The main goal of your
AdWords Google Ads campaigns is to work towards a positive ROI.
When you spend money on Google you want to make sure that, in the end, you get more value out of it then what you put in.
With e-commerce websites, this is relatively straightforward, as you’d be able to track the exact outcome of your campaigns.
But how do you make sure your lead generation campaigns are profitable?
Step 1: Understand how much a new client is worth to you
The first step is to know (on average) how much you earn per client.
Is the client returning to your business or is it a one-off sale and, if so, how often is he likely to return?
You want to know your total customer value and how much profit you earn from it.
Example: your customer value is $500 and $400 of this is profit.
Step 2: Decide how much you’re willing to invest to get a new client
Once you know your customer value and your profit you’ll need to decide how much of this you’d be willing to spend on getting a brand new client in.
Often this is a certain percentage. The higher it is, the more volume you’d be able to reach (as Google works based on an auction model).
Example: You decide to invest 30% of your profit to get a new client. 30% of $400 is $120.
Step 3: Understand how many leads you need to get a new customer.
Not all leads will automatically convert into a customer (unless you’re a great salesperson – in that case well done!).
You need to know how many leads on average you need to get one sale. This will give you the cost per lead target that we need for our AdWords campaigns.
Example: On average you need 2 leads to make 1 sale. 50% of $120 is $60, which is your cost per lead target.
Step 4: Know the conversion rate of your site
The conversion rate of your site will decide how much you, on average, can spend on a click to your site.
All you need to do is to make sure you’ve got conversion tracking in place and that you set up your Google Analytics goals.
Example: 15% of your clicks convert into a lead. 15% of $60 is $9, which is on average the cost per click you can afford to make your campaigns profitable.
Step 5: Optimise your campaigns based on the data
Now the fun part starts.
All of these numbers will change depending on how well you’re doing. It will also be different for each of the keywords in your account.
Some of your keywords will have a lower conversion rate (CVR), while others will be more relevant and have a higher CVR. If the CVR of a particular keywords turns out to be 25%, you can spend $6 more per click as it attributes more value to your site.
Once you have meaningful data you’d be able to optimise your bids down to the keyword level to get maximum result out your budget.
Also, you can A/B test your ad copy’s and landing pages to improve the CVR of your campaigns. This way you can bid higher, get a higher ad ranking and get more volume and leads for the same cost per lead target!