The advantage of the Internet over any other form of marketing and highly targeted promotional efforts is the ability to measure performance to the penny, to the person. No other media can promise that with reliability. As my friend Lenny Berner and I used to joke, it’s all math. It really is.

Today I will make the argument that it is prudent and wise to increase your Internet marketing costs as a way to get in the face of the world’s economic downturn. It’s precisely the math that makes that argument persuasive.

While a newspaper or a magazine can tell you how many subscribers it has, or how many issues were sold or distributed, that is not the same thing as telling you how many people saw your advert.  It can tell you only the number of possible people who might have seen it.

On the Internet, though, where everything is measurable, you can learn exactly how many people visited your site.  Secondly, if you are engaged in a Google Adwords campaign, your statistical data can tell you exactly how many “impressions” (page openings) displayed your sponsored result.  Thirdly, your data can tell you how many people clicked on your sponsored result (meaning you had to pay your bid price for that click).

There’s a formula we use to help our clients calculate what they should be willing to pay for that click and still be assured of profitability from their web site.  Yes, assured.  It’s a very basic and common sense formula, and it takes just a few minutes to assemble the variables for the equation.

Site traffic is the first variable.  How many visitors came to your site?  If you don’t have Google Analytics code inserted on all of your web site pages, you should have your webmaster add it for you today – - it’s that important, and helpful.

Most Desired Response is the second variable.  Every site has one – - buy the product, give your email address, call for an appointment, fill out a contact form.  There is something every e-commerce website wants from its visitors.  How many MDRs did you get from your site traffic?

These two numbers will tell you your conversion rate:  how many visitors were required in order to get one MDR?  If it took 100 visitors to sell one widget, the conversion rate is 1%.

Now, it gets a little more involved, but still pretty easy.  Profit per MDR is the third variable.  How much did you make on the widget sale?  or from the email address?  or from the telephone call?  or from the contact form?  What is the average profit per MDR?  Let’s say, for round numbers and easy calculating, that your average profit per MDR is €100.

We now get to the calculating part:  You need 100 visitors at a conversion rate of 1% in order to make €100 in profit.  So, how much can you afford to pay per visitor in your Internet marketing campaign  in order to break even?  100 visitors divided by €100 = €1.  Let’s call that your Break Even Customer Acquisition Cost.

This means you can afford to pay €1 for each of those clicks in your Google Adwords campaign to break even with your online advertising budget.  It also means that you can remain profitable by paying less than €1 per click; and conversely, lose money by paying more than that.

There are nearly 900 million regular Internet users in the world today, and with thousands coming online daily in the emerging markets of China and India, we’ll see 1 billion within the next decade, if not sooner.  Studies show that nearly 100% all of regular Internet users do all or virtually all of their pre-purchase research online no matter the product or service.

If you know your potential customers are researching the products or services you sell online, doesn’t that mean you should be helping them find you?  With money tighter than it has ever been in recent memory, those customers are looking at every penny they will spend more closely today.  You want them finding you when it comes time to spend those pennies.  The competition for business is very keen.

This Break Even Customer Acquisition Cost (BECAC) formula helps you determine how to keep your online business profitable.  Tally your conversion rate (how many visitors to your site to generate one sale), sort your average profit per sale, and do the math.  Always bid lower than your BECAC in your Google Adwords campaign, and your website will remain profitable.  This example simplifies the concept, and your click bids should be well below your BECAC.  But the concept is quite valid and will help you look at your web site business and Internet marketing differently.

It’s all math, just like Lenny and I have always said.