In order for your business to develop successfully, it is important to increase its absolute profit. Clearly defined goals will help you to achieve this. The ideal approach to Sklik campaigns is to focus on promoting products or services, attracting new customers, supporting existing customers, and building a brand.
When optimizing campaigns, advertisers determine a specific ACoS (Advertising Cost of Sales), according to which they then evaluate the success of the campaign. This metric helps you to quickly orientate yourself in everyday optimization. However, when increasing the overall profit, one needs to have a comprehensive overview of how it works.
As a result, overall profit decreases as higher margins per order do not compensate for lower numbers of orders.
Reduced ACoS leads to reduced revenue, while fixed costs remain unchanged. The cost of managing campaigns and operating an e-shop should be added to the cost of credit.
Higher prices per click mean that ads get to higher positions. This gives them more clicks, which means more visitors to the site.
With the same conversion rate, the number of conversions and thus the total revenue, will increase.
While the profit from a single order is smaller, the sum of all orders may exceed the total profit.
Your ads will take up a larger market share at the expense of your competitors.
While it is not a rule that higher CPCs automatically mean greater revenue, you can achieve higher profits by optimizing your ads.
Various possible scenarios are set out in the table below. We expect a business margin of 10% and a value of 2,500 CZK for a single conversion.
| Variant | Clicks | Budget in CZK | Conversion ratio | No. of conversions | Value of conversion in CZK | AcoS | Gross profit in CZK | Admin costs in CZK | Profit in CZK |
| Original state | 10 000 | 43 750 | 5% | 500 | 1 250 000 | 3,5% | 125 000 | 5 000 | 76 250 |
| Reduced AcoS | 4 500 | 16 875 | 5% | 225 | 562 500 | 3% | 56 250 | 5 000 | 34 375 |
| Increased ACoS | 12 500 | 63 500 | 5% | 625 | 1 562 500 | 4% | 156 250 | 5 000 | 88 750 |
Ads have dropped to lower positions due to reducing the ACoS through lower price per click. We have maintained a lower budget, but at the same time the number of clicks has decreased.
Maintaining the same conversion ratio means that the e-shop gets fewer orders. This leads to a lower overall profit, despite the smaller ACoS, as it does not achieve sufficiently high revenue.
With higher ACoS, ads get more clicks because higher CPCs mean that they are given a higher position. However, with the same conversion ratio, a larger number of orders are created, increasing the e-shop’s net profit.
Recklessly reducing ACoS can cause a significant fall in profit.
Different types of campaigns fit different purposes and together form a mutually supportive whole. Campaigns should therefore be evaluated based on their type, over a longer period of time, and using multiple metrics.
Search ads typically have a much better ACoS than content acquisition campaigns as they promote a product when the user is actively looking for it. Content campaigns are very important because they gain new customers, who help increase the overall profit.
Therefore, do not place limits on acquisition or brand campaigns based on an ACoS calculated by last-click attribution. Allocate a separate budget to them and optimize them to reach the most relevant target group.
How else can I support profit growth?
A sophisticated strategy and the strengthening of campaign performance with comprehensive evaluation will help you achieve higher profit and successful growth.
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