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This article breaks down exactly how to calculate what you should be spending to acquire new customers, and suggests some tools that can help you along the way. It also links to a Google Spreadsheet where you can input your own numbers and automatically calculate your costs.

  • ET

    Everette Taylor

    about 5 years ago #

    A couple tools I hadn't heard of before listed at the end, going to have check them out.

  • GK

    Gabe Kwakyi

    about 5 years ago #

    Good read, great calculations, thank you Diana!

    I have a follow up:

    True, you can calculate a max CPC, however with most digital marketing platforms (bing ads, adwords, facebook ads, twitter ads, etc.) you don't pay what you bid; your actual cost per click is lower and depends on performance, competitors, supply, etc. This means that if you bid your calculated max CPC, you will see low, inefficient acquisition volume.

    Can you comment on how to adapt your model to account for this concept of bid vs actual CPC head room?

    • DS

      Diana Smith

      about 5 years ago #

      Hi Gabe! I'm glad you enjoyed the article. That's a great point. Often times your max CPC ends up being a bit higher than your actual CPC.

      There isn't really a good way to calculate what to put as your max because each ad platform is different. Bidding slightly above your max is the best way to go. Then, you should monitor your average CPC to make sure it's under your calculated benchmark. If it's way under, then you can adjust your max bid accordingly. Hope that helps!

  • DS

    Daria Shualy

    about 5 years ago #

    Thanks for sharing, it's a good place to start. Once you've got the hang of it, you need to start looking at your TROI -- that's where you gain a real advantage over your competition.

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