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OP56

1. With a $1000 budget and $2.50 CPC, the advertiser can receive 400 clicks. 2. With a 60,000 impression, 1.8% CTR, and $1 CPC, the advertiser will spend $1080. 3. With a $3000 budget, $0.50 CPC, and 5% conversion rate, the CPA is $10 and the advertiser can get 300 conversions.

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Divya Goyal
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67 views2 pages

OP56

1. With a $1000 budget and $2.50 CPC, the advertiser can receive 400 clicks. 2. With a 60,000 impression, 1.8% CTR, and $1 CPC, the advertiser will spend $1080. 3. With a $3000 budget, $0.50 CPC, and 5% conversion rate, the CPA is $10 and the advertiser can get 300 conversions.

Uploaded by

Divya Goyal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Solve for the following

1. With a budget of $1000, an average CPC of $2.50, how many clicks can the advertiser receive before
their budget is exhausted?

2. With an unlimited budget, an average CPC of $1.00, a CTR of 1.8%, and 60,000 impressions, how
much will the advertiser spend?

3. If you have a $3000 budget, your average CPC is $0.50, and your conversion rate is 5%, what is your
current CPA? How many conversions can you get for $3000?

4. Assume you buy women’s skirts at wholesale for $10, and you resell them online for $50, and you give
away free shipping which costs $5, and you want to make $20 per dress, what should your target CPA
be?

5. Using the above information and answer, with an average CPC of $3, how many clicks can you get
before you get a sale? What should be your target conversion rate?

Expert Answer
Answer 1.:

No. Of Clicks that the advertiser receives before their budget is exhausted = Available Budget / Cost
Per Click (Or CPC)

= 1000 $ / 2.50 $ (Both Values are taken the same as given in the question)

= 400 Clicks

Answer 2.: The spending of an Advertiser = No.of Impressions X Click Through Rate X CPC

= 60000 X 0.018 X 1 (Kindly note that we have converted Click Through Rate (CTR) into the decimal
form)

= 1080 $

Answer 3-A:

First, find the current CPA (Cost Per Acquisition) as mentioned below:

Step a. First, find the no, of clicks needed for getting one conversion or sale.

Here, it's given that conversion rate is 5%. It means that 5 out of 100 clicks would result in sales. Hence,
1 sale (acquisition) will take place for every 20 clicks (100/5).

Step b. Now, use the formula of Cost Per Acquisition (CPA):

Cost Per Acquisition (CPA) = No. of clicks needed for 1 acquisition (See the result of Step a.) X CPC

= 20 X 0.50
= 10 $ CPA

Answer 3-B

Now find the No. of conversions that can be got for the budget of 3000 $, using the following formula:

No, of Conversions = Available Budget / CPA

= 3000 / 10

(Note: CPA = Answer 3-B)

= 300 Conversions

Answer 4.: Here, we will use the following formula to find the Target CPA:

Target CPA (Cost Per Acquisition) = Retail Price - Wholesale Buying Cost - Shipping Cost - Target
Margin

Where Retail Price = 50 $, Wholesale Buying Cost = 10 $, Shipping Cost = 5 $, and Target Margin = 20 $

(All the values are taken from the question only)

Hence, Target CPA = 50 - 10 - 5 - 20 = 50 - 35 = 15 $ is Target CPA

Answer 5-A.: Here, we will use the above answers to find the No. of Clicks we can get before we get a
sale, as mentioned below:

No. of Clicks we can get before we get a sale = Target CPA / CPC

Where Target CPA (Cost Per Acquisition) = Answer 4 = 15 $, and CPC = 3 $

Hence, No. of Clicks we can get before we get a sale = 15 / 3 = 5 Clicks

Answer 5-B.: Here, we will use the above answers to find the Target Conversion Rate, as mentioned
below:

Target Conversion Rate (%) = The ratio of 1 conversion to the no. of clicks needed to get 1 conversion
X 100

= (1 Conversion / 5 Clicks) X 100

= 20 %

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