Can someone explain how to do this question from my MKTG assignment please? Thank you so much!
You are currently in position 2 of a paid search term, the click-through rate is 1%, and the cost per click is $1.50. You can get into position 1 by paying $2.50 per click. In position 1, you expect a click-through rate of 1.5%. In position 3 you would pay $0.50 cost per click and have a click-through rate of 0.5%. The conversion rate once someone clicks is 10% in all 3 positions. Our total profit per order—before search costs—is $30. Our goal is to maximize absolute $ profit.
Please show all your analysis, and specify any assumptions you make.
Questions
A) What is the cost per order in position 2?
B) What is the cost per order in position 1?
C) Which of the 3 positions do you want to be in?
D) At what click through rate in position 1 are you indifferent between positions 1 and 2?
E) What is the marginal cost per order of the orders you lose by moving from position 2 down to position 3?
