ETD: 896 Pay-Per-Click; Calculating Gross Margin; Bleeding
Edge Technology
E-Tailer's Digest
etd_post at gapent.com
Thu Jun 16 11:05:51 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0896 June 16, 2005
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] Pay-Per-Click
[3] Calculating Gross Margin
[4] Bleeding Edge Technology
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[1] Greetings.
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Hi All:
We've been doing work with another client who is trying to gain more sales
online. After analyzing their efforts to date, we concluded they need to
redo their site and focus more on their advertising campaign. They were
getting traffic, but not sales. One partner was proud of the traffic,
while another partner was more interested in sales, which pays the
bills. I've included something in today's digest on Pay-Per-Click and
understanding how to work them.
List member Alan Zell offers some comments on calculating gross
margin. And he has a question for our retail gurus. Where and when did
the term "keystone" come into use for describing the selling price to be
200% of the cost or the cost being half of the selling price? Who has
that answer?
List member Javilk has some information on bleeding edge technology. What
have you looked at with new technology?
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
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[2] Pay-Per-Click
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Have you ever tried Google Ads or similar types of ads? The ones where you
only pay if somebody clicks on that ad and goes to your site (Pay-Per-Click
or PPC). Many people believe this is the ideal way to advertise,
especially those selling ads. And many are lead to believe that PPC works
and if you don't get business it's because of what you are selling or
because of a poorly-designed site.
While some of that logic may be true, for the most part, I don't buy
it. Yes, it is true if your PPC ad is for a particular product and you
direct the click to the general site and the customer has to search to find
the product. PPC sends traffic to your site.
The only measurement of success is conversion. With PPC you are buying
visitors. You need to know three pieces of information:
1. How many visitors did you buy? Let's say 100
2. How much did you pay per click? Let's say $5.00
3. How many sales did you make? Let's say 5
The cost of buying visitors was $500 (100 visitors times $5 each). You
sold 5 customers, so your cost per customer is $100. If your product sells
for $1,000 that's not bad. If you product sells for $10, you'll need a
bigger truck :-D
Buying traffic is meaningless, unless you are selling advertising space, of
course. You can get traffic a lot cheaper by hireling a high school kid to
sit at a computer all day and click on your site. That gets traffic.
To be effective with PPC you need to analyze what works, and capitalize on
that. You need to track the keyword phrases you use, and track those
phrases to determine which converted to sales. Then increase those keyword
phrases and drop those that do not produce.
Remember, PPC is about buying customers, not traffic.
George
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[3] Calculating Gross Margin
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George, I giggled at your explanation of how to figure gross margin. It
depends on how you define "gross" Does it mean a percent or does it mean
that the result of misfiguring causes the answer to be gross? :-D
In my youth, during WWII, in our family's jewelry business here in
Portland, OR, my after school and Saturday job was to calculate what the
"luxury tax" (10%) was for each sale. When I was told to divide each sale
by 11 and that would give me the answer I wanted, I did not understand
until one of my uncles explained that adding 10% meant there were eleven 10
percents in the total price when the luxury tax was added.
In the subsequent years in retailing and an as a consultant, I know that
many people did not how to figure what gross margin so I found a chart
which I made into a handout for my clients.
Which brings up another point/question which I've been asked many times and
have not been able to find the answer to no matter how much I've
searched. The question is, "where and when did the term "keystone" come
into use for describing the selling price to be 200% of the cost or the
cost being half of the selling price"? Does anybody have the answer?
Alan J. Zell, Ambassador Of Selling
azell at aol.com
Winner of the Murray Award for Marketing Excellence
Member, PNW Sales & Marketing Group
Member, International Consultants Association
www.sellingselling.com
+++ [Moderator's Comments] +++
Thanks Alan. I'm sure somebody will have an answer on keystone.
Alan included a chart of "Markup to Gross Margin Conversion" which can be
used to determine the gross margin. Basically the chart is the calculation
I stated in the last digest - divide the cost by the reciprocal of the
gross margin, i.e., for a 30% gross margin, the reciprocal is 100% - 30% or
70%. For a $10.00 cost, you divide by 70% which equals $14.29 sales price.
George
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[4] Bleeding Edge Technology
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You wrote...
> Scaffolding is a good concept. I didn't have a name for it, but it is
> something we have been doing since 1997. We had the existing system
> modified so that the Post-It (tm) notes that were on the screens were now
> on the application, i.e., notes about a specific order, comments on a
> customer credit, instructions on put-aways in the DC, etc. I like your
> concept to go to the line item.
That is part of what they missed with the web. Our original browser (1982)
retained the cursor position, and when you came back a level, the cursor
was where it had been. The other part is to indent so as to create an
outline of the pages you had viewed. And a key to pick up and drive a link
into the current page. Really simple stuff, but what a difference!
For the ability to scan at point of entry, Paper Port use to make a scanner
that sat on the keyboard. I don't know if they still do. A wire frame for
the camera would take up a bit too much desk space... but there are other
ways of doing that.
Re: your philosophy that if you haven't learned something today, you have a
wasted day...
That keeps the brain young! In the Nun Study (on aging, ref Time Magazine
years ago), showed that those with the habit of exploring and learning
retained much of their abilities into very old age despite physical ravages
to their brains similar to those found in the brains of Alzheimer's victims.
-javilk- mall-net.com
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