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PPC & CRO: Acronyms, Vocabulary, Definitions, & Equations

CPCCost-per-ClickCost to an advertiser for each click on a promotional link by a site visitor or newsletter reader
Cost-per-ConversionThe cost of acquiring a customer, typically calculated by dividing the total cost of an advertising campaign by the number of conversions. The definition of "conversion" varies depending upon the situation; it is sometimes considered to be a lead, a sale, or a purchase.

Cost-per-Conversion = (Total Cost of Campaign/Number of Conversions)

I.e.:	Cost-per-Conversion = ((CPC * Clicks)/Number of Conversions))
	Cost-per-Conversion = (($1.00 * 42)/12))
	Cost-per-Conversion = (($42.00)/12))
	Cost-per-Conversion = $3.50


Suppose the Target Cost-per-Conversion is $2.75 & and our maximum 
budget is $120.00 is met at 100 clicks. 

How many conversions are required to meet our target?

	Cost-per-Conversion = ((CPC * Clicks)/Number of Conversions))
	$2.75               = (($1.20 * 100)/x))
	$2.75               = (($120.00/x))
        43.63               = x
        43.63               = Number of Conversions

Approximately 44 Conversions are required to meet the Target 
Cost-per-Conversion of $2.75 at maximum spending. 


CRConversion RatePercentage of respondents to an ad, or re aders of a sales message that complete the action desired
CTRClick-through RatePercentage of website visitors or new sletter readers who click on a particular link
DMADesignated Marketing AreasA region where the population can receive the same (or similar) television and radio station offerings
PPCPay-per-ClickA set amount is paid for each click on a promotional link by a consumer
PPIPay-per-ImpressionAn advertiser pays for each display (impression) of their advertisement
ROASReturn on Advertising SpendProfit made after advertisi ng costs only have been subtracted
ROIReturn on InvestmentProfit made after advertising and other costs have been subtracted


I.e.: ROI = ($50.00 - $1.35)/$1.35 
ROI = 36.04% Where: $50.00 = Gross amount of sale generated from click-through to ad landing page $ 1.35 = Cost of click Suppose 4 sales via our ad generated $645.00 in sales: ROI = ($645.00 - $5.40)/$5.40 ROI = 118% Or, 4 sales generated $20.00 in sales: ROI = ($20.00 - $5.40)/$5.40 ROI = 2.7% What if I need to achieve a minimum 8% ROI and my CPC is $1.35? 8.0 = (x - 1.35)/1.35 10.8 = (x - 1.35) 12.15 = x Let's reverse it to check our numbers for a single sale: ROI = (12.15 - 1.35)/1.35 ROI = 8% Therefore, my average amount per sale at a cost of $1.35 per ad must $12.15 in order to achieve an ROI of 8%.