A friend recently sent me an article that summarized the stories of two boutique chocolate companies using AdWords to increase their sales. One was quite successful, selling over 30,000 pounds of chocolates through AdWords in a year (my estimate is their revenue was about $900,000, and I know their AdWords cost was $100,000). The other was not happy, spending $3,000 over 3 months and generating only 5 sales, probably $300 in revenue.
Based both on the article and also my experience launching and managing AdWords campaigns ranging from $20 per month to $10,000+ per month, here are the 5 most important tips to make sure you maximize your Google AdWords Campaign ROI.
1) Dedicate lots of time. AdWords is not a lightswitch - you can't just turn it on and expect to get satisfactory results. Many agencies charge a minimum of a few thousand dollars and/or 15% markup on your AdWords spending to manage your campaign. If you are going to do it yourself, then you just need to dedicate time to make sure you are successful. A good rule of thumb is for a campaign with 50 similar keywords and 3-4 ads linking to the same landing page, should take about 4-6 hours per week to manage once it is set up. About 3-5 hours one day to do a deep review and make changes to the keywords, bids, landing pages and ads to optimize the campaign, and about 15 minutes per day another 4 days to just check in and make sure things are ok and not going to hell in a handbasket. A campaign of this size probably takes a couple days to set up, depending on what tools you have available to do the keyword research, write the ads and build the landing pages.
2) Try lots of keywords. There are two major benefits to using a lot (100's or 1000's) of keywords on AdWords, at least to start. First, by trying lots of words you can find opportunities where there is less competition for words, so you will pay less for the clicks. Second, you are more likely to find words and especially phrases that are more targeted to your business (like "buy Internet marketing software" rather than just "internet marketing") and will be more likely to have a higher conversion rate.
3) Keep your CTR (click through rate) high. Having a high CTR means that you can be higher up in the ad placement for lower bids, so you get more for your money. Google only makes money when people click on ads, so they give you a little boost if your ads actually get people to click. One great way to get a higher CTR is to have very targeted ads for each keyword - so if the keyword phrase is "buy Internet marketing software" use all of those words in the ad text and especially headline. This is a real pain to set up, especially for a lot of keywords, but I have seen it double your click through rates (or even more) in many cases.
4) Measure everything. Make sure you measure not only the things Google tells you in the AdWords interface like CTR and CPC, but also conversions* and the cost per conversion, plus ultimately the cost per sale. Measuring the CPA (cost per action) and is critical - and you can decide if the action is a lead or a sale. You have to know what you are spending for the desired action you are driving people towards. AdWords is a numerical and mechanical process. Having good data is essential to success.
5) Optimize on your CPA (cost per action) not CPC (cost per click). If someone is definitely going to buy my product, then I would probably pay at least $500 for a click. If there is no chance in the world they will buy my product, I would not pay $0.05 for the click. Whatever your goal is (generate leads, whitepaper downloads, sales) make sure to focus on the cost of achieving that goal. Your goals do not align with Google's goals. Don't get fooled by Google - their goal is to get as many clicks as possible at as high a price as possible. Your goal is to get as many actions as possible for as low a cost as possible. These goals are not completely opposite one another, but they are definitely not aligned. Be careful with using Google's tools, since they are honestly in my opinion designed to get you to get more clicks at a higher price, which might not get you more leads or sales at a lower price.
Are these tips useful? What other tips do you have based on your experience?
Originally published May 30, 2007 5:04:00 PM, updated March 21 2013