Even with all the AI automation options available today, running a profitable paid search campaign is still an art. It takes a balanced mixture of human logic, touch, and reasoning along with careful automation. Too much automation and many find themselves in a less than desirable position.
Increasing your return on investment from paid search is not as difficult as it may seem. It is true, it does take time, and you need to consistently keep a watchful eye on your analytics and always be aware of opportunity vs. expense. Despite that seemingly daunting concept, you can run a successful paid search campaign if you follow these five tips. And if you don’t have the time, or just want experts to handle it for you, contact our PPC management professionals and we’ll be happy to help!
Focus on Conversion Rate not Click Through Rate (CTR)
Too often people focus on how many visitors they receive from a paid search campaign. It is their belief that the more clicks they get, the more sales or leads they should receive. To make matters worse, there are companies out there that actually measure paid search success on CTR alone.
Any of these beliefs is a recipe for disaster and these practices often result in spending more money than is made from the paid search advertising effort.
To correct this problem, you should focus on the Conversion Rate metric as it relates to leads generated when running a paid search campaign. This is a more realistic indicator of whether your campaign is moving toward success or not.
The formula for calculating conversion rate is:
Completed Actions (sales or leads) / Total Number of Visitors (Sessions)
One reason many people overlook this metric is that to calculate the Conversion Rate, a proper tracking code needs to be present on the thank you page of your website. For the majority of sites, this is the page a customer arrives at after filling out a contact form. The tracking code placed on this page gathers data on completed actions.
All major paid search providers have codes similar to this at your disposal. For Google Analytics this is called “conversion tracking” and is obtained from within your Google AdWords account. This tracking number is different from that which is provided to you through the use of Google Analytics alone.
Your conversion rate is a measure of unique visitors to completed actions on your website. Alone it will not guarantee you make money from your efforts, but combined with the remaining elements outlined below, it is one of the key metrics for running a successful paid search campaign.
Know Your Value per Visitor
Your Value per Visitor is the revenue you generate from each visitor to your website. In other words, it is a measure of how effectively your website generates sales or leads from the visitors it receives. The higher your value per visitor, the more effective your website is at converting them into qualified prospects.
Value per Visitor helps:
- Evaluate customer acquisition efforts
- Determine how effective your sales funnel is
You calculate your value per visitor using the following formula:
Revenue Generated / Total Number of Unique Visitors
Value per visitor can be confusing for many. Take for example a site with sales totaling $35,000 during which time 10000 unique visitors were attracted. This translates to a Value per Visitor of $3.50. Given this measurement, we could accurately say that the site owner makes $3.50 for every visitor who arrives at the website. Confused, one might ask “how do I make $3.50 for each visitor when not every visitor converts?”
The answer is found in the way the metric is perceived. It shouldn’t be looked at as each visitor completing a transaction with your site, but rather each visitor being worth an amount that ideally should be less than your CPC (cost per click).
To further illustrate, if your Average CPC was $1.25 and your value per visitor is just $3.50 then you are making $2.25 for each visitor you drive to your website. In other words, you spend on average $1.25 to get one click that is worth $3.50 to you. At this rate, you will never profit and should consider reworking your paid search campaign, hiring an expert PPC marketer, or shutting it down until you can do one of those options.
Keep your Average Cost per Conversion in check
Your Average Cost per Conversion (sometimes called Cost per Action) is the average amount of funding it takes to generate one action (a sale in the case of ecommerce sites.)
It is calculated using the following formula:
Advertising Cost / Total Completed Actions
In its simplest form, your average cost per conversion should be lower than your average order value or you are losing money.
To illustrate, if your average order value is $35 and your average cost per conversion is $40 then you lose $5 each time a sale is completed on your site. In other words, you are spending $5 more in advertising than you are receiving from a sale.
This one can be hard for many to see as they look at only the end result … the completed sale. They neglect the advertising cost which went into achieving that sale and therefore often end up continuing to run paid search campaigns that are not profitable to their business.
The exception to the rule is a company that has a built-in average lifetime value of a customer and is willing to lose money or break even on the first sale to gain future sales from that same customer. With careful planning and proper implementation, this strategy can successfully be used to build a viable business online.
Use long-tailed keywords and exact match type instead of broad match keywords
When internet users begin their search for more information on a product or service, they often use what are called general or broad keywords. They do not know exactly what they are searching for but do know they need more information on a given item of interest. As a result, the keywords tend to be shorter and more general.
Searches result in terms like “shoes”, “running shoes” and “Nike” for example. While these terms would likely return data relating to a given product type, they would likely not return data on a specific shoe.
These terms would yield traffic on a broad level with all visitors looking for information yet few looking to buy. Not only would these search terms yield broad-scale traffic, but they would come at a high price. Often the more broad the keyword is, the more competition there is for it and the higher CPC you will pay.
Consider now the user that has already done their research and is ready to buy. They have performed all the searches, learned what is the best running shoe for their needs, and are now on the hunt to find out where they can get it.
As the user narrows their search and has gathered more data about a given product their search shifts to a more exact methodology. They begin to use what are called long-tailed keywords to find more specific results. Terms like “Nike Airmax running shoe” or “Nike Airmax size 7 running shoe” are used.
You can see just by looking at the search terms utilized, that the user is more qualified to buy. They know exactly what they want and now they want to know where to get it.
Although there will be competition for these keyword types, the competition will likely be less than what is seen at the broad level. As a result, you’ll achieve lower CPC prices and in turn more qualified traffic by bidding on these types of “long-tailed” terms.
Build smaller keyword lists targeted across more specific ad groups and campaigns
One of the most common mistakes made by non-experienced paid search marketers is “dumping” large lists of unrelated keywords into a few ad groups across a few campaigns.
While this tactic may save you time, it will ultimately be the iceberg that sinks the ship in the end. Trying to save time and money, in the beginning, will only result in losing money on the other side.
Take your time upfront, perform your due diligence and structure your paid search campaigns to take advantage of the opportunities that smaller, more targeted keyword groupings can do. In case you are asking “what can they do?” here’s a list.
- Provide more control over ad presentation.
- Increase click-through and typically increase the quality of traffic.
- Increase quality score.
- Increase relevancy.
- Increase Quality Score which decreases bid cost and increases placement.
Paying attention to these 5 tips might not make you an expert at paid search, but it certainly will put you on the right track toward achieving higher ROI from your efforts.