It can be easy for marketing spend to run away with itself, which is why there are some areas to consider to reign it back in.

1. Calculate Your Selling Price

The first step when using online marketing to sell your products is to understand your selling price and your product margin. The easiest way to do this would be to note down all the costs associated with your product. This would include purchase cost, picking cost, shipping fees and any other costs you incur.

item cost calculations

2. Understand Your Margin Cost

Once you’ve calculated the overall cost of a product you need to understand your profit margin. For example, if a unit cost £440 and the RRP was £1,000. Then the profit margin for that product would be £560. If you didn’t consider marketing costs when working out your product costs, you would need to factor this out of the profit margin.

3. Calculate your Cost of Sale (COS)

Your COS is a key metric when it comes to Google Ads Advertising. This indicates how much you can afford to spend on advertising to meet your margins.

Cost of Sale = Media Cost / Revenue * 100

This figure can easily show you how much flexibility you have for your Google Ads campaigns.

4. Understand Your Google Ads Conversion Rate

Once the above calculations are completed you need to think about your websites conversion rate. This is a strong indication on whether or not your Google Ads campaigns will be profitable or not.

Conversion Rate = Total Conversions / Total Clicks or Visits * 100

It’s the percentage of users who complete a conversion once they’re on your site. Users may be prevented from completing a conversion by slow load speeds, bad user experience or site errors. The more accessible and user friendly your site is, the higher conversion rate you’re likely to have.

conversion rate and cpc calculation

5. Use Google Keyword Planner to Plan Your Campaigns

Google Keyword Planner tool allows you to easily forecast how profitable your campaign keywords would be. This tool can show you the average monthly searches for a keyword, as well as the average cost per click. You can use this data to forecast the cost of your marketing plan.