Tag: AdWords

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Value Per Click – Bidding Strategies

In some cases you as a business owner may consider that a click activity is important to your advertising strategy. This may be the case when you have an unknown product or be in the process of establishing your brand. You may consider that a click in to your website where a visitor is initially exposed to your message, product, or service has a measurable value. Each business case will be different and the value per click will really depend on what you are selling.

In some cases a business owner considers that click activity may turn into a repeat visitor or potential future buyer. They may want to assign a value to each click. This value may be substantially less than that for a true conversion, but still has some value. For example a business owner may say that each click merits $1 whereas a lead conversion would be worth $20 and a sale $2,000.

“The value per click is the expected profit from a current visitor to your website. You’ll likely want to … reflect the fact that the visitor might not convert on this particular visit, but may return in the future to buy something. The size of this adjustment will depend on your particular product or service.”

I do not recommend that you make advertising budget decisions based on click traffic but rather more data and typically data from micro conversions (lead conversions) or sale conversions.

 

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Cost Per Acquisition CPA – Bidding Strategies

Some businesses that sell services on Google AdWords may find Cost per Acquisition (CPA) a helpful metric to determine if a Google AdWords program is working for them. In the case of CPA you will evaluate a number of metrics to determine what will be profitable for bidding in AdWords.

“Each time a user who clicks on your ad completes one of these goals, they’ve given you a new conversion. You should be able to attribute a value to each of these conversions. For example, you may sell digital cameras on your site for US$300. Let’s assume that each camera has an additional wholesale cost of US$200 to you. Therefore, a conversion for a user who buys a camera on your site generates US$100 of revenue for you. This amount is the price the user paid (US$300) minus the cost to you (US$200). The US$100 revenue is your maximum profitable cost-per-acquisition, or CPA. You can pay up to US$100 for each conversion and still make a profit on the sale.”

Understanding your conversion rate is the next step to be able to extrapolate on the average what you should bid per click to stay within your goal cost per acquisition to maintain profitability. If your conversion rate is 2.0% that means that for every 100 clicks 2 people will actually buy your product. If each sale generated $100 of profit each or a total of $200 in profit, you need to be spending under $2 a click to show a profit in your AdWords program.

If instead each acquisition you make is for a new client who will typically spend $30,000 over the effective lifetime of their use of your services, then your investment in Google AdWords takes on whole new approach. You will be willing to spend more to advertise to earn that client who will in turn spend more with you over the course of several years.

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AdWords Recommends Separate Mobile Targeted Campaigns

I sat through a seminar this past week that I found very interesting. It was done by Jason Woods from Google AdWords on Mobile Specific Programs.

Here are a few important points that I gleaned from the seminar that I wanted to share with you:

  1. Google AdWords is recommending that businesses do breakout campaigns to target just high end mobile phones and tablets. Although Jason Woods recommend that tablets be put into the desktop and laptop campaigns I don’t agree with that focus just yet. I’ll expound on that issue later.
  2. Google AdWords is recommending more general keywords in this program due to the types of keywords mobile users will type in.

Here are some of my comments and recommendations that I have seen from client accounts we are already managing that have separate mobile/tablet campaigns.

1. The click cost is typically less, but so are the conversions and activity. But don’t think you shouldn’t do a separate mobile program for these reasons, just alter your budget and click cost accordingly and watch your cost per conversion. So far we’ve have good results for clients in the mobile and tablet arena.

2. I don’t necessarily agree with putting tablets into the desktop campaign. I base this on my observation of tablet users. Most tablet users I’ve seen are using cell phone access to the web, meaning that they are out and about and are using access to the web via Sprint, Verizon or some other service. Although most tablets will connect to wireless networks, the fun of a tablet is to access information anywhere not just where you find a hot spot. Now this may change as more and more mobile service providers reign in big data users, but at this time make your own decision based on what you and your client see. For you, you may want to put tablets in with your desktop program.

It is easy to see if you should try a mobile specific program now by logging in to AdWords, go to your campaign tab, select the segment drop down, then click network. Google will show you the number of clicks and conversions that have come from mobile devices with full browsers and tablets with full browsers. Base your decision to do a breakout program from this data.

If you are looking for a savvy Google AdWords account manager, I would be glad to chat with you about your Google AdWords needs (301-705-7303) or I invite you to visit our AdWords account management services page for our programs and pricing.

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Reviewing Ad Profitability: ROAS – Metrics Part One

ROI also known as ROAS (Return on Ad Spend) is just one important metric to monitor to make sure your AdWords advertising plan is working for you. The formula for ROAS is shown below:

((Sales less AdWords Spend) divided by AdWords Spend) times 100

This yields a percentage that is an important figure to keep in mind when you evaluate if a Google AdWords budget is working properly to yield a return for your business.

If your ROAS is above 1% you are creating more sales than your expense to advertise. Here’s and example. A typical sale generates $4,800 of income. You spent $400 on AdWords to generate the sale, your ROAS is 11%. If your typical sale generates $4,800 of income but you spent $1,400 on AdWords to generate the sale your ROAS is 2.42%.

The subjective part comes when you try to analyze what is a satisfactory number for your ROAS figure. This varies for each business. For most businesses you really should be at a number higher than 1%.

For businesses selling products online, the ROAS is fairly straight forward, but how about when you sell a service or are looking to add a new patient to your practice. In this case, a review of Cost Per Acquisition may be more valuable tempered with a review of ROAS as well. The key is to generate more sales than it costs to advertise to get them. This takes much more analysis than just running reports in Google AdWords,;you really need to measure your AdWords ad spend against reports on your company’s overall profitability to determine if AdWords is really working for you.