NOTE: You may want to use the Conversion Rate Calculator first to get the CR% figure for the Bid Cap Calculator

The values needed as input (blue backgrounded fields) for the PPC Bid Cap Calculator are:
CR: Conversion Rate -- periodic ratio of visitors vs visitors who bought [more info]
NP: Net Profit Per Sale generated by the web site [more info]
SAC: The percentage of that Net Profit you are willing to SACrifice to PPC click-thru expenses [more info]

Bid Cap Calculator

CR (%) NP ($) SAC (%) Enter raw numbers without $ or % symbols and with no commas. Examples: enter 10 for 10%, 1000 for $1,000.00      SEE CALCULATIONS BELOW

UV -- Unique Visitors to your web site in a certain time span (at least 3-4 weeks to be representative). NOTE: "Hits" vs Unique Visitors will be a higher and less meaningful figure. If you calculate your Bid Cap by page Hits rather than Unique Visitors you will be working with an inflated figure and will calculate a somewhat lower Conversion Rate (and thus lower Bid Cap) than actual.

Sales -- The number of sales generated (not the dollar amount) in that same period.

*CR -- Conversion Rate. Percentage (ratio) of Customers to Unique Visitors. A numerical rating of your web site's efficiency at making the sale. Enter CR figure in the Bid Cap Calculator as a raw number (eg., 5 = 5%). You may first want to use the CR Calculator above. [top]

NOTE -- The CR from PPC traffic should be somewhat higher than that of overall site traffic as PPC visitors generally represent a more targeted and qualified prospect UV. If your server logs processing software is capable of identifying PPC UVs AND Sales attributable to those PPC UVs, enter those figures for UV and Sales for a more accurate calculation of your Bid Cap. If unknown, it's safer to work with your web site's overall sales efficiency: (UV/Sales = %CR).

You may also enter the number of Sales (in the CR Calculator) and NP (in the Bid Cap Calculator) per individual item to determine Bid Caps for hot/cold sellers. This would be an especially good idea if your product line includes items with a wide spread of profit margins per item (eg., NPs ranging from $5 to $200). If you are only selling one item, or if your profit margins for all items in your product line are within a narrow range (eg., <$20 difference), and no one item dominates the number of sales (over 50% of all sales), use the current 30-day average NP for all sales ($/number of sales) transacted online and/or otherwise generated by your web site.

** NP -- For most small and intermediate size businesses, it is prudent for these calculations to treat PPC bidding as a separate and additional advertising expense to be paid out of Net Profit. Unless your business is a large, over-funded corporation where advertising expense money is [seemingly] no object, determining a Bid Cap is a most critical consideration regarding your competition in PPCs. Exceed your calculated Bid Cap and watch your ROI for bidded positioning in the PPCs lapse into the negative. See the note in the paragraph above for further discussion on determining what figure you may wish to use for your NP. [top]

*** SAC -- A subjective figure to be determined by the site merchant/owner. Since the Bid Cap Calculator works with Net Profit rather than Gross Profit, it can be presumed that other expenses associated with the sale have already been deducted (wholesale cost, other advertising expenses, etc.). For the sake of calculating a Bid Cap, working with NP will isolate PPC click-thru expenses as a unique advertising expense. Play around with the SAC figure. You may be able to "pad" your selling price a bit to stay at your self-determined "Acceptable Final Net Profit" per sale, and thus afford a higher Bid Cap. Of course, you would only want to bid up to your Bid Cap if forced to do so to secure a desired position. The SAC figure may range anywhere between 1(%) and 49(%). Enter the SAC percentage figure without the % symbol (eg., 15 = 15%). [top]