Knowing which campaigns offer the best return on your investment is essential to ensuring your marketing budget is allocated appropriately. That way, you can focus on investing in the campaigns that work hardest for you.
To measure your return on investment (ROI) of your Google Ads campaigns to make the most of your marketing budget.
2 Measuring your return on investment matters
Measuring the ROI on your Google Ads, whether you use it to increase sales, generate leads, or drive other valuable customer activity will help you evaluate whether the money you have spent on it is making profits for your business.
Your handy ROI refresher
Simply put, ROI is the ratio of your net profit to your costs. It is based on your specific marketing goals and shows the real effect that your advertising efforts have.
How it works:
The exact method you use to calculate ROI will depend on the goals of your Google Ads campaigns.
Let’s say you have a product that costs £100 to produce, and sells in your market for £200. You sell six of these products as a result of advertising them on Google Ads, so your total cost is £600 and your total sales is £1200. Let's say your Google Ads costs are £200, for a total cost of £800. Your ROI is (£1200 - £800) / £800 = 50%
In this example, you're earning a 50% ROI. This means for every £1 you spend, you get £1.50 back.
For physical products, the cost of goods you sell to your market is equal to the manufacturing cost of all the items you have sold plus your advertising costs, and your revenue is how much you made from selling those products. The amount you spend for each sale is known as cost per conversion.
If your business generates leads, the cost of goods sold is just your advertising costs, and your revenue is the amount you make on a typical lead. For example, if you typically make one sale for every 10 leads, and your typical sale is £20, then each lead generates £2 in revenue on average.
The amount it costs you to get a lead is known as cost per acquisition.
What ROI means to you
Calculating your return on investment tells you how much money a particular Google Ads campaign has generated. It lets you make informed decisions about how to best spend your marketing budget. Knowing your ROI can help you choose to spend more money on a successful Google Ads campaign, and less on ones that aren’t getting the results you wanted. Using ROI data can also help you tweak and improve less successful campaigns.
Getting the measure of your ROI
To find your ROI you will need to measure the customer actions which are valuable to you in your new market. These could be purchases, sign-ups, web page visits, leads, or video views. These actions are called conversions.
You can track how many clicks lead to conversions with the free Google Ads conversion tracking tool. Tracking this can also help you determine the profitability of a keyword or ad, and track conversion rates and the cost for each conversion.
Once you've started to measure the conversions, you can begin to evaluate your ROI. The value of each conversion should be greater than the amount that you spent to get the conversion.
For example, if you spend £10 on clicks to get a sale and receive £15 for that sale, you've made a profit of £5 and received a good return on your Google Ads investment.
3 Measuring Performance of Google Ads
Setting a goal for each of your Google Ads campaigns is the key to being able to measure your performance. Do you want to increase traffic to your website? Or do you want to increase sales or conversions in your new market? Whatever your goal, the best data can help you track your ROI, and make informed changes to improve your marketing and ad spend.
1. Increasing traffic to your website
This is a common goal among businesses entering a new market. You should focus on increasing clicks and click-through rate, monitoring your keywords and reviewing your search terms.
Increase clicks and click-through rate to your site by:
- Creating great text for yours ads
- Organising your ad groups by a common theme, product, or goal
- Creating smaller lists of tightly themed keywords to ensure your ads are relevant and compelling to your customers.
Additional tips for creating successful text ads
Create high-quality user traffic by maintaining a good keyword list. Monitor the performance of your keywords, and remove and replace those that aren’t working for you. A click-through rate of 1% or higher means that the keywords are performing well for you.
You can see a list of the customer searches that have triggered your ad in your account, and then add them as new keywords. Likewise you can add search terms that are irrelevant to your business as negative keywords. A 'Google Ads search terms' report can help you distinguish between general traffic to your ads, and the relevant traffic that is made of people you’d like to turn into customers.
Negative keywords stop your ad or campaign from being seen by people who are searching for something you don’t offer. For example, a Garden Nursery Centre would put in ‘childcare’ as a negative keyword as they want green-fingered shoppers seeing their ad, not parents looking for a nursery. By adding negative keywords, you make your ad relevant to the very people you want to find your business.
A search term is the exact word or set of words that a customer enters when searching on a search network site. A keyword is the word or set of words that users of Google Ads create for a given ad group to target ads to customers.
2. Increasing sales and conversions
A conversion is when someone clicks your ad and takes an action on your site. This could be a purchase or a request to receive information. Increasing conversions could be your goal if you want to use a Google Ads campaign to sell a lot of a particular product in a new market or want to encourage people to sign up for a service.
The most important step that you can take to increase your sales and other conversions is to start paying close attention to your conversion data and updating your campaigns based on what you find out.
After tracking your conversions, you might notice that a certain keyword leads to many conversions, while another one doesn't. You could choose to spend more of your marketing budget on the keyword that produces more conversions.
You should also make sure that the destination URL you use for each ad directs your customers to the most relevant page within your website. This web page should match the specific product or service that's highlighted in your ad.
- Learn which types of data to track when you want to increase sales, and where to find the data in your account
3. Raising brand awareness
Raising brand awareness should be your goal if you have created a Google Ads campaign to:
- Generate buzz around one of your products or services
- Encourage users to interact with your brand
- Offer users a sneak-peek at a new video
You should focus on increasing impressions, customer engagement, reach, and frequency.
Because impressions represent how many users saw your ad, if you want to show your Google Ads campaigns to as many users as possible within your target audience, increasing impressions on your site should be high on your list.
Are your users clicking on your ads or viewing a video? This is, of course, a good thing because they’re interacting with you. Measure their interactions by using the click-through rate for Search campaigns, and use conversions for Display campaigns to measure your site visitors’ engagement. Use reach and frequency numbers to learn how many people are exposed to your ad, and how often they see it.
- Learn more about what defines a branding campaign, which data to track and where to find it in your account
4. Increasing your return on investment (ROI)
You can use an ROI calculation to compare two advertising campaigns against each other to see how much money you've made from each one. For example, a luggage manufacturer might be able to determine that a less expensive blue cabin bag which sells more briskly in one campaign is actually generating higher profits than a more expensive cabin bag in a different campaign.
For this you should focus on conversions. To improve your ROI, you first need to start measuring conversions. Once you've done this, you can evaluate your ROI to make sure that the pounds that you spend on advertising are turning into profits for your business.
Conversions are the customer actions you believe are valuable, such as purchases, sign-ups, web page visits or leads. Use the free conversion tracking tool to help track how many clicks lead to conversions.
Knowing which Google Ads campaigns are working hardest for you is made easier with Google Analytics’ data tracking and ROI measurement tools. They give you the freedom and flexibility to adapt your marketing to meet the needs of a new market whenever you need to.