Welcome to the kick-off post in a three-part series that will teach you to audit your AdWords campaigns for conversions and profit. Today we’ll focus on the Campaigns (Clicks) piece; part 2 will focus on Sales (Customers), with part 3 tackling Profit (Cashflow). We’ll go through some basic truths, strategies, and philosophies about AdWords conversions, and then we’ll go into a very detailed breakdown of accurate and effective conversion tracking. Let’s get started!
Two harsh truths (and no apology)
1. Most AdWords advertisers don’t need help with their campaigns; they need help with their business first 2. AdWords always works when you know what to do with your campaigns, your website, your offers, and your sales process
AdWords always works – but for whom?
All AdWords advertisers should be interested in one goal: Profit. To reach it, you need to know what the goal actually looks like, where you are, what things look like now, and what you’ll have to do differently. If profit is not the goal you want to achieve with your AdWords campaigns (and it isn’t for every advertiser, strange but true), stop reading now. Still with me?
Insurance policy – or Profit Center?
Most AdWords advertisers run campaigns because everyone else is and they don’t want to get left out – not because they are a source of profit, but more like an insurance policy. This guide will help you either audit your campaigns yourself, or safely use a 3rd party to do it for you. Pretty much every agency you can employ to manage your campaigns will offer an initial (usually free) audit – and they have to, to find out what they are letting themselves in for. The responsible ones will turn you away if you can’t provide the resources you both need to achieve a mutually profitable, long-term partnership. Others will take your money for as long as they can and justify their existence in ways other than profit share, like a fixed monthly fee where they have no incentive to increase your sales and revenue. Or like constantly fiddling with your campaigns when it isn’t even needed. Or not even doing anything (check your Change History to find out what they’ve been up to).
Audit the auditors
There’s a lot of data inside an AdWords account, much more than most advertisers and many agencies realise. Some parts of it are more important than others, and it depends on where in the lifecycle of your campaigns you are, and how your business works. If you’re having an agency do your audit, make sure they are focused on the same thing you are (or should be): profit. If they’re not, they probably should not be spending your money (not to mention getting paid for the privilege).
“You can’t manage what you can’t measure” (Drucker)
“Profit – a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something” Google make it ridiculously easy for you to spend your money on clicks. They get paid for clicks, but you don’t; you get paid for conversions. It’s easy to see how much money you’re spending on AdWords. This is actually the profound difference between AdWords and SEO: SEO is not accountable to the click. Unfortunately, it’s often not that easy to see what you earn in return. It’s also quite possible to sell stuff online, earn money, and still go broke.
Data beats opinion
When you know you’re earning profit from your ad spend, there’s only one thing you want to do: spend more (provided the profit keeps coming). Data-driven decisions rule. It’s true that campaign structure, budgets, bidding, delivery, ad rotation, keyword and match type selection, networks, devices, ad copy and landing pages, ad extensions, negative keywords, scheduling, impression share, and all the technical aspects are important. But not before profit (in my opinion). Once I had achieved consistently profitable campaigns for clients, I began to think about them quite differently. How could we spend more, not less? What data in the campaigns should we be looking at to see possible bottlenecks we could remove to get more sales and revenue? (This is called the “theory of constraints.”) And if we could not achieve profitable campaigns, what was wrong with the way the website and/or business was working?
Clicks are for Show, but Conversions are for Dough
“Speculation is the Mother of all Evil” – Gordon Gecko, Wall Street: Money Never Sleeps Unless you are correctly tracking Conversions and their value, all the clicks you buy are nothing other than speculation.
What is a Conversion?
“A conversion is a customer action that has value to your business, such as a purchase, downloading an app, visiting a website, filling in a form or signing a contract. Online and offline actions are called conversions because a customer’s click translated – or converted – to business” (AdWords Help Center) Although you might not trust Google’s motives, they actually do give you all the tools you need to earn a profit from their advertising platform. You just have to figure out how to connect them all up correctly, and what data is important amongst all the noise. Every business is totally unique, so there’s never a magic bullet for everyone – although there are certainly best practices. More features keep coming all the time, and if the platform didn’t work, no one would pay Google for clicks any more. Not everyone knows whether it’s working for them though, and that’s where this guide can help you with the difference between using AdWords as an insurance policy or a profit center. There should really be no more excuses any longer for not making a profit from your AdWords campaigns.
Even Google are finally (publicly) embracing the concept of Profit-Driven Marketing, as they discuss in recent articles on thinkwithgoogle.com: With selected ecommerce clients, this is what I have been practicing since 2011. I’ll give you the list of the first things I audit in every AdWords account, but first a couple of notes:
-Without conversion tracking correctly set up and working, I can’t accept the advertiser as a management client, only for consulting.
-If an agency audits your account and doesn’t go through these with you, don’t trust them with your budget.
The Physics of Conversions
Here’s a reminder of how conversion tracking actually works, and how it can get broken both beyond your control, and within your control.
-You create a new conversion tracking event
-You place the dedicated code on your transaction completion page (lead or checkout)
-User types their search query into Google
-Search query matches or approximates a keyword you are bidding on (related to match types and campaign settings for related terms)
-Depending on the ad auction, an ad is triggered from somewhere in your campaigns, generating an Impression
-If the ad position is high enough above the fold to be seen (premium positions, or side positions above 5) and compelling enough to the user, you may get a click, generating a CTR (clickthrough rate)
-Their search query is also recorded in your account and can be used later to bid on if you don’t already have it, or use as a negative if it is undesirable
-Conversion tracking is cookie-based, and cookies don’t follow devices, so if a user searches at work, then converts later at home without an ad click, you lose the conversion (this is beyond your control)
-The user’s device (laptop, pc, mobile) is cookied, providing they don’t block cookies or subsequently clean them off (also beyond your control)
-Cookies (other than Remarketing) last for at most 90 days (used to be 30, Google increased their limit)
-The user is now on a landing page on your site, so providing they don’t leave, and subsequently find their way to your conversion tracking page, the code there will match the cookie on their device and a conversion event is generated
-Depending on how you have configured conversion tracking, no value, a static value you’ve set, or a dynamically generated transaction-specific value will be passed back from your page to the AdWords campaign
-If the user calls you and places an order over the phone, you lose the conversion event unless you either bring them back to the site with a workflow, or import an Offline Conversion event later from your CRM with the gclid variable (this is within your control)
-Google recently overhauled their conversion tracking environment and now allow you to see conversion Repeat Rates (useful for sales of multiple items) and Uniques (useful for leads where you only want to count a single form completion per visitor even if they complete multiple copies)
Conversion Tracking – How to Do it Wrong
-Not turning it on
In the screenshots above, conversion tracking has not been enabled, so this advertiser has no clue as to the value of their campaigns and does not dare bid higher or spend more. How to fix: simply create a new conversion event and follow Google’s instructions.
-Not counting conversions
This advertiser has 6 accounts in an MCC (My Client Center) and although conversion tracking is turned on, it’s not being used. External tracking solutions can work, but they leave you unable to use any conversion-based bidding features in AdWords like enhanced CPC, CPA, Conversion Optimizer, and Flexible Bid Strategies. More of these were announced in April to come later this year. How to fix: ensure your conversion tracking code is correctly copied and pasted ONLY into the final page reached by your visitor after completing your desired conversion event, e.g. lead completion form or cart checkout.
-Multiple counting conversions from multiple sources
This is very common. This advertiser is multiple-counting the same conversions by importing them from Analytics whilst also counting them in the AdWords campaigns. This makes conversion-based bidding inaccurate. What’s even worse in this example is that one source is recording transaction values and the other isn’t. How to fix: Disable the Analytics tracking and use AdWords conversion tracking only for campaign management. Continue to use Analytics for essential website metrics and ecommerce revenue values, but not for bid management.
-Multiple-counting conversions from multiple pages on your website
This advertiser has got practically every page of the website tracking conversions, resulting in a meaningless jumble with insanely high and useless conversion rates, sometimes even higher than 100%. No conversion-based bidding is possible. How to fix: Ensure your conversion tracking code is correctly copied and pasted ONLY into the final page reached by your visitor after completing your desired conversion event, e.g. lead-completion form or cart checkout. Note – it is not desirable to track mixed conversion types with completely different objectives and values, e.g. cart checkout and brochure request.
-No conversion value (in other words no revenue), a value of 1, or some arbitrary amount not related to the actual revenue
This advertiser is diligently tracking many conversions, but they have no value. He can still use CPA bidding effectively to control conversion costs (good for lead generation) as long as a realistic Customer Acquisition cost is being used. How to fix: For ecommerce, it’s crucial to correctly configure AdWords with Transaction-Specific conversion tracking rather than importing from Analytics (more follows on that). You can also set a static value if you only have one price point (say a subscription), or import the value from your CRM by using the Offline Import conversion type using the gclid parameter for transactions that happen later. The advantage of this is you can use the Return on Ad Spend (ROAS) metric to manage bids, based on what your customer actually spent, rather than what it cost just to acquire them. With many products at different price points and margins, CPA bidding is just not accurate enough.
Conversion Tracking – How to Do it Right
-Note that calls and app downloads aren’t considered here
-Turn conversion tracking on and follow Google’s instructions explicitly
-Paste the tracking code only on the final page reached after the conversion event
-Run a single keyword, with a single ad that has the destination url of the transaction completion page, bypassing the landing page or even shopping cart if possible
-If the cart checkout page is dynamically generated, do a test purchase
-Test it by searching for and clicking on your own ad
-Check that you see the Site Stats badge on the final page, and that a conversion event and value shows up shortly afterwards in the campaign (stats are not real-time but usually pretty rapid)
If you’re tracking online conversions from leads or sales, set up a new Web page conversion. Note that Google has recently updated how they count conversions, and it’s important to use the right settings for your application (leads or sales). (Read Google’s help page for full details.) Choose an appropriate conversion category; if you have multiple conversion events, you can view these separated out in a report from the Dimensions tab. Choose a conversion window; 30 days is usually fine, but you can go up to 90 for longer sales cycles. You can use Search Funnels to see actual elapsed times between visit and conversion. Choose how to count conversions: All (best for purchases) or Unique (best for leads). Choose your own static conversion value, e.g. if you sell leads, this could be how much for, or if you sell items at the same price every time. Choose dynamic conversion tracking for ecommerce where you have several or many differently priced products. This is absolutely the key to success with bid automation for ecommerce merchants. Check Google’s help text for details, as every website and cart uses different technologies. With the cart provided by Big Commerce, for example, you just paste the code into their system, and it all works fine. Or, set no value to the conversion – but note carefully what Google say about tracking your profits! Leave the Advanced settings as default; you can change them later if you need. Leave the tracking indicator at default unless you have a compelling reason not to. Google have relaxed their rules on this; they used to make it mandatory. Finally, copy and paste the code, or email it to your webmaster. You’re done! Make sure you do a test before going live. You should see the Google Site Stats badge show up on the conversion tracking page. Once conversions are coming in, you’ll see the tracking status changed to “Verified”. If you get phone call orders, you can import these from your CRM with the Offline Conversion Import facility introduced by Google in September 2013. This is good for both leads that turn into sales later and for phone call orders for ecommerce merchants. To finish offline conversion import, complete the same steps for category, conversion window, count, and value as shown previously. Note that there’s no code to embed with this conversion type, and you’ll need to learn how to track and import conversions from Google’s help text.
The final result: AdWords campaigns as a Profit Center
-High budgets with no loss of Impression Share
-High average ad positions that get maximum visibility, and show as many Extensions as we have set up
-Tracking many conversions
-We could use CPA bidding for bid management if we wanted
-Tracking actual revenue values from our cart
-Return on Ad Spend = total conversion value (revenue)/total ad cost
-Average ROAS = 15.5, in other words 1,550% ($1.00 in AdWords spend brings $15.50 in sales revenue)
-Note that you have to also factor in your own actual margins to calculate a profitable ROAS for your business (if your margin is 20%, your minimum ROAS to preserve it is 100/20 = 5.0; if margin is 5% it is 100/5 = 20.0)
-We can use ROAS as a flexible bid strategy for bid automation
-Remember, as ROAS goes UP, you’re bidding LESS so your ad position will fall, bringing you lower clicks and conversion opportunities, so you need to strike a balance between your profit and your bidding
For more about AdWords auditing, see the upcoming book at ClicksCustomersCashflow.com