When you invest in a Google Ads paid search strategy, you expect to see positive results.
If an advertiser decides to run an Adwords campaign, it is not to line Google’s pockets; rather, it is to make his business (with his products or services) profitable.
This is why it is critical to track the outcomes of your advertising campaigns.
You can learn about and improve your ROI by using Google Ads (or return on investment).
Here are some clarifications.
The ROI, or return on investment, is the percentage of profit generated by Google Ads in comparison to the cost of creating and running them. To calculate the ROI of an advertising campaign, perform the following calculation:
The ROI is calculated as “Revenue from Google Ads” minus “Overall Costs” divided by the same “Overall Costs.” In layman’s terms: ROI = (Revenue from Google Ads – Cost) / Cost
To accurately estimate your ROI on Google Ads, you must track conversions and their associated values. Conversions are the actions (e.g., purchase, download, registration, calls, etc.) that you expect your customers to take on your website after clicking on one of your ads.
You can use Google’s tools, Google Analytics and Conversion Tracking, to determine your conversion rate.
The calculation of ROI is more than interesting for advertisers because it indicates the true impact of campaigns on their businesses. Aside from knowing the number of clicks or impressions, it is critical to ensure that Google Ads help the business grow. And only the calculation of the return on investment can tell you if the campaign was truly profitable.
John is an advertiser with a €50 production value product. He decided to charge €100 for this product. He spent €100 on a Google Ads campaign to increase his sales. John was able to sell approximately ten products for a total of €1000 as a result of his campaigns.
Here’s how to calculate his return on investment (ROI):
Cost of producing all the products: €50 x 10 = €500
Investment in Google Ads: €100
ROI = turnover – (cost of producing all products + Google Ads investment)/ (cost of producing all products + Google Ads investment)
KING = (€1000 – (500 + 100) €) / (500 + 100) €
ROI = 2/3 or 66.66%.
To put it simply, John got €0.66 more for every €1 spent on his business.
To obtain a good ROI, i.e. a consistent and precise return on investment over time, several criteria must be considered in the overall calculation. Indeed, if Google Ads considers a certain number, it is necessary to include others to ensure a good ROI.
First and foremost, there is the cost of manufacturing the product to be sold, which includes the price of raw materials (or the primary cost of the product), transportation costs, labour costs, and so on. Second, there is the cost of launching the product: television advertisements, Google Ads and extensions, hosting the website, raising awareness, and so on.
The cost of launching the product must also be determined: TV ads, Google Ads and extensions, the cost of hosting the website, awareness -raising, and so on. Finally, don’t forget to consider the delivery costs and taxes associated with the products you sell.
Knowing these various costs will assist you in determining how much you have invested in each product. This will assist you in determining the selling price of the item to maximise profit and have a good ROI.
Knowing how much you spend on marketing your products isn’t enough to calculate a good ROI percentage. You should also include offline sales in your calculations.
Off-line sales are those made without the use of Google Ads or the Internet. Offline sales are frequently those made in your shop if you have one.
The third thing to keep in mind to get an accurate ROI figure is the time to conversion. Count the time between when your ad was published on Google Search, Google Maps, or Facebook Ads and when you received a conversion (e.g. purchase, registration, download, etc.). Several Google Ads tools can assist you in tracking conversions.
Knowing how long it takes for a conversion allows you to calculate a long-term ROI. Indeed, you will understand how long it takes for users to become customers and customers to become loyal. As a result, the ROI will become increasingly precise.
The term “lifetime value” refers to a customer’s lifetime value. In other words, the lifetime value is the sum of a customer’s expected profits over his lifetime. Lifetime values differ depending on the customer’s characteristics as well as the customer’s behaviour toward the products you market.
To calculate the Customer Lifetime Value, first, define a time period (ideally between 6 and 12 months) and then examine the purchases made by a customer during that time period. Based on the customer’s overall lifetime, you would then be able to assign an approximate value to their purchases.
In addition to assisting you in determining your ROI, the “Lifetime Value” will assist you in determining the characteristics (age range, budget, products of interest, and so on) of your most loyal customers.
Finally, seasonality plays a role in the development of a good ROI. In fact, not all returns on investment will be the same throughout the year. It is thus up to you to determine when your market is most active (e.g. during the beginning of the school year, during the holidays, during the summer or winter, etc.).
When it comes to activities with a high degree of seasonality, it is best to compare your performance and ROI to the previous year rather than the previous period.
There are a few tricks you can use to increase your return on online investment.
Do a campaign tracking to find out which of your Google Ads ads were the most effective. You can learn about the strengths and weaknesses of your campaigns by tracking them on a regular basis. This allows you to focus on the most relevant ads while changing those that are ineffective in terms of ROI.
Refine the keywords you use in your Google Ads campaigns to increase ROI. Concentrate on the most relevant keywords that speak directly to your target audience.
For example, if you sell children’s t-shirts, select a specific keyword such as “cheap children’s t-shirt” rather than a broad and generic keyword such as “T-shirt.”
Finally, emphasise in your ads the various promotions and interesting offers you are providing. This will assist you in increasing conversions and, as a result, your ROI. Google Ads extensions can be of great assistance to you.
Do you want to achieve a good return on investment or increase your ROI?
Entrust your project to professionals in this field! Our agency specialised in SEM can help you to draw up a business plan to maximise your ROI.
You can benefit from progress monitoring, assessment of your strengths and weaknesses and advice on how to achieve a flourishing ROI on Google Ads!
For more information, do not hesitate to contact our SEM agency.