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One of the great things about a pay-per-click campaign in Google is the ability to access a myriad of data points to judge the effectiveness of your strategy. The idea is to use all of the data available at your fingertips to make small changes to your campaign so that you can achieve two simple goals:
- Highlight the pieces of your campaign that is performing well
- De-emphasize those pieces that haven’t performed well
Sounds simple, doesn’t it? It is – until you get a look of all the data that gets generated from a paid search campaign. By the time most advertisers finish looking at their CPC (cost per click), CTR (click through rate), Cost per conversion, conversion rate, etc, their head begins to spin.
With so much information, it’s important to decide which is important enough to act on. My rule of thumb when it comes to deciphering this information is simple: your most important data is closest to your bottom-line business goals. Why worry about CPC, when cost per lead is closer to the actual sale? Why worry about the percentage of people who click on your ad (click through rate), when you can focus on the percentage of clicks that turned into a “conversion” (conversion rate)?
When I am working with one of our agency partners on their insurance marketing SEM, and need to do a “quick and dirty” assessment of their campaign’s performance, I have some go-to metrics that I look at first. Let’s take a look at three of them:
- Campaign Cost. This might sound overly simplistic, but keeping a close eye on your campaign spend to-date is the first thing you should do when analyzing performance. All of your important secondary metrics are going to be based off of cost, so keep an eye on your spend on a daily basis to answer these questions:
- How much have I spend already on this campaign?
- When is my budget projected to run out, based on campaign spending so far?
- What campaigns are spending the most?
After you get a handle on how much you’ve spent, you can get started on looking at metrics that show how your money is performing. And the first thing I look at is…
- Cost per Opportunity (CPO). Sometimes referred to as a cost per lead (CPL) or cost per acquisition (CPA), this is a leading indicator of how much you are spending to acquire a lead through your SEM spend. My insurance agency partners fund SEM campaigns in order to gather insurance quote requests from search engine users who are looking to get an estimate for their policy needs. If each individual quote request averages $20 per year in profit for the agency, and each average policy is renewed twice more, the agency should be willing to pay up to $59 for each lead through SEM in order to turn a profit ($60 profit from the lead {$20 per year x 3 years} – $59 invested per lead = $1 net profit from SEM).
One caveat: as I mentioned in the beginning of this post, the most valuable metrics get as close to the “sale” as possible, so the ultimate indicator of performance is cost per sale (or cost per customer). If you can directly attribute online sales to your SEM campaign, use a cost per sale as your substitute for CPO — this metric will tell you if your generated revenue is more than your investment in paid search.
- Conversion Rate. This is simply calculated as a ratio of SEM conversions to clicks. It answers the question “how many visits to my site lead to a conversion?” Overall, this can answer two very interesting questions for your campaign:
- Is my website (more specifically your SEM landing page) effective at driving business?
- What keywords are most successful at driving conversions, and which keywords are just costing me money with very little return?
Your campaign’s conversion rate is a good indicator of how your landing page is performing. If the page to which you are driving traffic is built with your conversion point in mind (a quote request form, for example), your conversion rate will benefit. Since you’ve paid for the visitor’s click, you might as well pay attention to their behavior after they have cost you money. Your conversion rate will tell you if you are successful at converting costly visits into conversions.
Your campaign is capable of tracking conversion rate at the keyword level, which is a GREAT metric to be more efficient with your costs. Does a particular keyword have a high conversion rate? React to that by pushing up your bid and making that profitable keyword more visible. Is there a certain set of terms that are costing you money but not producing conversions? Pause or de-emphasize that term.
Use these metrics as a starting point in evaluating paid search marketing campaigns. They’ll help you sort through all of the data that you can find in Adwords (or the SEM report that your marketing partner sends to you!), and get to the information that really matters.
If you get lost in all that data just remember to ask yourself one very important question: which data most directly impacts my bottom line?
