Set up conversion tracking so that you can link the outcomes (leads, enquiries, sales) to the ads and find out how much each conversion costs. Then in order to evaluate Return On Investment from the ads you need to know the value of the lead/enquiry/sale to your business.
If you have an eCommerce site have eCommerce Tracking set up in your Google Analytics account so that you can see the value of orders generated by clicks from the ads. Also try to answer the 3 key questions below:
1. How does your pricing compare to your competitors?
If you have an online store you’ll already know that the market is really price sensitive. As well as competing with local businesses, you might have online competitors from other parts of the world who offer free shipping and/or lower prices.
A person can easily click on several ads to compare pricing before they decide where to place their order. If your pricing isn’t competitive, or your business isn’t unique in some other way to make people want to buy from you, you might not get the return you hoped for from AdWords.
2. How will you track the results?
The best possible scenario for tracking results is to set up AdWords Conversion Tracking. For an e-Commerce store, the best conversion to track is a completed order. Conversion Tracking provides information about how much you spent on AdWords clicks in order to get each order. It also provides information about the conversion cost of each keyword.
Conversion Tracking allows you to optimise your campaigns by allowing you to focus on the keywords that lead to conversions efficiently, and pausing those that don’t convert. Conversion Tracking is relatively straight-forward to set up if you have a payment gateway and orders are transacted on your domain. In this case a piece of code is added to the final “order confirmation” page.
Similarly, a Goal can be set up in your Google Analytics account to track which source of traffic generated orders. This means that you can compare how well each traffic source converts to find out what your best traffic sources are.
If your payments are transacted via PayPal or another service that’s not part of your website, tracking conversions is more difficult. Either work with a really savvy web developer or you can also read this information from Loves Data.
When Conversion Tracking can’t be set up, what are the other options for tracking the return from your AdWords spend?
If it’s a new website with low traffic from other sources and when you run an AdWords campaign you start getting orders, it’s a reasonable link that the orders were generated by AdWords. But what happens when traffic from other sources increases?
Other scenarios are worth considering but if you’re serious about investing in Google AdWords in the long term to increase orders, get your website set up in a way that Conversion Tracking and Goals can be set up.
3. How much is an order worth?
Once you have Conversion Tracking set up you’ll get valuable insights into how much you spend on AdWords to get each order.
Over time your campaigns and website can be optimised to improve your conversion rate but right from the start you should know what an order is worth.
The value of an order relates to the profit on the order, and potential life-time value of a new customer. For example you might sell a product for $50, of which the profit is $25. If you spend more than $25 to get the order then you’ve blown all your profit.
If you have a loss leading strategy of spending money to get new customers because you have a great marketing program that allows you to get repeat orders from existing customers, you might consider this scenario OK. But if you need to make a profit from each order then you don’t want to spend more than the profit to get it!
This scenario is different for each business owner and varies depending upon the size of the order but you’ll need to work out what an order is worth in order to evaluate the return from your AdWords spend.
1.Define your Goals - is it website traffic, on-site engagements, leads, sales, revenue, or other? Be very specific about it.
2.Choose KPIs that will allow you to measure against your Goals. It's always a good practice to have 2 sets of KPIs - one primary, another secondary. Primary KPIs will allow you to measure business related results and can be used for optimization. Secondary KPIs can complement primary in assessing performance and help inform campaign optimizations. For ex: You Primary KPI is CPA (cost per sales acquisition), your Secondary KPIs are CVR (sales conversion rate) and CTR (click through rate)
a.Traffic - Click Through Rate, Cost per Click, Bounce Rate, Page Visits per Session, etc. b.On-Site Engagement - Cost per Engagement, Engagement Conversion Rate. c.Leads - Cost per Lead, Lead Conversion Rate. d.Sales & Revenue - Cost per Acquisition, Sales Conversion Rate, Return on Ad Spend.
3.Establish benchmarks on your KPIs that make sense for your business (based on your Goals). Ex: You make $100 of a single sale on average. It makes sense for you to spend $50 to acquire a sale still make $50 profit at the end (your sale value minus ad spend). Therefore the maximum CPA (cost per sale acquisition) you are willing to pay is $50 and that’s what you will measure success against and optimize towards (lower CPA, increase amount of sales for a given budget).
4.Ensure proper tracking - once you decide on your KPIs you know what you need to track and can figure out how to do so and what tools (Google Analytics, AdWords and Bing conversion tags, 3rd party tracking solution, etc.) you might need. Do not even think of running a paid search campaign without having proper tracking in place that is in accordance with the KPIs.
5.Assess performance and optimize – if you see that you are somewhat close to your benchmarks (maybe you are slightly above) that means you are on the right track. There is always a room for improvement and with proper optimization you will achieve efficiency. If you are way above your benchmarks – stop doing it, but don’t give up on AdWords completely. It might be just that you are doing it in a completely wrong way both strategically and tactically.