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While setting paid campaigns, conversion rate is usually the unknown element. We refer to the minimum conversion rate for a campaign as the breakeven conversion rate. As the name implies, at the breakeven conversion rate the campaign will not generate any profit or loss.
The formula to calculate the breakeven conversion rate is:
Breakeven conversion rate = Total costs / (Profit per conversion * Number of visitors)
Let’s assume this company knows it will have to spend 55 cents per click. Let’s walk through how to calculate the lowest possible conversion rate:
Pay-per-click budget: 100,000 * 0.55 = $55,000
Design, optimization, and software costs = $15,000
Total campaign costs = $55,000 + $15,000 = $70,000
Total number of widgets sold to cover cost = $70,000 / $75 = 934 widgets
Minimum conversion rate = 934 / 100,000 = 0.934%
Or minimum conversion rate = $70,000 / ($75 * 100,000) = 0.934%
Design, optimization, and software costs = $15,000
Total campaign costs = $55,000 + $15,000 = $70,000
Total number of widgets sold to cover cost = $70,000 / $75 = 934 widgets
Minimum conversion rate = 934 / 100,000 = 0.934%
Or minimum conversion rate = $70,000 / ($75 * 100,000) = 0.934%
Learn more about this topic from Conversion Optimization.
Turn website visitors into customers with Conversion Optimization. This book offers practical advice on how to give your visitors the material they need to make a quick buying decision -- without driving them away through navigation or information overload. You'll examine various techniques for blending successful website sales approaches with the particular needs of your business and the people you want to attract.
