the cost per acquisition (CPA). So, for example, if it costs you $2 per click to reach a number one slot
in search results and your budget is for $100 per month, then you can only afford about 50 clicks per
month (volume). These 50 clicks per month don’t equate to a great volume, therefore, you might
consider a slightly lower ranking in the SERPs that will generate more volume within the budget that
you have to spend.
On the other hand, there is an exponential decrease in the number of clicks that you’ll receive as
you decrease your ranking position. In general, there is about a 20 percent difference between the
first and second ranking slots on a SERP. Each ranking slot below that increases the difference, so
some experts estimate that being ranked first on a SERP might produce at least 10 times the traffic
generated by a tenth-ranked site.
Using this information and your budget availability, you can decide whether it’s cost effective to stay
in a lower position, or if bidding for a higher spot would net greater click potential. Here’s the bigger
question, however. Ranking higher will result in much more traffic, but does the additional traffic
result in more goal conversions? If not, then spending the extra money to reach the top ranking slot
is probably a waste of money.
Carrying over our preceding example, if you’re paying $2 per click for a top ranking that generates
50 clicks per month, but only 1 percent of those visitors make a purchase from your site, you don’t
have a good conversion rate. But if you were to change your keywords a bit to make them more
specific and then reduce your cost per click to $1 for a slightly lower rank (let’s say a number three
ranking slot) that generates 100 clicks per month, and those 100 clicks also resulted in a 1 percent
conversion, you’re still reaching more conversion goals, and therefore making more money with the
lower rank than you would be with the higher rank.
So how exactly do you forecast search volumes and the cost associated with those volumes?
It’s best to start by researching a keyword list that includes 100 to 300 keywords and phrases. Use a
varied keyword list that includes both broad and specific terms. And during your research, use both
personal investigation and keyword selection tools to determine the click volume and the cost per
click for each of those terms. Using this information, you can then estimate search volumes and the
cost of those search volumes, but additionally you can estimate other performance metrics that will
help you to determine both the cost and the value of the keywords that you’ve selected. Those addi-
tional metrics include:
Estimated Click-Through Rate (CTR)
Estimated Clicks per Month
Average Cost per Click (CPC)
Estimated Budget Requirements
Using this information, you can increase the effectiveness of the budget that you invest in your PPC
program. For instance, keywords with lower CPC rates typically have less competition than more
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