Every marketer chases a better click through rate, conversion rate, cost per click and cost per acquisition. Though this is part of our job, this is usually where marketers stop. Unless of course, our customers point out that the really cheap leads we’ve been sourcing are poor quality.
Thus the conundrum occurs: how can we reliably track the value of a lead?
In my previous article on setting up custom URL’s within Ads, we built the variables that can be captured by our lead management system, Leadtrekker. Today, we’ll focus on manipulating the data to make the best business driven decisions to improve the ROI on our ad spend.
Conversions vs. Internal Conversion Rate
The conversions we’ll look at are those that we can link reliably to a specific online marketing activity, for example, an Ads campaign or ad group. Because we’ve set up the custom variables that capture these elements, we can apply simple math to establish which campaigns, or ad groups, are providing the best types of leads.
I’ve created dummy data for us to work with, and sampled below:
With some basic Excel data manipulation, we can establish the following:
|Number of leads||30|
|Number of customers||10|
|Leads per ad group|
|Customers per ad group|
To calculate the internal conversion rate, we make use of the following formula:
Number of conversions / Number of converted leads x 100 = Internal conversion rate
For example: Overall internal conversion rate 10/30 x 100 = 33%
Internal conversion rates per ad group:
These conversion statistics only indicate the quality of the leads that are being generated in the various ad groups. The keywords and ads in the forklift campaign might be generating low-quality leads, but the wheel loader ad group has the highest internal conversion rate.
Calculating the ROI per Ad Group or Campaign
To calculate the ROI of your ad groups and campaigns you will need to work in close association with your client or your sales team. You’ll need to know the cost of the item sold; if your client doesn’t want to share this information due to its sensitive nature, you can provide them with the following formula:
ROI = (Revenue – [Cost of goods sold + Google Ads Costs]) / Cost of goods sold
In our example, I’ve used a general markup of 30% to get an approximation of the cost of the goods sold.
ROI = (5 903 665 – 4 571 281) / 4 541 281
ROI = 0.29
Therefore, the Return on Investment from this campaign is 29%
Let’s calculate to ROI per ad group.
|Ad Group||Revenue||Cost Of Goods||ROI|
|Cranes||R 1 957 217||R 1 516 351||29,07|
|TLB||R 987 842||R 767 078||28,78|
|Wheel Loaders||R 2 958 607||R 2 284 851||29,49|
|Forklifts||R –||R 3 000||-100,00|
The TLB and Forklifts ad groups are performing below average for the campaign’s ROI. And the Crane and Wheel Loader ad groups above average. As a marketer, we would look to see how we could keep the quality of the leads we’ve generated on the Wheel Loader and Cranes ad groups while reducing the CPA to get more customers for the same ad spend.
With the right data, marketers and business owners can make intelligent business decisions that will increase their revenue and produce the best return on investment on Google Ads.