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Objective: Learn how to calculate your advertising ROI (return on investment).
The term 'conversion' refers to converting from leads to customers or users of your service. So if someone clicks on your AdWords ad, and buys something on your site, that click is a conversion from a site visit to a sale. Other conversions you might want to track are page views or signups.
Advertising is only effective if it generates measurable results for your business. Your Google AdWords account is an investment of time and money that you use to drive customers to your website. In this lesson, the resulting conversions are called your return on investment, or AdWords ROI.
ROI can also be called Return on Ad Spend, or ROAS. Your ROI can be calculated as revenue from sales, minus advertising costs, all divided by the cost of advertising. For example, if your advertising costs for the past week were £500 and you've sold £1,000 worth of inventory as a result, you have a 100% ROI for the week ((£1000-£500) divided by £500). To express ROI as a percentage, you multiply the result of this formula by 100.
Determining your AdWords ROI can be a very straightforward process if your business is after web-based sales. You will already have the advertising costs for a specific time period for your AdWords account in your Campaign Summary statistics. You can also create reports via the Report Centre. The net profit for your business can then be calculated based on your company's profits from sales made via your AdWords advertising, minus the cost of your advertising. Dividing your net profit by the advertising costs will give you your AdWords ROI for that period in time.
In other cases, your ROI may require a different formula. For example, if you are interested in calculating the ROI for a page view or lead, you will have to estimate the values of each of these actions. For example, a Yellow Pages ad for your business may cost US$1,000 per year and result in 100 leads. Ten of those leads become customers, and each customer provides an average profit of £120. The value of each lead is therefore £12 (100 leads/£1200 profit), and your ROI for the Yellow Pages ad is 20% ((£1200 profit minus £1000 spent)/ £1000 advertising cost) x 100.
A simple alternative to estimating values for your leads and page views is to use a cost-per-acquisition (CPA) measurement. This method will allow you to focus primarily on how your advertising costs compare to the number of acquisitions those costs deliver. Using the Yellow Pages example again, your ads may cost £1,000, resulting in 10 sales: therefore, your CPA for those ads is £100. Your CPA should not exceed your profit derived from each acquisition. In the case of the Yellow Pages ad, the CPA is 20% less than the revenue the acquisitions provide.
Ultimately, your ROI calculation will help you determine the best way to spend your advertising dollars. For instance, if you represent a camera shop that sells photography equipment and provides photography classes, the keywords 'photography' and 'photography classes' could both potentially be valuable to you. However, how would you determine which keyword would have the greater potential ROI for your business?
Assume that you have a £100 daily advertising budget. The keyword 'photography' generates 110 clicks, resulting in £120 in sales, but it also costs you £60 a day. This results in an ROI of 100% for that keyword. The keyword 'photography classes' uses only £25 of the daily advertising budget, but generates 40 clicks. These clicks result in £90 in sales, with an effective ROI of 260%. This advertiser would be better served allocating more of their budget to the 'photography classes' keyword because of its higher ROI, despite the potential for fewer clicks for this keyword.
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Objective: Understand and implement AdWords conversion tracking.
An AdWords conversion occurs when someone clicks on your AdWords ad and performs an action your website that you recognise as a completed sale or collected lead. Conversions can include the purchase of a digital camera, a visitor submitting their contact information for an insurance quote, or a prospective buyer downloading a white paper about your company's software capabilities.
Another important term to understand when tracking conversions is 'transaction'. While a conversion represents somebody coming to your site through AdWords and making a purchase, the transaction represents the purchase or desired visitor action itself.
Setting up conversion tracking is a straightforward process that gets you started tracking overall conversions with minimal steps. You can also select advanced conversion tracking options with more customised conversion tracking preferences such as assigning unique conversion values. With conversion tracking in general, you can specify conversion types such as purchases or sales, leads, signups and page views. You can also create your own conversion type from the Other option. The advanced settings options will be covered in detail in later topics.
To set up conversion tracking for your account, click the Conversion Tracking link on the Campaign Management tab at the top of your account.
You can stop or re-start conversion tracking at any time. To do so, log into your account and click the Conversion Tracking link on the Campaign Management tab, then click Stop conversion tracking. To stop sending tracking data to Google or remove the Google Site Stats text, remove the conversion tracking code from your website. Stopping conversion tracking in your AdWords account will remove the statistics and tracking information from your AdWords account pages. However, your reporting data will still be available via the Report Centre.
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Objective: Understand how to select your settings and implement your conversion tracking code.
There are two important options to consider while setting up conversion tracking: the security level of the HTML code you would like to implement, and the language you want to use for your Google Site Stats link and corresponding informational page. The choice of 'http://' or 'https://' conversion tracking code is determined by the security level of your conversion page. Most shopping carts will use the more secure 'https://' option, and you can easily determine your own needs by examining the address bar in your web browser when you access your conversion page. If in doubt, use the more secure 'https://' since it will have no negative effects on your website.
Your choice of language will affect which Google Site Stats link is displayed on your conversion page. It will also give your users information about conversion tracking in a language appropriate for the majority of your site's visitors.
Adding the code to your website is a simple cut-and-paste procedure. Make sure that you copy all of the code from within your account and that when adding the code to your website it is completely within the HTML <BODY> </BODY> tags, as shown here:
[Purchase Conversion Default: Sample code snippet only - DO NOT USE]
<html>
<body>
<!-- Google Code for Purchase Conversion Page -->
<script language="JavaScript" type="text/javascript">
<!--
var google_conversion_id = 1234567890;
var google_conversion_language = "en_US";
var google_conversion_format = "1";
var google_conversion_color = "666666";
if (1) {
var google_conversion_value = 1;
}
var google_conversion_label = "Purchase";
//-->
</script>
<script language="JavaScript"
src="http://www.googleadservices.co.uk/pagead/conversion.js">
</script>
<noscript>
<img height=1 width=1 border=0
src="http://www.googleadservices.co.uk/pagead/conversion/1234567890/?value=1&label=Purchase&script=0">
</noscript>
</body>
</html>
You should see a small text block on the conversion pages where you have placed the code. Again, you should then check your conversion reports to ensure that the conversion has recorded correctly. The Site Stats text link is an important feature of the programme. It lets users know that you are tracking their purchase, and gives them a link to more information about Google conversion tracking.
If you cannot see the Site Stats link, verify that the conversion code has been added to your webpage with no additional line breaks (compare your page to the conversion code available within your account). Some HTML editing programs will insert line breaks into the conversion code for the lines that are long enough to have wrapped to a second line in your account. The conversion tracking code should not have any line breaks inside the '<' and '>', unless there is a ';' at the end of the line.
You can verify if the code is working by waiting for a conversion to occur or completing a test conversion yourself. If you know that a conversion has occurred on your site from an AdWords ad, check the conversion column in your reports to see that the conversion registered. Please note that updates to your account reports may take up to 24 hours.
You can also run through the process yourself by searching on Google, clicking on one of your ads and completing a conversion on your site. However, this method costs you an ad click, so we recommend that you wait for a conversion to occur.
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Objective: Learn to:
- Analyse conversion statistics
- Determine the return on investment, or ROI, of your campaigns
- Improve campaign performance using your conversion data
Once you have implemented conversion tracking, two new columns will appear on all your campaign management screens. The Conversion Rate and Cost/Conversion columns give you a quick overview of how your campaigns are doing, but they do not include any of the advanced statistics available through your Report Centre.
The Conversion Rate is the percentage of clicks that become conversions. Cost/Conversion is the cost you have accrued over the time period which you are viewing, divided by the number of conversions you received as a result of those clicks. This data will give you a quick overview of how well your clicks are converting, and the average cost of those conversions.
The conversion tracking statistics available in your AdWords account will provide the data you need to improve your ROI. Statistics are available both at the Ad Group level and via the Report Centre.
Your Ad Group summaries will include conversion rate and cost-per-conversion data. Again, conversion rate is a basic percentage, highlighting the percentage of clicks you received that resulted in a conversion. Your cost-per-conversion number represents the total cost of clicks for that campaign or Ad Group, divided by the number of conversions. This number will help you to quickly evaluate your ROI for the Ad Group as a whole.
Your Report Centre gives you detailed and specific conversion tracking information. Generating a custom report will give you access to all your conversion statistics, including the number of transactions and your cost-per-transaction. See the Reports lesson to learn more.
A Custom Report enables you to evaluate keywords based on performance for each transaction type. Even seemingly relevant keywords may not provide the ROI you expect, so careful evaluation of the actual conversion and transaction data is essential for optimising your campaigns.
After selecting the relevant conversion tracking fields for your report, you can start evaluating your account's performance. Conversion rate and cost-per-conversion are important statistics to monitor, but each individual conversion can lead to multiple transactions as users shop for various products on your site or return later to make additional purchases. Consequently, your transaction and cost-per-transaction statistics can prove even more valuable, since acquiring regular customers is more valuable than any single conversion. Tracking your transaction statistics can provide valuable insight into the effectiveness of your advertising, as well as the effectiveness of your site and the value of your product offerings.
Advanced Option Conversion Statistics: The conversion tracking statistics in your AdWords account provide data for improving your ROI. When you select the advanced option, you will receive data based on the unique conversion values you have set.
Improving the conversion performance of low-ROI keywords can help make your advertising budget last. Helpful questions to ask include:
- Are the keywords targeted and relevant enough to produce the desired results?
If a keyword is too general, you run the risk of getting clicks to your site that are not really relevant, and have a lower conversion rate. By narrowing the appeal of your keywords (using tennis racket instead of just tennis), you will get more relevant clicks and customers coming to your website.
- If the keywords are well-targeted, then is your site hindering your conversion rate?
Taking a prospect directly to the most relevant page on your site can boost your conversion rate. Improving the usability of your site in general by making it easier for prospects to find and purchase your products or services can make a huge difference in your conversion rates.
The Google conversion tracking system has a few limitations. Because the tracking code is JavaScript function associated with a cookie, Internet users who have disabled cookies or JavaScript in their Internet browsers will not be tracked. For this reason, multiplying the number of clicks you have received by your Conversion Rate may not always be an accurate way to calculate the number of conversions you have received, but should be a close approximation. In your reporting, clicks which cannot be tracked are not included in your conversion data.
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