Determine your own feedback loop to discover what is the most you should pay for advertising, or determining the value of a visit to your ecommerce website. The process of moving visitors through your ecommerce website, from landing page to purchasing is a sales funnel. Here I show you how to find out what a visit to each step through the sales funnel is valued at. There are two major elements in play, 1.) knowing your conversion rates between the steps your visitors take and 2.) knowing your average order value, or profit per order. Once you know those then you can work backwards to determine the value of a visit to each step is worth.
Meet Sports Shop Seán. Seán owns an online shop that sells sports equipment. He running a back to school advertising campaign for kids sports gear. He knows his average profit per order is around €10. He's wondering how much is too much to spend on a Facebook or Adwords advertisement driving visits to his shop.