How to calculate sales and cost per conversion from your ads?

Imagine you are selling bicycles online and wish to gain more sales. You have placed the ads about the end-of-summer discounts on search engines. Your goal is to collect bike rental reservations online till the end of August for this limited-time offer.

Since you have got the first results, you can track your campaign effectiveness. A crucial indicator of how to do that is Cost per conversion. Simply put, it’s the relation f total campaign cost to the successful sales driven by those ads.

The formula looks like this:

Cost per conversion = Total cost of ads/number of conversions

So if your daily budget is €250 and your sales are €150, then the conversion cost would be 250 / 150 = €1.6.

If you are new to data analytics, you could be curious how to calculate the total cost of advertisement and the number of conversions (sales).

Total cost of ads / Sales = number of clicks * Cost per Click (CPC)

Clicks =how many clicks you received (let’s assume 5000 clicks)

Cost per click = your price for every click (let’s assume €0,05)

Number of conversions = 5000 * 0,05% = 250.

Number of conversions or Sales = Clicks * Conversion rate

Clicks =how many clicks you received (let’s assume 5000 clicks)

Conversion rate = Number of visitors (100) / Number of Sales (3)

Conversion rate = 100 / 3 = 3%.

Number of conversions = 5000 * 3% = 150.

Most industry leaders consider 2–3% as the average conversion rate for online stores.

You might also find reports claiming that 5% is more accurate for eCommerce stores, while 1% is still an acceptable rate.

Image https://www.twaino.com/en/definition/c/conversion-rate/