To use pay per click advertising successfully you really need to know what your cost per acquisition is or rather how much you are willing to spend to get a new customer and still have profit left over. Without knowing your cost per acquisition, you can actually be paying Google AdWords for each new customer sale you make or each new customer your get. Google will work hard to spend your money, but it is your job to make AdWords profitable for you.
So, do you know how much it costs for each customer? How to you figure this out? A lead conversion in Google AdWords does not mean a sale. The formula for each business is different. One of my clients told me that for their business, it takes 10 leads to make a sale. Typically the higher the value or price of your service, the more lead conversions you will need to make a sale.
AdWords will track the lead conversions for you, but you need to track sales generated and each month look at the sales generated, total spent on advertising in all areas and then extrapolate to determine your cost per acquisition. In some cases when clients review this information they find which avenue is a better lead generator for their business or that one is more cost effective to use than another. Without this additional information and careful review, you may be spending more than you should on generating new business.
Once you know your desired or average cost per acquisition, Google AdWords has some excellent tools to help balance your traffic and cost per click to keep you within your profit restraints. The conversion optimizer with a maximum cost per acquisition setting is an excellent tool. You can balance what you want to spend with what Google recommends. Remember however that Google is in the business to serve clicks and you need conversions and sales so make sure that the setting you use does not stretch your margin too tightly.