When managing Google AdWords accounts, there are a number of things you can do that might seem like logical ways of increasing your return on investment (ROI). They may, however, be the very things that are holding your account back.
1. More Views Are Good
It’s tempting to view clicks and impressions as a key metric when judging the performance of an AdWords account. But when assessing the ROI of an account, I wouldn’t recommend basing the success of the account on these factors.
It can be good to get your ad out there to more people, and in theory, the more people that view your ad the more likely you are to make a sale. There are, however, a number of long term effects that can prevent your account from achieving a higher ROI.
More views doesn’t always mean more clicks. 100,000 impressions with just 100 clicks can be great for getting your brand out there, but is it really adding value to your business? Having such a poor click through rate can lead to your keywords receiving poorer quality scores. This means that you’ll have paid more to receive those 100 clicks than you would have done had your ad been viewed just 2,000 times.
To prevent this from happening, ensure your ads are targeting a relevant audience, and avoid using impressions as a key performance indicator for your account.
2. Lifetime Customer Value
An easy way to gauge your Google AdWords ROI is to use your ecommerce tracking to measure the pound in to the pound out. In some cases, this is all that is necessary. However, if the information is available, it might be a better idea to consider the lifetime value of your customers.
For example, say you work on a model of an ROI over 5 times investment returns profit. In theory, this will allow you to spend £1 for every £5 generated.
If, however, your data shows that customers are on average 50% likely to purchase from you again, it could be argued that the acceptable ROI from Google AdWords is to generate 2.5 times your investment, as it is likely the remaining 2.5 of your ROI will be retrieved through lifetime sales.
Due to the changing market or the lack of available data, it may not necessarily be practical for your business to determine the true lifetime value of a customer. Nonetheless, it is worth considering the value of a single sale beyond the revenue generated.
3. Increase the Ad Position on High Value Terms
It sounds like a no-brainer: increasing your ad position on the keywords that are generating you a good ROI. But with every keyword, there comes a point where increasing your ad position will generate traffic at too expensive a rate to remain on course for your target ROI:
It’s vital that you continuously test and review the ad positions that provide you with the optimum ROI.
Is ROI Really All That Important?
While the above tips will help you avoid some common pitfalls when it comes to maximising your Adwords ROI, it is worth considering a couple of other points:
1. Return on investment isn’t everything – Having an ROI of 1000% with a total revenue of £1,000 is less desirable than an ROI of 800% with a total of revenue of £500,000. Don’t use ROI as the be all and end all when judging the success of your online advertising.
2. There is a limit of what can be achieved through AdWords – AdWords is highly competitive, and this sometimes results in a situation where it is not possible to generate the desired ROI. This varies from industry to industry, and even keyword to keyword, so you may find that it is not viable to compete for certain keywords based on the return that is required.