In order to justify spending money on paid search (PPC), you must understand the value of the desired result. For example, what is a lead from a web form worth to you? Or, how much are you willing to pay for $1 of revenues from your shopping cart? These results are actions on your site that are easily tracked using Google Conversion Tracking or Google Analytics.

Initially I found it surprising that very few companies actually know what a lead is worth or what they can pay for revenues, but over the years I have realized most companies struggle with this. Taking the time to figure this is out is absolutely a must! It may require some reverse engineering of the sales funnel metrics (lead – opportunity – close – upsell) or a visit to the sales team or accounting office to figure it out, but the benefit of knowing what you can pay for new business is paramount!

Knowledge is king, and it is all available information inside a company. Even if you only get 50% of the data and have to guess the rest, you are far better off than without. If you don’t know what it will take for you to make paid search profitable, and deliver on it, you will remain an expense post in your company – and expenses get cut in tough times! Take the opportunity to drive positive results; don’t remain part of the problem. To me, this is more of a mindset than having the “correct” answer; if you keep thinking ROI, you will keep improving over time.

How Google Calculates Cost Per Click