60 = $2520
Cost for generating $5000 revenue on Facebook: 42 * 100 = $4200
You need to use ROAS, which is all conversion value divided by ad spend.
If your conversion value is $960 (120*8) and your ad spend is $952 (680*1.4) You are at nearly at a loss.
You need to lower your bidding by half, exclude search terms, improve ranking etc... to increase your return of investment.
Your ad spend should be 500%, ie $1000 conversion value and $200 ad spend = 5 or 500%
Hope this helps.
Hope I got your question right, please double check my calculation:
Cost per conversion = Cost/ Conversions = (cost/
click) / ( clicks/conversions) = CPC/Conversion Rate =
Ads investment = Cost per Conversion* Number of conversions = Cost per Conversion*(Revenue / conversion_value) = (CPC / Conversion Rate) * (Revenue / conversion_value)
Assuming Facebook and google have same conversion rate, as suggested from your question,
Google Cost per Conversion = 1.27/0.0087=$146
FB Cost per conversion = 0.18/0.0087=$20
Assuming a conversion value is $120, For a revenue of $5000:
On Google you'd need to invest 146*(5000/120)=$6083
On Facebook you'd need to invest 20*(5000/120)=$833
Keep in mind that CPC , conversion rates etc. vs ads budget is close to linear when your audience is large enough comparing to the budget, if it's small and frequency is effecting ad quality then the formula will tell a different story.
All the best!