A huge mistake that advertisers make when advertising with AdWords is not knowing their profit margins.
What I like to know is the profit margin, pre-advertising spend. So basically, before we spend any money on advertising, what is the profit margin? That way I can take a look at the advertising spend and I can say:
“If we spend X, we get this many sales and this is the total cost. If we spend Y we get more sales because we’re spending more and this is the total profit.”
It may be less it may be more. The only way to know this is actually know what your profit margin is.
There is going to be a sweet spot for every advertiser where you’re not spending too much or too little, you’re spending the perfect amount possible to generate just the right amount of sales that is going to give you the biggest overall profit.