Pay-Per-Click Advertising Explained – cont’d

Making it Work: Conversions, Not clicks

How do you engineer a successful pay-per-click advertising campaign? By paying more attention to conversion, and less to clicks. Keep five rules in mind:

1. Track Conversions

If you want to stay on budget, you have to track conversions. What’s a ‘conversion’? It’s any time a visitor to your web site takes a desired action. Examples of conversions might be:

  • Visitor makes a purchase
  • Visitor completes a sales inquiry form
  • Visitor downloads a white paper and registers

A conversion doesn’t have to be a sale. But a conversion has to be worth something to you. If you can’t think of any measurable, useful outcome of a visit to your site, do not spend money on pay per click advertising – there’s no point.

Google and Yahoo provide conversion tracking – most other pay-per-click services do not. Take a look at Google Analytics for a free, one-shot tracking system that will let you measure conversions from all PPC sources.

If the ppc advertising service you’re using doesn’t offer a conversion tracker, and you can’t set up Google Analytics, try something more basic: In a spreadsheet, track the number of conversions, total, per day. Do the conversions increase after you start your campaign? If so, you’re likely on the right track. If not, then there’s very little chance that your pay per click investment is working.

2. Manage your PPC Dollars: Set a Sensible Budget

A lot of folks ask me how much I typically spend on clients’ PPC campaigns. My answer is always ‘just a bit less than too much’.

A little glib, I know, but the there is no ‘right’ amount. It all depends on your circumstances. A good formula, though, is:

cost per click is less than:
conversion rate * total clicks * profit per conversion

In other words, the amount you spend per click should always be less than the total profit earned per click. Let’s say, for example, that I’m spending $1.00 per click to bring customers to my (totally fictitious) bicycle shop web site. I know that 2% of those visitors contact me regarding products, and that 30% of those potential customers actually purchase something. I also know that I average $10.00 profit on those purchases. Finally, I also know that I get 200 clicks per month. That puts my pay per click campaign in this light:

.6% * 200 * $10.00 = $12.00

So, I’m only earning $12.00 per month on my PPC campaign, but it’s costing me $200.00. I need to reduce my cost per click, a lot, or cancel the campaign altogether.

Don’t make this a hard-and-fast rule, though. While your initial, direct profit from your PPC campaign may disappoint, you might be acquiring loyal customers.

Going back to my bicycle shop example: At this point, I’m ready to cancel my PPC account and never look back. But I dig a bit deeper, and notice that customers acquired from the PPC campaign spend another $800 each, per year, on higher-margin items that deliver an average profit of $200 per sale – I’m getting loyal, long-term business. That changes the picture significantly:

.6% * 200 * $70.00 = $252.00

Suddenly, my PPC campaign is a narrow but definite success. I’m earning $52.00 per month.

If you can’t get this kind of precision, pay close attention to your metrics over time: If your sales, leads or other desired visitor actions increased right after you began your pay-per-click campaign, chances are you’re on the right track.

But if you’re selling a product or service, I strongly recommend that you invest the time and energy to collect this data and crunch the numbers – it will pay off in the long run.

3. Find Niche Keywords

A lot of folks aim their ads at the broadest possible terms, such as ‘dresses’, or ‘bike parts’, or ‘search engine optimization’. Since the broader terms get far more searches, it’s a strong temptation – with a big disadvantage. Since everyone bids on the broad terms, the cost per click is generally quite high. And the chances of a conversion, even if someone clicks on your ad, is lower.

Focus instead on narrow, focused keywords: ‘Bridesmaids dresses’, ‘road racing tires’ or ‘Seattle search engine optimization’. These terms will cost less, and searchers who use them will be far more likely to buy.

Google, Yahoo and most other PPC services will show you estimated cost per click and searches per day for keyphrases – use these tools to test for the best focus, cost and clickthru combination.

4. Good Writing: Don’t Ignore It

Most pay per click advertising requires that you write a very short descriptive phrase about your service. Don’t underestimate the importance of this phrase – make sure, at a minimum, that your grammar, spelling and overall language is correct and appropriate for your audience. Also verify that your language adheres to the rules enforced by the pay-per-click service – Google, for example, won’t allow ads with superlatives (‘the best’, ‘the greatest’, etc.), with repeated keywords, or with excessive capitalization.

As an example, this is not so good:


Rubber Baby Buggy Bumpers!
BUY NOW! BUY BUY BUY!

This is much better:

Rubber Baby Buggy Bumpers
High Quality, Fast Shipping.

See the difference? Get specific. Why would the reader want to click on this ad? See Elizabeth’s excellent post about Writing Killer Ad Copy for more about this.

5. Go for quality

Remember what I said at the start of the article? Yahoo!, Google (and probably Bing) now have this nifty thing called a Quality Score: They examine:

  • Your ad
  • Ad performance
  • The quality of the page to which the ad points

Based on various factors in all three places, search engines will either increase or decrease the bid amount necessary for you to gain a specific position.

If you want a great quality score, you need to:

  • Build your history. The longer you’ve run a specific campaign, ad group and ad without changes, the better your history. If you move to a new account, your entire history goes PAFF and you have to start over. So don’t move unless you absolutely have to.
  • Never stop testing ad copy. Constantly test ad copy for the best clickthru rate. A higher clickthru rate will probably give you a better quality score.
  • Put keywords in your ads. If you’re buying the phrase ‘nubwit’, make sure ‘nubwit’ shows up in the ad.
  • Put keywords on your landing page. Make sure the page to which you’re pointing your PPC ad has those keywords, too.
  • Split good keywords from bad ones. Put high-performing ads and keywords in their own campaign. Otherwise the bad performers will drag down the good ones.
  • Focus!!! Focus your campaign by time of day, geography, search network, etc.. If you don’t know what this means, you need to hire someone who does. Like us, maybe. Just sayin’.

Quality score can easily reduce costs by 20-30%, if not more. A bad quality score can knock you right out of the rankings, too.

Adjust, Adjust, Adjust: A Corollary

This isn’t so much a rule as an overarching concern – don’t set up your ads and then forget about them. You need to continuously manage your ppc advertising campaign.

  • Someone might outbid you.
  • Or, someone might have dropped out of the top spot, meaning you can reduce your bid and keep a #3 rank.
  • Search patterns may have changed.

If search patterns change and your keywords are searched less often, don’t immediately alter your campaign – wait at least a few days to make sure you aren’t seeing a statistical ‘blip’. But keep an eye on things, always, or you might end up spending money unnecessarily. In my experience, a well-designed campaign needs to be ‘tweaked’ every few weeks.

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