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How to calculate the ideal CPC to bid on a Google AdWords account?

How many times have you tried to find the 'perfect' bid for a given campaign in Google AdWords? For starters, not everyone is equally brave, not to mention the few clues that Google Shopping gives about the level of quality. That's why we thought about the usefulness of a small guide, on how to calculate the ideal CPC to bid profitably.

Not obsessing, of course, but it can make our management a little easier. When we turn to Google Academies, it's the quintessential shocking mathematical formula. Maybe you can be impressed too, right? We tried it!

Formula to calculate the ideal CPC to bid on Google AdWords:

Imagine that our business needs to achieve €100 for every €5 of investment. First, let's calculate the average order of our store:

  • Average order = Revenues / Transactions.
  • The 5% of the result of this operationwill be our quantity 'cap maximum, to be able to invest in the Google Adwords account.
  • But it doesn't end there. We also need to know, how many visits do we need to achieve a sale in our online store. We will therefore divide: 100 / % Total Conversions.
The ideal CPC to bid on Click

Stop for a moment to think about it and you will see all the sense. The final formula establishes the ideal CPC to bid as the result of this division:

Maximum amount to be invested in Google AdWords /Number of people we need to achieve a sale.

Ex. We have an online store that this month has earned 365,341 €, achieving 938 transactions. If, as mentioned above, we want 100 € for every 5 € and our conversion rate is 1'25%, let's discover our CPC Max. Ideal!

  • We calculate the average order: 365.341 / 938 = 389,48 €
  • 5% of 389'48 = 19'47 € is ours 'cap maximum to invest in Google AdWords.
  • We calculate the number of visits I need to perform a conversion: 100 / 1'25 = 80 users
  • SOLUTION. The ideal CPC to bid if we want to achieve profitability is 0'24 €

Is this operation the solution to all our problems?

No, of course not. Undoubtedly, discounting from the average order the fixed costs of the company, the data would be much more realistic, but it is information that most of the time, Digital Marketing Agencies do not know. Even with this, it can be a indicative metrics when playing with bids in the different SEM accounts. Therefore, not only for bidding on Google AdWords.

We can apply it to the ideal CPC in price comparatorsin Facebook AdsBing Ads,... Did you already know about this formula? Do you find this data interesting on a global level?  Shared knowledge makes us better. If you like it, share it! If you disagree, tell us about it! 🙂 🙂

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