The CPC (Cost Per Click) "Is It Worth It?" Calculator

Many businesses use Cost Per Click (also called Pay Per Click) advertising in order to drive traffic to their websites. CPC can be a powerful tool for promoting a site, and there's a good case for arguing that it should be part of every business's marketing mix.

What isn't often discussed though is the fact that for many industries, CPC ads can be very expensive, to the point where it actually isn't economically viable to rely solely on this type of advertising.

The calculator below is designed to help you make sensible decisions regarding whether your business model is actually a good candidate for the Cost Per Click model. The results will change automatically when you change the input fields.

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Basic Assumptions
Gross Margin %
Avg Size of Sale $  
Avg Cost Per Click $  

Market Size
Market Size  
Market Capture % %
Annual Purchasing % %
Likelyhood of Repeat Business %

Customer Capture
Click-Through Rate %
Purchase Rate %

Results

Net Profit Per Sale
Goal: Customers Needed Per Year
# of Clicks Needed to Reach Annual Purchase Goal
Annual CPC Budget
Monthly CPC Budget
Acquisition Cost / Customer
Gross Sales
Net Sales (before CPC/PPC and other expenses)
Net Sales less CPC/PPC cost
Recommendations  

Disclaimer: There are a large number of variables involved in the decision making process for how you should set up your marketing "mix". This calculator is intended for illustrative purposes only, and you should use your own common sense (as well as your feel for your own business) in making those decisions. The goal here is solely to illustrate how the cost of campaigns can compare to gross product margins.




Gross Margin

This is the internal gross margin on your product or service.

Average Size of Sale

This can be difficult to estimate in some cases. A rough guess is good enough here.

Average Cost Per Click

Most CPC/PPC programs start at around $0.10 (USD) per click. Large ticket, competitive products like life insurance can run around $40 per click.

Market Size

This is the number of potential customers, not the dollar value of the market. There are roughly 7 billion people in the world, 100 million families in North America, and 5000 Fortune 5000 companies.

Market Capture %

Your goal for the percentage of the overall number of customers in existence that you intend to sell to. This will help determine the upper limit of your annual sales.

Annual Purchasing %

Most people will buy food on a regular basis; cars, on the other hand, may only be purchased every few years. This number won't work well if your market is disposable razor blades, but it will help calculate roughly what the annual market for your product or service is.

Likelyhood of Repeat Business

If your customers are highly likely to return for repeat business on a regular basis, the "lifetime value" is much higher, and it may make more sense to spend more money (on a per capita basis) to acquire new customers.

Click-Through Rate

This is the percentage of people who see your CPC/PPC ad, who click through to your website. On the low end, this can be zero. The highest we've seen on a sustained basis is around 20%.

Purchase Rate

Only a portion of people who click on your ad will actually make a purchase from you. This percentage can vary significantly based on a large number of factors. A rough guess will work here.