Proving ROI of PPC
PPC | Strategy
In many cases, digital marketing proves to be more profitable than traditional marketing due to the ability to target your ads to the right audiences. Getting in front of the right people paired with the ease of filling out a contact form (as opposed to calling a sales representative) can be very effective. To prove that to your management or c-suite, you need to speak ROI to them. We can help you get a grasp on what your return on investment is for PPC.
What is PPC ROI?
Return on Investment (ROI) is typically measured as profit minus cost. Pay-Per-Click (PPC) ROI can be measured this way because you are able to set the budgets in the platforms you are running your campaigns in so you know that cost. What is missing here is your profit which heavily depends on your ability to track conversion points.
Upon setup of a PPC campaign, it is highly recommended that you set up your conversion points and conversion values (if possible). For example, if my campaign is set up to drive a request for quote form completion on my site, I will make sure my analytics can track those conversions and attribute them back to my campaign prior to running. Conversion value is usually a little more complicated to determine if you don’t already have that calculated. One way to get that is to calculate the average value of your sale (profit) as well as the average lead-to-sale conversion rate. If I make a profit of $100 average on every sale and 25% of my leads turn into sales, I can determine that each lead has a conversion value of $25 because it takes four leads to make one sale with an average profit of $100.
How do you calculate PPC ROI?
Calculating ROI on PPC can be done in a couple of different ways. First, you need to determine what your goal is for the campaign you are running.
Most commonly, the goal of your campaign is going to be sales. You will need to have your profits tracked and calculated (as stated earlier in this article). The calculation would be your total profits generated from the campaign minus the total ad spend and divide that result by the total ad spend.
If the result is more than 100%, you’ve made back your ad spend and then some. If the result is lower than 100%, you did not make a profit on the campaign, but don’t be discouraged! This could be your new benchmark for improvement with the next campaign. Keep in mind that despite the overall goal being sales, you likely drove awareness which will have a positive impact on the business at a later touchpoint.
If the goal of your campaign is awareness, calculating ROI based on sales generated will not be a fair representation of the effectiveness of the campaign. Instead, you may calculate ROI using a value per impression (or 1,000 impressions). This is how valuable impressions are to your brand and company. You could also determine a value per click (or site traffic generated from the campaign). You would then take the total value generated minus the total ad spend and divide that against the total ad spend. Convert that number into a percentage. If the result is more than 100%, you’re in good shape and essentially drove enough awareness to make a profit on your ad spend.
What are the roadblocks to tracking PPC ROI?
To set yourself up properly to track return on investment for your PPC, you need to have a few things in place prior to running a campaign. Laying the groundwork will save you a lot of time at the end when you are asked to justify your cost.
- Make sure your ads and your site have a clear conversion point (call-to-action). If your main goal is to generate “request a quote” form completions, don’t make the user work for it. That form or button to the form should be highly visible as soon as they get to the site.
- Make sure you are tracking your traffic and goals properly. Whether you are using Google Analytics or another site analytics tool, it is imperative that you test traffic coming from your campaigns to make sure they can be segmented out. Additionally, test your goal completions to make sure you can determine how many people from your campaign completed the goal.
- Have an ROI goal prior to starting the campaign so you can check along the way to make sure you are on pace. This goal may be to simply generate more sales than costs, or it may be a specific cost per lead target based on other campaigns. Eliminate the possibility of surprise at the end of your campaign by tracking as you go. This may also help you determine if you need to shift your strategy at any point.
- If you can, get access to the leads you are generating so you can spot-check the quality. Because we try to make it easy for visitors to complete the action we’re promoting, we inadvertently make it easy for spammers or unqualified individuals to complete these actions as well. If you can get access to the leads that are coming in from your campaign, you can try to improve the quality of leads by making tweaks to your approach thus improving your lead-to-sale ratio and ROI.
We not only know PPC advertising, we know what is important to your overall business- profitability! We can help you improve the profitability of your marketing efforts with our ROI-first approach. Our team of digital marketing experts is ready to work with you. Let us know if you’re interested!