Everyone uses AdWords, some do it right
As more companies use Google AdWords, competition for keywords is increasing, and cost-per-click (CPC) rates are rising because they are determined through an auction process. Due to these rising CPC rates, there is frequent talk of pulling out of AdWords. However, a decision based solely on CPC is not well-founded!
We assess the efficiency of an AdWords campaign exclusively with measurable ROI targets. However, not all companies are familiar with the parameters for measuring success, so they rely on click-through rates (CTR) and click costs (CPC). A company uses AdWords to target qualified prospects and buyers for its offer. And it does this not at any price, but profitably. To do this, it determines how high the costs for an order - CPO (cost per order) - or an inquiry - CPL (cost per lead) - may be. If no empirical values are available, assumptions are made: If the sales price is 100.-, acquisition costs of 50.- are out of the question, 5.- francs on the other hand are realistic. Thus, the AdWords campaign must acquire new customers at a CPO of 5.- francs. Here is an example: If, for example, an average of -.50 is paid per click (CPC) and every tenth AdWords visitor orders, then the goal has been achieved. If only every twentieth visitor orders, the CPO increases to CHF 10.
Wrong targets lead to losses
We recommend subjecting the targets, which are based on assumptions, to a plausibility check: For example, if the average CPC for keywords on the topic of red wine is 1.42 francs, a CPO of 5.- francs is hardly achievable, since every third visitor would have to place an order. (For the plausibility check we use the Keyword Tool in the AdWords account. Attention: The CPC figures tend to be set too high). Once the campaign is up and running, after two to three months of intensive optimization work, it is clear whether the CPO or CPL targets have been reached. If the CPO is not reached, the campaign does not necessarily have to be terminated; a focus can bring the desired success: e.g. by abandoning expensive generic keywords such as "red wine", "hiking boots", "hotel Ticino" in favor of more favorable niche keywords such as "light red wine with fish", "waterproof hiking boots" or "hotel center Lugano". If the campaign does not reach the CPO target, this may well be due to inherent website problems: The landing pages do not convince visitors, as a result the conversion rate is low and the CPO is high. Since landing pages contribute significantly to the success of an AdWords campaign, they must be included in the optimization process. In order for an AdWords campaign to be profitable with increasing click costs and higher optimization efforts, measurable targets are therefore essential.
Imre Sinka
