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by Tara West on 12th August 2014
If I asked you what your PPC goal is, you’d probably tell me it’s to increase sign-ups, sales, or enquiries. That’s a great starting point, but you also need goals and targets to ensure these sign-ups, sales, or enquiries are cost effective and profitable for you.
As such, we’re going to look at what kind of specific PPC goals you could be tracking, and how to ensure your targets are realistic and cost effective.
In most cases, PPC is used as a direct response form of advertising of which the purpose is for users to click the ad and then ideally go on to perform an action on the site, whether that is a purchase or an enquiry. If this matches the objective of your PPC account, you should consider the following metrics:
Measuring your Cost per Conversion (or Cost per Acquisition) is very important to ensure you are not paying more for a conversion than you can afford to.
For example, if you were a sunglasses retailer and sold sunglass at £100, making £40 profit, you’d need to ensure your cost per conversion ensures you are still making enough profit to justify the ad spend and any other costs you incur.
Cost per Conversion should be measured and targeted at a detailed level, rather than as one overall target for your PPC account (unless you make the same amount of profit on all the products / services in your PPC account). Using the sunglasses example above, lets imagine you make £40 on Raybans and only £20 on Dior sunglasses. You’d ideally have each brand in a separate campaign anyway, and then you can set a different Cost per Conversion target for each brand or product type.
If you are an ecommerce retailer, it can be quite straight forward because you are measuring sales that happen online, and you can judge how much profit you make on a sale, and see directly the sales that took place online. You then have to come up with a target for each product or brand type.
This concept is basically the same for lead generation websites, however there is an extra step to consider. Not all enquiries will result in final sales, so you need to consider at what rate these enquiries then tend to convert into final sales, and then how much profit you make on those sales. From this information you can come up with an ideal target.
It’s just as important for lead generation websites to set CPA targets differently for different services or campaigns depending on the profit you make on a particular service. If your account has different campaigns to target people at different stages of the purchase funnel, you may also want to set the cost per conversion target differently depending on whether the aim of that campaign is to generate awareness and initial interest, or whether it is designed to result in a direct response sale.
I’d recommend using a compatible CRM system so that you can track enquiries back to their PPC performance and see whether the enquiry actually results in a final sale. This works by editing your contact form so that it has a hidden field which pulls in the unique AdWords Click ID which is a cookie that is placed on the users browser when they click an ad. This information from the contact form is then directly imported into your CRM system with the enquiry. You can then later upload data of all your final sales that occurred in the last 30 days with the associated Click ID and AdWords will match them up with the original click that generated the original enquiry. This is a great way to get more visibility within your PPC account as to how many enquiries actually lead to sales. Learn more about this system here.
One of the main reasons for a CPA target is to ensure the account remains profitable, but like all businesses, I’m sure you’d like to improve on your levels of profitability.
Chat to whoever is managing your PPC account and set a maximum CPA target which you simply could not afford to exceed because it would make the campaigns unprofitable, but also set an ideal range CPA target. The ideal range CPA target is the cost per conversion that you’d really like to reach. For example, the maximum you could afford to pay for a conversion might be £25, but you’d ideally like to only be paying between £10 – £15 per conversion. This will give your PPC manager an idea of what you’d like to achieve, as well as what you must achieve.
Cost per Conversion is important, but it’s dangerous if considered in isolation. What if a particular product or term in the campaign has a much higher Cost per Conversion than the target for that campaign, but it also brings in the highest level of revenue which makes it worthwhile allowing it to have a higher Cost per Conversion? Be sure to sanity check your campaigns and review instances like this before simply culling the term because it is above your CPA target for the campaign.
Conversion rate is the percentage of your clicks which are resulting in sales or enquiries.
This is a good metric because it shows the level of conversions in relation to the number of clicks you’re getting. This means that it is transferable whether your account was receiving 500 clicks of 1,000 clicks, you may still target the same conversion rate percentage.
Be aware that conversion rate is dictated by many factors other than the performance of your PPC account, which are beyond the control of your PPC manager. For example, changing an aspect of your landing page may affect conversion rate, or if you have a sale on. Likewise if your competitors drop their prices or hold a promotion you may find your conversion rate is negatively affected.
Set a target conversion rate which is a bit higher than the conversion arte of your other traffic sources (look in Google Analytics to find that data). This is because you are paying for every visit and should only really be bidding on keywords which are profitable for you; so you would expect their conversion rate to be higher than that of organic traffic where many different search queries (that you have less control over) might be leading users to your site.
Return on ad spend is the level of revenue you receive in relation to the amount of ad spend you have spent. This is only possible in accounts where you track revenue (mostly ecommerce sites unless you assign a value to your enquiries and are happy to work with this as an accurate metric).
This metric is ideal when you can’t share information such as profit margins or other costs, which make it less possible to calculate a reasonably accurate ROI.
You won’t find this metric directly within the AdWords interface, but you can ask your PPC manager to calculate it by dividing revenue from ad spend. You can then communicate this by showing that every £x in ad spend resulted in £x amount of revenue, and it’s commonly written as £4:1 which in this example shows that £4 in revenue was generated for every £1 in ad spend.
If you wanted to beef up this formula to make it a bit less simplistic, you could calculate your PPC management fees and exclude them from your revenue before you work out the ROAS.
Return on investment can be a tricky little metric to calculate accurately, and so it’s one I try to avoid unless I can get accurate information about all of a client’s costs. If you do have access to this data and are comfortable that it’s accurate, ROI can be an excellent overall measure of account performance.
I’ve been shown a few ways to calculate ROI in the past, but the AdWords recommended formula is:
ROI = (Revenue – Cost of goods sold) / Cost of goods sold
Their example explains it as:
“Let’s say you have a product that costs £100 to produce, and sells for £200. You sell 6 of these products as a result of advertising them on AdWords. Your total sales are £1,200, and your AdWords costs are £200. Your ROI is (£1,200-(£600+£200))/(£600+£200), or 50%.”
If awareness is your primary goal, you’re probably running display advertising of some sort, whether it is remarketing or standard display ads.
If your goal is to be present on a particular advertising placement as often as possible using the Google Display Network (GDN), you could measure your impression share. Impression share can be affected by a few elements, from your budget to your rank, so consider these aspects when setting a target. Also be aware that 100% impressions hare isn’t always a good thing – especially over long period of time, as it means you are probably annoying your audience!
If you are choosing to use search campaigns to generate awareness (for exampl,e by bidding on competitors’ names), then the average position of your ads might be something you’d like to measure. This is the average of all your ad positions, so it’s not an exact science, and you may still find that perhaps you have a few top performers in great ad positions, but the majority are below the average position. On top of this, you should consider that average position is only the average position of when your ads did show. Use this metric alongside impression share for a more holistic overview of performance.
View through conversions are when a user is exposed to an impression of your ad, and does not directly click the ad and go onto convert at that time, but does convert within the next 30 days by visiting the site again (possibly via another ad or via another traffic source). The conversion window of 30 days is now editable so you can set this based on your average user waits before returning to the site to purchase. This might be longer for higher value items and shorter for lower value products or services.
These are just some metrics you may wish to consider measuring depending on what the overall aim of your campaign is. There are also many other important metrics that your PPC account manager will be keeping an eye on. If you can think of any metrics that are particularly important to your campaigns feel free to comment below.
Tape Measure Via BigStock
Leads Via BigStock
Awareness Via BigStock