Why we ask what a job is worth before we ask what a click costs
Daniel Hemmerich Cost per click is the first number an ad platform shows you. It is also the least useful one. Here is the chain of arithmetic that turns it into a number you can run a business on.
The short version
- Cost per click is the number ad platforms show you, because it is the number they control.
- Four numbers turn it into something useful: cost per click, clicks per lead, leads per job, and what a job is worth.
- Knowing job value is what lets an agency tell you to spend more, spend less, or stop.
Every ad platform leads with cost per click. It is the number they control, so it is the number they show. But you do not sell clicks. You sell replacements, repairs, consultations, installs. To know whether the marketing is working, you have to walk the click all the way to the job.
The chain
A click costs something. Some clicks become leads: a call or a form. Some leads become booked jobs. Each job is worth something to you. Four numbers, in a row: cost per click, clicks per lead, leads per job, and job value. The first three multiply into cost per job. The fourth tells you whether that cost is acceptable.
Suppose, for the sake of the arithmetic, that a click costs $2.50, one in six clicks becomes a call, and you book one in three calls. Then a booked job costs you $45 in ad spend. If the job is worth $400, that is comfortable. If it is worth $150, it is marginal once labor, materials and the appointments that never become a sale are counted. If it is worth $2,000, you are almost certainly underspending. If it is worth $50, stop.
You cannot know whether $2.50 a click is good or bad until you know what the job is worth. So we ask that first.
Why agencies skip this
Because it requires a conversation, and the conversation requires the client to know or estimate numbers they may not have handy: close rate, average ticket, how many jobs they can take in a week. It is easier to report clicks and impressions and let the client assume the rest. We think that order is backwards.
What it changes
Once we know the job value, close rate and capacity, three things follow. We know how much a lead is allowed to cost. We know when to raise the budget, because the jobs are profitable and you have room. And we know when to tell you to stop, because you are booked out and every extra lead is money spent on a customer you will call back in three weeks.
That last one matters most. It is also the one that is impossible if the only number anyone is looking at is cost per click.
Run the arithmetic on your own numbers.
Questions people ask about this
There is no such thing in isolation. A $2.50 click is cheap if the job is worth $2,000 and expensive if it is worth $50. The only way to judge it is to walk the click through to a booked job.
Multiply cost per click by clicks per lead, then by leads per booked job. Or more simply: divide the spend for a period by the number of jobs booked from it.
Because capacity is real. If you are booked out three weeks, additional leads go unanswered and the money is wasted. Spending should follow what you can deliver.
Questions about your own numbers? Tell us about your business.