What company doesn’t want to maximize ROI for their advertising? The “I” portion of that is usually pretty simple – you know how much you are paying to advertise because you have bills from the advertising companies you have to pay. The “R” portion is where things get trickier and where many companies struggle. There are two main issues to overcome in determining the return for your advertising dollar.
1. Know what you are tracking
For example, if the goal of your AdWords advertising is to sell items that vary in value, tracking the number of conversions alone is not sufficient – you really should also be tracking the value (or revenue) from the conversion as well, which AdWords conversion tracking can do. Otherwise, you cannot really tell what kind of return you are getting – you may be getting lots of conversions from your ads, but only for low value items whose profit will not cover the ad expense.
This kind of thing can also happen if you are importing Google Analytics goals or conversions into AdWords, either because you have an active AdWords conversion tracking action that is tracking the same thing as the imported Google Analytics goal, or because you are importing multiple goals that overlap in what they are tracking. Unfortunately, the screens that most people use in the AdWords UI to see how they are performing (e.g. the Ads, Networks, and Keywords sub-tabs under the Campaigns tab) do not separate out conversions by each conversion tracking action, but simply show the aggregate of the conversion information from all active actions. This can make it easy to erroneously believe you are getting more conversions or revenue from your ads than you truly are.
Fortunately, Finch has experts that look for these kinds of issues when performing a free AdWords account audit. We have seen them time and again. Using the AdWords’ programming API, we are able to tease apart the information from each conversion into the separate conversion tracking actions that have tracked it, allowing us to pick and choose what actions to pay attention to. Then when Finch’s PPC bidding engine optimizes your Google AdWords account, it is doing so based on the true revenue or number of leads that you are obtaining.
2. Know what each conversion is worth to you
The second issue many run into when determining the “R” portion of their advertising ROI, after figuring out how many leads or revenue their ads generate, is knowing how much profit comes from those leads or revenue. In a prior blog post, Bjorn talked about the importance of knowing how much you are willing to pay for a lead or a certain amount of revenue. Though it can be hard to discern the value of a lead or the total COGS of an item you sell, particularly when taking into account potential repeat business, warehouse inventory costs, etc., it is critical to know as you determine the actual profit from your advertising.
Armed with the ability to track conversions from your ads and knowing how much profit you make for a lead or a dollar of revenue generated from those ads, you can now correctly calculate your ROI from Google AdWords. All that is left is the easiest part of all – maximizing that ROI that you’re calculating. That might sound like the hardest part of all, but if you are using an automated PPC tool like Finch to analyze the data and figure out the ideal bid for every single keyword and placement for you, maximizing your ROI truly becomes the easiest part of the process.