I have been using this strategy since quite some time now to develop a frontend product. And then use the profits from that product to advertise and attract enough visitors that lead to at least 1 more sale - and create a perpetual traffic cycle out of it. (I'm writing a 60 page book on it.)
Some things I've learned from experience.
1. You don't want to use the Google Keyword Tool. Thats a good tool for keyword suggestions. Not for keyword bidding. You want to use Google's Traffic Estimator tool instead. You will have to login to your Google Adwords account to use it. (Adwords > Tools & Analysis > Traffic Estimator)
2. You don't want to use category defining keywords. You want to make it slightly long tail. Don't search for "crossfit". Search for "crossfit training". Don't search for "speed reading". Search for "learn speed reading". Why? Because Google starts minimum bids for category defining keywords from $1 - even if there aren't any competing advertisers on that keyword. This inflates the numbers in your formula.
3. After searching for a keyword in the Traffic Estimator tool, click on "Impressions" and hover your mouse over the cliff in the graph they show. That is the Max CPC you want to take while calculating your price. (http://i.imgur.com/upj77.png)
With the above steps, the CPC you get for learn speed reading is 41 cents. If you expect a 1% conversion rate, you need a product that sells for about $41 minimum.
If you go to the clickbank.com marketplace and search for speed reading, you will see that the most popular product on speed reading (Quickeye Speed Reading Software) is infact priced at $47.
I've noticed if you lower your Max CPC bid, the Traffic Estimator will show that you get a lower click-through rate, but at a better price. Do they restrict your add to less competitive time frames to give you that better price? Does that then impact your conversion rate, or is a click a click?
If you lower your CPC bid then the Traffic Estimator shows you the rates for lower positions. The ad on the top of the page always gets more click throughs than the ad that is shown 5th on the page. And thats what Traffic Estimator takes into consideration.
But you should know that the Traffic Estimator is just that - an estimator. Your real cost per click and ad positioning with Google depends on a lot of other factors. Including things like how good your landing page is. And how better your ad is than others.
So determine the CPC at the cliff on their graph. And then optimize your Google ads. (Also, a lot of ad networks are cheaper than Google Adwords. So use Google Traffic Estimator to find an optimal price point. But start advertising your product at other places.)
Actually, Google has this measurement scale called "Quality Score." Your landing page is one of the things they evaluate to measure the quality score. And your quality score affects your CPC.
Some things I've learned from experience.
1. You don't want to use the Google Keyword Tool. Thats a good tool for keyword suggestions. Not for keyword bidding. You want to use Google's Traffic Estimator tool instead. You will have to login to your Google Adwords account to use it. (Adwords > Tools & Analysis > Traffic Estimator)
2. You don't want to use category defining keywords. You want to make it slightly long tail. Don't search for "crossfit". Search for "crossfit training". Don't search for "speed reading". Search for "learn speed reading". Why? Because Google starts minimum bids for category defining keywords from $1 - even if there aren't any competing advertisers on that keyword. This inflates the numbers in your formula.
3. After searching for a keyword in the Traffic Estimator tool, click on "Impressions" and hover your mouse over the cliff in the graph they show. That is the Max CPC you want to take while calculating your price. (http://i.imgur.com/upj77.png)
With the above steps, the CPC you get for learn speed reading is 41 cents. If you expect a 1% conversion rate, you need a product that sells for about $41 minimum.
If you go to the clickbank.com marketplace and search for speed reading, you will see that the most popular product on speed reading (Quickeye Speed Reading Software) is infact priced at $47.