Successful PPC Campaign Management: You only need 4 numbers

 

PPC campaign management can be overwhelming if you are not simplifying matters and monitoring & tweaking what really counts.

If your task is to manage a company’s PPC account with a medium to large budget, the complexity of managing it effectively can grow exponentially. You might be facing multiple campaigns, each of which with several ad groups, hundreds of ads and thousands of keywords running simultaneously.

If you get confused over which numbers to follow you can get pretty lost. There is a problem with not knowing where to keep your eye fixed. If you start putting under consideration all metrics – clicks, impressions, Avg. CPC, Avg. Position, Click through rate, Conversion rate, Cost, Cost per conversion, etc – you will soon realize that the only thing going always up is your stress level.

Don’t Panic! You need to simplify and focus your efforts where it will leave most effect. Here is how:

 

ROI – The Prime Number

 

There is only one number to spot before the others – margin or return on investment (ROI). ROI can be selected as a metric if you are using Google Analytics (or any other web analytics software) to measure your PPC campaigns which is basically the goal value (revenue from sales) minus Cost divided by Cost.

If you are not using Google Analytics you can instead measure direct profit or loss margin by subtracting your total goal value (number of conversions*your average sale price) with your ad cost. So for instance let’s say that the overall number of conversions for a campaign were 100 and your average sale price is $50 then your total goal value for that campaign is $5000 (your total goal value is automatically calculated if you are using the adwords conversion tracking and inputed a goal conversion value). You had 1000 clicks at an average CPC of $0.50 so your total costs was $500 (again this is a given in adwords).

In other words you spent $500 for that campaign and sold $5000 worth of products. Hence your margin is $5000-$500=$4500. This may be a quick way of measuring the profitability of your campaigns, ads or keywords. You can take this a step further by calculating the real net profit – that is subtracting the advertising costs from the profit margin of the products instead of their sale value.

Taking the same example above, let’s say the sale price is $50 but the net profit margin for each sale is $10. Hence the total profit out of the 100 sales is $1000. The real overall net profit margin is then $1000 minus the $500 in advertising costs = $500 return after ad costs.

Note: the profit margin for each sale ($10) can always be inputed as a conversion value in Adwords instead of the sale value ($50) if you prefer. This will enable you to measure net profit directly from each campaign or ad.

Break down the problem into simple manageable parts

 

If any of your running ad campaigns are flagging a negative ROI you can start by troubleshooting the problem into easy to follow ‘logic gates’. I find this method to be a very simple, effective and systematic troubleshooting procedure which avoids leaving you with more questions than answers or fuzzy loose ends.

Negative ROI can mean one of 2 things (or rather one thing stated in 2 different ways): Either the Cost per click (CPC) is higher than the revenue per click (RPC) or that the average cost per acquisition (CPA) is higher than the margin of the product sold.

In either case it means that CPC or CPA are untenable because of one or all of the below:

1. Keywords bidded for are way too competitive to get substantial return

2. Your Conversion rate is low due to inherent problems in your landing page or product

3. The margin of your product is too low to balance the cost of this advertising channel

 

Deconstructing the Core of the problem: CPC & CPA

 

The beauty of this approach is that it deals with as little metrics as possible. It simplifies the optimization process. In other circumstances you can easily be led astray by too many problem-solving paths and factors to consider. What this approach offers is a clearly signed map.

It focuses on dealing with the core of the problem directly by looking into CPC and CPA. In case of a negative ROI, both metrics need to be lowered.

CPC can be lowered if you:

1. Bid for keyword phrases that are not so competitive but can generate potential traffic

2. Improve CTR through better ad copy (attractive headlines, Keywords in title, call for action in copy, etc) – Split testing is a good way to improve on this

3. Manually reduce the bid price to a point where it still generates traffic/conversions but total costs are lower than revenue earned

CPA can be lowered if:

1. Conversion rates are improved. This is achieved through keeping those keywords with high conversion rates (good keyword research essential), discarding the ones with low conversion rates and improving your landing page (more user friendly, good copywriting)

2. By lowering CPC (see above)

Essentially another way of seeing it is that by lowering CPC and CPA you are increasing your ROI.

So in a nutshell, the most important metric to monitor at first glance is ROI then follow action by improving CPC and CPA. This of course should be a continuous and iterative process.

Traffic as a Time Factor:

 

Traffic (or number of clicks) is the variable to use to measure the urgency to action. Let me explain.

If you have a campaign, ad group, ad or keyword that has negative indicators – let’s say a negative ROI because of a high CPA or a high CPC – but you only had 20 clicks in all it’s not a matter of urgent concern. Secondly you cannot base a decision on such little traffic. It might be the case that more traffic comes in and the indicators change for the better.

However if the same campaign, ad or keyword is getting in 300+ clicks per day it would require immediate action. If it has a negative ROI, costs and money loss will be incurred very quickly by the hour. If on the other hand it has a positive ROI but there is room for optimization then you would also be losing opportunity fast.

This is how I see traffic flow as a time factor and it can be expediently used to gauge priority to action.

Tagged as: Avg. CPC, Avg. Position, Click through rate, Conversion rate, Cost, Cost per conversion, CPA, Google Analytics, impressions, licks, PPC campaign management, ROI