Did you just accidentally put your most profitable paid search keywords on hold? If you’re not careful, you could end up among the ranks of thousands of marketers who have inadvertently paused their most effective keywords.
In the latest Quick Class from Disruptive Advertising, John Thuet, Director of Product & SMB at Disruptive Advertising explained:
- How you may be optimizing your paid ads based on the wrong metric
- How to shift your optimization efforts to the right metrics and
- What impact this may have on your bottom line
Check out the webinar here:
In this post, we’ll review several takeaways from John’s class that can help you avoid this common marketer’s pitfall and increase your ROI from your paid search advertising.
Focus On The Right Metrics
When you use paid search advertising like Google AdWords, it’s easy to get caught up in optimizing for cost per click (CPC) to reduce your cost per lead (CPL). After all, CPC is your most direct cost metric.
When you pay for every click, the cheaper you can get clicks, the better your return on investment (ROI) will be, right?
But what if a keyword generates 100 leads and only 1 turns into a sale, while another generates only 10 leads, but 3 of them close? Isn’t your best bet the second keyword, even though the CPL might be higher?
If you only pay attention to CPL, you’re losing the opportunity to discover which keyword or keywords perform best. This might prompt you to turn off the keywords that are actually turning into the most sales and allocate more of your advertising budget to keywords that may generate tons of leads, but produce little new business.
Focusing on CPL fails to take into account whether the leads generated by a keyword are high-quality leads, or as John aptly puts it, “just garbage.” Instead, you want to invest in keywords that drive the biggest return on investment (ROI),
To do this, you must focus on two metrics that are a far better indicator of success—the lead conversion rate and lead-to-close rate for each keyword.
Get Set Up To Track The Right Metrics
So how can you get set up to track lead conversion rates and lead close rates? First of all, you must be able to track leads.
That’s typically pretty easy with ad platforms like Google AdWords—you just add a tracking pixel to the landing page from the ad and whenever a visitor clicks the ad and lands on the page, it relays some code back to the web server that indicates that someone opened the ad-specific landing page.
To be able to determine the quality of your leads though, you need to import them into a customer relationship management (CRM) system like Salesforce, Zoho (a free-to-cheap CRM), or even a spreadsheet and have your sales team members rate the quality of each lead and update them with any details, including lead closes.
At a minimum, you’ll want to track name, email, phone number, the date each lead was captured and the search keyword the lead used. Then periodically, perhaps once a month, look at which keywords generate the highest quality leads and focus on optimizing for those keywords.
John emphasizes that in the best approach to tracking your leads, you pull that CRM data back into the advertising platform, being sure to include the associated keyword for each lead.
With that information in your advertising platform, you can see not only how many leads a keyword generated, but which keywords led to the most closes. You can then spend more advertising budget on those keywords.
Two Other Metrics You Need To Know
To really understand the impact of optimizing for the right metric, you need to know two additional metrics: your cost per sale and customer lifetime value (LTV).
CPA is the total marketing dollars you spend to get a paying customer. LTV is the amount you expect to earn over the lifetime of your relationship with that customer.
If your company is new, you might have a tough time coming up with an accurate CLV because you don’t have the data to determine that yet. However, you should be able to make a reasonable, ballpark guess at how much each customer is likely to spend with your company.
By the way, CLV gets even more useful if you track it by marketing channel, such as paid search versus organic search, Facebook or display. That allows you to see which channel generates the leads that convert the most and that make you the most money..
Optimizing With Your Newly Tracked Metrics
Now that you’re capturing the metrics that matter—the lead conversion rate and the lead to close rate—and you have come up with your CPA and CLV—you have what you need to start optimizing your search keywords.
The three most common measures advertisers use to optimize their accounts are cost per click (in an attempt to reduce the cost per lead), lead close rate, and lead conversion rate.
The screenshots below should give you a sense of just how much impact you can expect from optimizing for each metric.
In the situation above, you can see that reducing CPC does have some benefits. In addition to the values shown above, decreasing the CPC by $2 lowers the cost-per-lead by around $27.00, raises monthly gross revenue by about $700.00 and increases ROI by 3.8%.
Not bad, right?
However, contrast those results with what happens when you optimize for close rate:
Increasing the lead to close rate by just 1% doesn’t lower the CPL, but it increases monthly gross revenue by around $1,800 which bumps up ROI by 10%. That’s much improved compared to optimizing for CPC.
That’s great, but as a marketer, it can sometimes be hard to get your sales team to close more leads (even if you’re sending them qualified potential customers).
With that in mind, let’s take a look at what happens if you improve your conversion rate—something you should have a lot more control over.
Increasing the lead conversion rate from 5% to 6% increases monthly gross revenue by $3,640.00, decreases CPA by $1,220.00, and increases ROI by 20%!
So, wondering how these sorts of tweaks would work out in your own campaigns? To make this easy for you, here’s a quick little calculator we’ve built to help you calculate the effectiveness of your own paid search marketing:
[calculoid id=”19525″ show_title=”0″ show_description=”0″]
Just enter the appropriate information and you’ll be able to see if your advertising makes sense. Try it at the account, campaign, ad group, ad or even keyword level and see if you can identify your winners and losers.
Optimizing For Lead Conversion Rate
The big message here is that without a doubt, optimizing for lead conversion rate yields the easiest and largest positive impact on your monthly gross revenue and ROI.
So, focus on optimizing for the metric that makes the biggest impact first, lead conversion rate. Once you’ve done that, focus on the metric that makes the second biggest impact, lead-to-close rate. When you’ve maxed out optimizing those two measures, then focus on optimizing for least impactful, cost-per-click (and CPL).
Hopefully I’ve now convinced you that improving your conversion rate is important, but the question is, how do you do that?
To optimize your lead conversion rate, look at best practices for building landing pages that convert (we’ve got a lot of great content about this on the Disruptive blog, by the way). For example, be clear about what the conversion action is, don’t place the call to action button below the fold.
Prepare For A Few Challenges
In truth, you’ll have to get past a few barriers to gain all the ROI goodness from your optimization efforts.
Correctly integrating your CRM leads with the advertising platform can be technically challenging. Fortunately, most CRMs have support staff dedicated to getting you past this barrier. Reach out to them for help. If you have a custom CRM and are using landing pages, John recommends looking into using Unbounce to pull your leads into your CRM.
Importing the data from the CRM back into the advertising platform can also be difficult. The good news? You only have to set it up once and from that point forward the person optimizing your campaign has the necessary information in the ad platform to optimize for the keywords that bring in new business.
Finally, getting your sales team to update all the leads that you’ve worked so hard to get into the CRM can be a challenge. You need to train them on how to update the information, but perhaps more importantly emphasize that having this information allows you to get them more qualified leads, which means they’ll have a greater likelihood of closing more business.
Recapping The Quick Class Recap 😉
So, to recap the recap: Make sure you’re capturing or entering the data and information you need to focus on the right metrics—lead conversion rate and lead-to-close rate. Invest in the keywords that provide the greatest ROI. Then, focus first on optimizing your landing pages to increase your lead conversion rate, moving on to lead-to-close rate next, and CPC last.
Are you optimizing your paid search advertising based on the right metric? If not, has this post convinced you to shift your focus to optimizing for more lucrative measures?
If you have questions for John or me about how to do this, don’t hesitate to reach out here or in the comments.
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