Measuring Google AdWords Campaign Effectiveness
30/03/2007 by paul
Effective Search Engine Marketing (SEM) is the skill of delivering highly-targeted traffic to the most relevant areas of your website, thus providing the best opportunity to convert visitors to customers. But what measures can be used to quantify this effectiveness? This article explains some basic ways to work out whether your campaign is effective, and more importantly to measure whether changes to your campaign have resulted in improvements or not.
Like many paid search engine advertising services, Google AdWords places ads at the top and to the right of the organic search results. They are often the first thing that customers see when they perform a web search, and many people only ever use AdWords links when they're purchasing online, or looking to purchase, as they know that these are commercial websites selling products relevant to the search term.
The ads are ranked primarily on the maximum cost-per-click (CPC) the advertiser is willing to pay, but other factors, such as clickthrough rate (CTR) are also used, and may determine whether your ad appears within the top or right-hand listings.
CTR is the ratio of impressions (the number of times your ad appears) versus clicks (the number of times that someone clicks on your ad) and is normally expressed as a percentage.
Example: An ad appears 100 times and is clicked twice
Clickthrough rate (CTR) = clicks / impressions = 2 / 100 = 0.02 or 2%
Because CTR plays a role in Google's ad ranking algorithm, the more relevant or attractive your ad is to searchers, the more likely it is to be clicked (improving CTR), and the higher it will appear in Google's list of ads. The higher your ad appears, the more people are likely to see it and the more likely it is to be clicked (further improving CTR)...etc, etc. Spending a little time considering the wording of your ad and the keywords targeted can reap huge rewards and is the most cost effective way of improving CTR. Best of all, these improvements can be achieved without increasing your CPC. If this sounds too good to be true, remember that you pay Google every time someone clicks on your ads. The higher your CTR, the more money Google makes from your advertising.
Whilst you want to attract many customers to your site, and this is true of all online marketing efforts, paid or otherwise, you also want to attract the right visitors - those that are actively looking to purchase your products or services now or in the near future. Improving CTR is one way of increasing visitors to your site, but this needs to result in an increase in sales. The relationship between the number of visitors and the number of sales is called conversion rate and is also expressed as a percentage.
Example: 1000 visitors come your site and 30 make a purchase
Conversion rate = purchases / visitors = 30 / 1000 = 0.03 or 3%
CTR is a great measure in determining the effectiveness of your SEM campaign off-site. Conversion rate measures the on-site effectiveness of your website to convert visitors to customers. If the quality of visitors is low, perhaps because they've been misled into visting the store whilst looking for an unrelated product, and/or your website is of poor quality, then your conversion rate will be low; if the quality of visitors is high, because off-site advertising is highly targeted, and highly relevant, and the quality of the site is high, you can expect your conversion rate to be high. For the best results, the site visitors need to be highly targeted, and the website needs to be of suitable quality to convert those visitors.
The final measure of the SEM campaign relates to the cost per sale or acquisition (CPA). This is the relationship between the number of sales and the cost of attracting enough visitors to the site to achieve those sales and is calculated using CPC and conversion rate.
In this example, so long as you're averaging more than $3.33 net profit per sale, your SEM campaign is profitable.Example: 1000 visitors come your site costing 10c each (CPC) and 30 make a purchase
CPA = CPC / conversion rate = $0.10 / 0.03 = $3.33
In this article I've introduced the key performance indicators of your SEM campaign and the relationships between them. Like the balance sheet, p/l and cash-flow statement in management accounts, however, they should always be viewed in conjunction with each other. Having a great CTR is worthless without a conversion rate to back it up and, ultimately, the CPA needs to be positive to make your efforts worthwhile (remember to take into account time or money spent on managing the campaign). This is especially true when trying to improve one of the measures in isolation, as is often required. In future articles, I'll take each of these measures in isolation and discuss effective ways to improve them with minimal effect on the others.
How does this apply to you?
After an initial investigation to establish a baseline, we will develop a cost-effective search engine marketing (SEM) (paid search) campaign targeting a selection of keywords. Using Google AdWords, we will place your business right alongside the leaders in your market.
Keywords : sem, search engine marketing, web marketing, google adwords,
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