Cost Per Sale: What Is Cost Per Sale?

Cost per sale, also known as cost per conversion, is the amount an advertiser pays for each sale (conversion) generated by a particular ad.

How is cost per sale calculated?

To calculate your cost per sale, simply divide your total costs by your total revenue from sales. So, if your total monthly costs sum to $100,000, and you drive $1,000,000 in monthly sales revenue, your cost per sale is 10 cents. Nothing to shake a stick at, partner.

How can you reduce your cost per sale?

From a mathematical standpoint, you can go about this in a couple ways. You can reduce your costs, or you can increase your conversions – and, thus, your revenue from sales. Let’s look at these two strategies in turn.

Cutting costs

The best way to reduce your advertising costs is to stop wasting your paid search budget. For starters, make sure you’re not using exclusively broad match keywords. Although the occasional broad match is a great tool to reach a larger audience of searchers, it generates very few qualified leads. That’s a lot of clicks from people with absolutely no interest in converting. Alternatively, long-tail keywords allow you to reach a smaller, hyper-relevant audience of prospects with considerably more purchasing intent. Your volume of clicks may fall, but you can expect those clicks to convert at a much higher rate.

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Long-tail keywords attract relevant searchers at a lower CPC.

Another PPC mistake we see all too often is neglect of negative keywords. These bad boys allow you to identify searchers who demonstrate a clear lack of intent and prevent your ads from showing to them. So, if you sell new cars, failing to use negative keywords will allow people looking for used cars to see your ads. If they click through, you pay for nothing. To avoid this nightmare,, bid on “used cars” as a negative keyword to ensure that you don’t lose money.

Within Google Ads (formerly known as AdWords), bid modifiers allow advertisers to adjust their bids on certain keywords depending on several factors: the time of day, the location of the searcher, whether the searcher is on mobile or not, etc. Although this sounds like a dream scenario for capturing leads, bid modifier abuse can quickly escalate your CPC to an insanely high level. Use this tool in moderation.

Boosting conversions

If you want to outperform your competition, you have to stand out. A great place to start is your landing pages. No matter how beautiful they look, if the offer is boring or commonplace – a discount, a free consultation – you’re going to drive average conversion rates. Think about what the prospect needs right now and give it to them. Take our AdWords Performance Grader, for example. We offer an immensely helpful service that takes no time and costs no money. That is how you capture leads and drive conversions.

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Remarket, remarket, remarket. If somebody shows intent by clicking through your search ad, but doesn’t ultimately convert, don’t give up on them! Use the (relatively inexpensive) Google Display Network to show remarket and keep your company at the fronts of the minds of your prospects. Also, remarketing lists for search ads (RLSA) allow you to bid up on a keyword when a remarketing prospect searches it again. Basically, RLSA lets you step your game up when there’s real opportunity.

For more marketing tips and tricks, read the WordStream blog.