If you’re managing your own AdWords you may have noticed how easy it is to spend money and blow your daily budget, sometimes with little to show for it at the end of the day.
It may seem like it costs a fortune to get a top ad spot, and even when the clicks do start rolling in, there’s no guarantee of any conversions. Additionally, there’s a huge selection of metrics to track, not to mention the maintenance of campaigns, ad groups, keywords lists and ads.
If you’re struggling to figure out exactly where your focus should lie and notice a one-sided relationship forming between your costs and your revenue, maybe it’s time to take a closer look at your ROI.
Get to grips with ROI
ROI is composed of two components; your revenue and your costs. It’s these two components you use to work out your ROI, and these are therefore also the components you should focus on when optimising for ROI success.
You can calculate your ROI with the following formula:
(Revenue – Cost) / Cost x 100 = ROI
You can also look at your return on ad spend (ROAS) in AdWords to help guide you. This is simply calculated in AdWords by dividing your conversion value or revenue by the cost and multiplied by 100 to get a percentage.
Before you start optimising for better ROI you need to have a clear idea of what your goals are. Your ROI targets will vary depending on the products you sell and the margins you make, amongst other things. This means that depending on your range of products, your ROI targets may even change between campaigns within AdWords. For example, ad groups or campaigns targeting lower margin products may need a higher ROI target.
Looking at industry benchmarks can be a good place to start when selecting your own targets, as industry averages may indicate the minimum you should be aiming for to remain competitive. You then need to hone in your own profit margins, starting with your break-even ROI. If you have a 10% profit margin, then your campaigns will need to be achieving an 110% ROI to break even. To begin with, a good ROI might, therefore, be around 310%.
Setting your ROI targets low to begin leaves plenty of room to grow. You should be aiming to increase your ROI every year until you reach a profitable and sustainable target. Factoring in the typical cost of goods and other marketing costs, a ratio of 5:1 is a recommended long term ROI target. That means £5 of revenue for every £1 of marketing spend, or 500%. Again, this will depend on how many other costs you decide to factor in and how high those costs run.
Optimising for ROI success
ROI is about balancing costs and revenue, so there are certain metrics that are particularly helpful. A high cost per acquisition (CPA) for example indicates you may be spending too much for each conversion, and your ROI is likely suffering the consequences. This means any techniques or best practices aimed at reducing CPA will be essential in boosting your ROI.
Conversely, your conversions will highlight the revenue part of your ROI. In particular, your conversion rate lets you know how well you’re doing at converting and making money from your paid traffic. While you can look at total conversions when optimising for your ROI, you may find some ad groups have high total conversions, but low conversion rates. This could be a sign that you’re paying for a lot of traffic and not getting a lot of conversions in comparison, which you’ll see reflected in a poor ROI.
In every stage of our ROI optimisation process, you’ll find conversion rate optimisation (CRO) techniques to help boost revenue without paying for more traffic and CPA optimisation techniques to minimise costs.
Grouping your keywords into organised ad groups and campaigns should be the first step in optimising your ROI from AdWords. This is a relatively simple step which can help your ad groups achieve higher CTR’s, more conversions, lower CPAs and higher Quality Scores. All of this is great news for your ROI, yet a surprising amount of people fail to set the ground work early and often suffer the consequences later.
In our line of work, we’ve seen a fair few AdWords accounts that have missed the mark with structure. A lack of direction from the outset results in a chaotic and almost impossible list of campaigns, ad groups and keywords with many of them conflicting and cannibalising others. Conflicting or duplicated keywords are a major source of wasted cost.
To avoid this problem from the start, or to fix an already poor AdWords structure, we follow some easy steps:
- The Quality Score and overall effectiveness of an ad will depend partly on its synergy with the landing page. The stronger the ad reflects the landing page, the better the Quality Score and the more likely a customer is to convert. It’s therefore beneficial to divide ad groups and campaigns into categories based on your website and products. For example, boots might be a campaign, with each style of boot an ad group.
- You should also keep in mind that you can control the budget and bidding strategy of each campaign, so you may also want to structure them to reflect this. Top selling products or high-value products might warrant their own campaign to set a higher budget and more aggressive bidding strategy.
- Keep your ad groups small. While the size of each ad group will vary depending on the product, service or offer, generally smaller ad groups result in more focused keywords and are easier to manage and track.
Remove negative ad spend
The quickest way to start optimising for ROI success is to start by removing any negative spend. Anything costing you money but not converting should be the first to go as it will reduce your overall costs without negatively affecting any conversion value already coming in. It also leaves more budget available to those keywords that are converting, which may even increase your revenue.
You can do this at account level to quickly pick out whole campaigns that are underperforming, at campaign level to do the same for ad groups, and finally ad group level for keywords.
Use the filtering option in AdWords to view any campaigns, ad groups or keywords that haven’t converted in the last one to three months. Once you’ve identified the non-converters, you can organise the list by total cost in descending order to see the main culprits at a glance. Pause your most expensive non-converters and earmark the others for a serious overhaul. With all this wasted cost out of the way, you should start to see much healthier CPA’s on all your campaigns.
At the ad group level, it’s also a good idea to regularly update your negative keywords list. Examine your search terms and seek out any keywords that have been triggering your ads but aren’t relevant. By regularly adding these types of search terms to your negative keywords list, you can make sure you’re only paying for clicks that could potentially lead to a conversion and help your ROI. If you haven’t updated your negative keywords in a while you may see some substantial cost savings straight away.
Improve your Quality Score
Your Quality Score reflects your expected click-through rate, ad relevance to the users search and landing page experience. Google uses all three to help determine Ad Rank, making your Quality Score an important step in your ROI optimisation process. Better Quality Scores can result in lower CPCs and better ad positions, as well as determining your eligibility for other ad extensions that could also impact conversions.
There are quite a few quick and easy ways to increase your CTR, although some may work better than others depending on your industry or offering. While we recommend experimenting with all of these to test and find the right solutions for you, be cautious with your CTR.
While CTR is the main factor Google uses for Quality Score, focusing too much on increasing click-through-rates can negatively impact your conversion rate. This can lead to increased costs with little or no gain in conversions, the opposite of what you need for successful ROI.
We try and focus on CTR only after optimising other Quality Score factors and ensuring there is minimal negative spend in an AdWords account. If you do start to optimise for higher CTRs, keep a close eye on your account in the following days and weeks to catch any spiralling costs.
If you feel like you are in a position to improve your CTRs, try some of these quick and easy tips.
- Keep working to ensure your ad groups contain closely related keywords and test out match types. Broad match keywords achieve a high volume of traffic but can have less search query relevancy and lower CTRs. Phrase match and exact match keywords are more conducive to better click-through-rates.
- Capitalising the first letter of words in ad copy had also been found to increase CTRs, but this isn’t a blanket rule. Test your own ad copy with various capitalisation techniques in your headlines and description to find the best for you.
- All your ad copy should have a call to action, but continue to experiment with wording and positioning to improve your CTRs. Including words with ‘commercial intent’ such as shop and buy can help capture those further along the funnel and more inclined to click.
- Ad extensions only appear for ads in the top spots, but Google can’t show them if you don’t have them. Including relevant ad extensions means your ad can potentially take up more search page real estate, providing an extra clickable area. Ad extensions can also provide additional information that could be the deciding factor for a click.
Ad relevance is made much more achievable with smaller ad groups containing closely related keywords. The more related your keywords are, the easier it is to match your ad copy to those keywords and the user's search query. That means you need a good AdWords structure and some extensive keyword research.
Once your keywords are grouped properly it’s simply a case of ensuring they’re included in your ad copy without keyword stuffing. You can also try dynamic keyword insertion to automatically display the user's search term in the headline of your ad copy. While this guarantees relevancy, dynamic keyword insertion can look unnatural depending on your keywords and the search query. Test out dynamic keyword insertion yourself to make sure your ad copy remains compelling.
Landing page relevancy
As with ad relevancy a well-structured AdWords account is the key to achieving a quality and highly relevant landing page experience. When your ad groups are a good reflection of category landing pages you’ll naturally achieve better relevancy between your keywords, ad copy and landing page.
It’s always good practice to continually test and improve the experience of your website regardless of your AdWords goals. Optimising your website and landing pages to provide a better user experience is key to improving your conversion rate, whether it’s from paid or organic traffic. This is the best way to increase your ROI, both within AdWords and your business.
Aside from ensuring all your ad group keywords are compellingly woven into your landing page copy, continue to experiment with call to actions, page layout and additional information to find the best converting experience. A/B split testing can help you do this across your AdWords account with ad copy as well as your website.
Remarketing is a successful ad display strategy that aims to convert those visitors that have passed through your site. With the right remarketing strategy, you can increase conversions from your existing traffic without paying too much more, making it an important CRO tool in your ROI strategy. More ad impressions with remarketing can lead to an increase in conversion rate by as much as 147%.
Use remarketing to bring visitors back to your site by reminding them of your USPs or tempt them with a special offer. Whether it’s to claim an additional discount or simply because your brand name reminds them of their abandoned cart, remarketing can help to capture sales that would otherwise have been lost.
It is, however, worth exercising caution with this strategy. A more aggressive strategy can improve the success of remarketing, but it can also rapidly drive up costs if not monitored properly. Just like CTR, make sure your other costs are already in check before spending even more. You should also carefully monitor your remarketing campaign and your AdWords account as a whole to make sure your conversions continue to outweigh any costs in line with your target ROI.
Delivering ROI from your AdWords is essentially reliant on your ability to meet the needs of your audience. In the words of Google, ‘give your users what they need, and a great Quality Score will follow’.
This is true for your entire AdWords account. If customers find an ad that matches their search query, which takes them to a landing page with a good experience, your conversion rates will reap the rewards. You also won’t need to spend money on huge traffic volumes for the sake of a few conversions. Everything from your AdWords account structure to your keyword selection should aim to appeal to as many users as possible with minimal expenditure.
If you feel like you’re spending all your money on PPC and AdWords without any of the right results, talk to one of our team today about how we could help you reach your ROI goals.