If you’re overwhelmed by the sheer number of metrics in your Google Ads account, you’re not alone. Between the impression shares, engagements, CPCs and CPAs, it’s hard to separate the useful from the not-so-useful.
If you want the short answer to which metrics are worth tracking, it’s anything tied to actual ROI. This means you’ll want to track leads from the initial click through to the close, as well as measuring revenue generated per each incoming lead.
Over time you’ll start to learn which ads, keywords, and audiences are helping to make money or just eating up your ad spend.
Now, let’s dive into a few key areas that will reveal how your ads are working for you—or not.
1. Conversion Rate
An ad’s conversion rate is calculated by dividing the number of conversions by the number of total clicks. So if 200 people click on your ad and 20 make a purchase, then you have a 10% conversion rate.
The conversion rate will tell you how well your landing pages are working. For example, if you find that you’re getting a lot of clicks, but very few of those people make a purchase, then that’s a big hint that something isn’t right.
If this is the case, make sure that landing pages and ads feature the same message. If there’s a disconnect between the two—for instance, if your ad promotes winter boots, but the landing page encourages customers to purchase sneakers—there’s going to be some confusion.
If the message matches, but conversions are still low, consider testing other elements like changing the web copy, changing the color of the form, and so on.
2. Cost per Conversion
Cost per conversion is a metric used to help advertisers identify the actual cost of getting someone to make a purchase.
The formula for the cost for conversion is simple:
To figure out your cost per conversion, you’ll divide the total number of conversions by the amount that you paid to generate the traffic.
For example, if you spent $100, and 100 people visited your website, and then ten of those people converted, the formula is Cost per conversion = $100/10, which results in $10 per conversion.
3. Cost Per Action
Generally speaking, cost per action is a term that refers to the cost of generating a new customer. If you think this sounds an awful lot like the definition for cost per conversion, you’re not wrong.
The main difference between the two terms is the bidding strategy behind them. Cost-per-conversion shows up as a trackable metric you can review in any report–no matter what type of campaign you run. CPA is a bidding strategy that allows you to closely control your ad spending by determining how much you’re willing to spend on conversions ahead of time.
An action can be whatever you want it to be—it could be a sale, a newsletter sign-up, a download, or anything you can measure and track.
Instead of paying every time someone clicks an ad, you’re setting a target cost per action. Google aims to get as many actions as possible for your bid amount, though individual actions may be higher or lower than the amount you specified in your initial bid.
4. Customer Lifetime Value
In Google Analytics, you’ll spend a lot of time focusing on measuring the number of conversions or first order value. Those are important metrics, too, but they miss one crucial detail: how long those customers continue to purchase from your brand.
CLV represents how much money your customers will spend with your business during the entire life of your relationship. Let’s say a customer spends $100 every year over the course of 10 years, and it took $15 to acquire that customer. You’ll subtract that $15 advertising cost from the $1000 in revenue, so in this example, your CLV is $985.The reason CLV is a critical metric is simple. You need long-term customers to run a profitable business. Click To Tweet
The reason CLV is a critical metric is simple. You need long-term customers to run a profitable business. Statistically, it’s something like five times more expensive to attract a new customer than retain a loyal one.
5. Quality Score
Quality score is Google’s way of measuring the relevance and performance of your PPC campaigns. Measuring Quality Score can be a little confusing at first because Google measures this at the ad level, the keyword level, the landing page level, and even your overall account.
Google uses this metric to determine how ads rank, as well as how much you’ll end up paying per click, per action, or per thousand impressions. On Google’s side, measuring quality gives them a systematic way to ensure that their searchers see ads that match the intent of their search queries.
For advertisers, Quality Score matters for a few reasons. While it seems like something of a vanity metric, reviewing your quality score allows you to make sure that every aspect of your campaign is relevant—and paying attention to this number can even save you some money.
Higher bids don’t necessarily give you the most senior position. It’s in Google’s best interest to deliver ads that match searcher intent, so the algorithm favors those accounts and ads most likely to appeal to searchers.
Your cost per click is calculated using the formula: [Ad Rank of the ad below yours / your Quality Score] + $0.01.
Here’s an example of how this works:
Quality Score, along with CPC bid, will determine ad rank, which has a significant impact on your budget, so it’s essential to pay attention to your numbers and always be improving.
You can improve your quality score in a few ways, including the following:
- Keyword Research. Be on the lookout for new keywords that you can add to your campaigns. Long-tail keywords and questions are opportunities that can help you increase your traffic.
- Test Different Ad Copy. Make sure you avoid cut-and-paste ad copy, and instead, focus on using language that is targeted to the audience you’re going after. Better ad copy means it’ll be easier to attract the right audience—which should, in turn, improve your CTR, and by extension, the quality score.
- Improve Your Landing pages. Make sure that landing pages follow basic design principles and connect with your ad groups. The goal is to provide customers with a consistent experience that goes from typing in a search query, to the click, to the landing page, and finally through to conversion.
Use Negative Keywords to Improve ROI
Finally, it’s worth mentioning that you want to pay attention to how much of your budget goes toward running ads. While wasting money is something you need to watch out for when you’re running Google Ad campaigns, not using your full budget isn’t the best idea, either.
When it comes to your PPC spend, you want to keep ads low enough that you’re getting a good return on your investment, but not so low that you miss out on opportunities to reach the right people.
The best way to use your budget wisely is to take full control over every dollar. Part of this means leveraging negative keywords to ensure that you don’t waste money showing ads to the wrong people.
Allowing your ad to receive clicks based on irrelevant keywords is the best way to get into PPC debt, while frustrating searchers at the same time.
6. Profit Generated and Average Profit per Conversion
We’ve included these two as a single entry because they are part of a “custom build” we put together for our clients. You can add custom columns in Google Ads using custom formulas based on data we already have available.
By doing this, we can create two columns: one for Profit Generated and another for Average Profit per Conversion. These metrics allow us to see how ad groups, keywords, campaigns, and more are performing—meaning, we can capture super-specific data about what it is that’s driving sales.
Metrics on profits generated are handy for understanding where the most revenue is coming from, as compared to the larger pool of conversions. Our clients care about how much profit we’re generating, not so much how many impressions they rack up during a campaign.
When you segment conversion data by different criteria—think keyword, campaign, product, and so on—you end up with valuable insights that allow you to drill down and optimize conversion rates in these areas.
You can also use this metric to identify weak points in the campaign and make adjustments. Here’s how you can make the calculation:
Profit Generated = (conversion value X [profit margin]) – Cost
To maximize the profit, you’ll want to decrease the average CPA, while at the same time maintaining a high volume of conversions.
The thing to keep in mind here is balance. For example, if you reduce the CPA too much (e.g. by pausing poorly-performing campaigns or lowering bids) you’ll see a drop in average position, causing you to miss out on volume.
So the account might be more profitable (as in it might generate a higher % of profitability), but in terms of volume, the actual profit number will be lower than it could be.
Average Profit Per Conversion is useful because each product has different conversion values. Meaning, if we have a target CPA for the account, some products will have different profitability, and so target CPA should vary depending on the product.
The problem is, when you look at CPA alone, you don’t get to see the breakdown of products sold, due to the fact that consumers often purchase multiple products at a time.
Here’s the formula for this one:
Average Profit per Conversion = ((conversion value X [profit margin]) – Cost) / Conversions
We’ll get a more accurate metric if we look at the profit margin of the business. We can then work out the average profit generated per conversion (by using the related conversion values). From there, we can break down the profits generated by each campaign, keyword, ad group, and ad. This helps us focus on increasing this value for each campaign.
Key PPC is Conversion-Minded
In the world of e-commerce, conversions are a big deal. When you start an ecommerce campaign, you want to know that your marketing dollars are being put to good use. As many of us have learned the hard way, mismanage a few PPC campaigns, and you can quickly find yourself in the hole.
Whether you’re new to PPC advertising or need to give your ad campaigns a new lease on life, we’re here to help. Key PPC doesn’t waste time tracking metrics that don’t add up to more sales.
Contact us today to learn how we can help power up your growth strategy.