Pay-per-click costs have always been questionable. At times, the average PPC Conversion cost has been relatively low, but in recent years, costs have spiralled out of control reducing the chance of ecommerce companies making a profit on their initial investment.
But the average PPC conversion cost doesn’t have to be a reason to stop marketing through this channel. There are other considerations to why ecommerce companies should continue to use this medium to reach new customers.
The Historic Average PPC Conversion Cost
Data from 2005 has shown that the cost was just $0.38 (£0.24) per click. Conversion rates were also relatively low at $10.18 (£6.37). This isn’t such a bad cost for many ecommerce companies who would be looking to generate significant revenue from online sales. Although historic data is scarce, we can estimate that online spending was approximately £45.38 per transaction.
That could have led to a generous profit margin ten years ago. For the next three years, the average conversion cost decreased and stabilised at approximately £4.39. But at the same time, price per click was increasing and by 2009, the price exceeded $1 (£0.68) and the average PPC conversion cost had risen to over $12.60 (£7.88). From the previous year this was a 79.5% increase in the cost to sell via PPC.
The cost of conversions continued to increase until 2012, when a historic conversion cost of $24.40 (£15.25) became the industry standard. The next year there was a small relief for PPC costs. The average cost for conversion dropped to $10.44 (£6.53). This is attributed to a conversion rate in 2013 that was more than double what it was in 2012.
However, this respite was short lived. In 2014, the cost per conversion was $30.25 (£18.90) before reaching a new high in 2015 of $44.50 (£27.82).
This might make some ecommerce companies run away, however, there are some benefits. The average online purchase in 2014 was £55.36. Depending on profit margins, this does allow for ecommerce companies to make a small profit on their goods.
The Long Term Gains
However, it isn’t a single transaction that your ecommerce company should be looking for. Instead you need to be aiming at generating long term customers. Existing customers are easier and far more cost effective to sell to and with the right customer service you can keep them coming back and encourage them to spread news about your site via word of mouth.
So how can you gain long term customers through your campaigns that make the average PPC conversion costs seem like a worthwhile investment?
- Give great customer service – customers want to be treated like they are important. Therefore, ensure that every interaction you have with the customer is positive.
- Move them onto your email list – once they’ve made a purchase they have given you their email contact details. You also have the knowledge of what products have attracted them to your brand and what they bought, so you can also market complimentary or substitute products via email.
- Email regularly – brand loyalty can only really be achieved if you stay in the minds of your customers. Therefore, you need to be regularly emailing your customers with the latest deals and offers, not doing it on a whimsical basis.
Once you’ve implemented these three elements into your business operations you can start to see that initial investment becomes more worthwhile.
There is a trend for the average PPC conversion cost to increase. Recently it has risen so far that it could be questionable for whether or not your ecommerce company can afford to use paid adverts in your marketing mix. That is unless you consider all customers gained through PPC to be long term customers and continue to market to them through email marketing. Then that initial marketing investment can seem worth it and your business can grow.
Do you use paid adverts for your ecommerce company? What was your average PPC conversion cost?
Let us know in the comments below.