Adwords Spend, Time To Decrease? - My Annual Review.

[Phil.]

Hi,

Thanks in advance for any advice and help.

Bit of background, i've been using google ads for nearly two years, first year helped our website gain traction on a limited budget and we've really ramped up spend in the 2nd year. Our initial target was to buy as many clicks as possible whilst keeping out CPC relatively low, as things have progressed we've upped our spend to attract more customers and subsequently refined our campaigns with better ad copy etc. I've has several calls with adwords specialists and our own account managers over this time who have been generally very helpful.

To my actual point, over the course of this year we've increased our spend to effectively try and buy profits, i.e, to attract more relevant customers to our website who are likely to convert. This has worked upto a point although in the last two months has stalled, i feel like we're hitting a roof for our customer base.

This evening i've looked back through our spend across the whole of the year and whats actually apparent is that the more we spend (cpc), the better our stats are, bounce rate, page sessions etc, but this is actually very marginal in the grand scheme of things and costs us more money per conversion.

We can split our spend increases into 3 distinct timescales, as below:

Jan 18 - June 18 = 25p cpc, 57% BR, 2.61 page sessions and £361 cost per conversion.

July 18 - Mid October 18 = 37p cpc, 60% BR, 2.49 page sessions and £454 cost per conversion.

Mid October 18 - Dec 18 = 71p cpc, 52% BR, 3.12 page sessions and £506 cost per conversion.

So... my question is, should we pull back spend, we don't appear to be really getting much extra bang for our book. I get the feeling as long as we're on the first page our actual position doesn't have a huge affect on our conversions, fyi, we're in a niche area and are the go to in the UK market.

Any comments or feedback would be really appreciated.

Thanks,

P

 

[Peter Bowen]

Hi @Phil.

What are you counting as a conversion?

How does the cost per conversion compare with the business value of that conversion?

 

[Phil.]

Hi Peter,

Thanks for your response.

Conversion is a transaction on our website, the business value on the face of it is actually expensive, ie we’d like our cost per conversion to be below 100 pound, certainly below 200.

We suspect the actual figures are incorrect and circa 50% of people who find us via google actually pass our product details into their partner to make purchase so we only really use it as a guide.

Hence the reason to drop our cpc as the stats don’t back up the higher spend?

Thanks,

Phil

 

[KyushuTravelAgent]

Your CPC don't seem too high but your conversion cost seems very high (even taking into account they may be 50% overstated as you mention).

>Jan 18 - June 18 = 25p cpc, 57% BR, 2.61 page sessions and £361 cost per conversion.

If my maths is right for every 1,444 clicks you get a conversion. Wonder if it's worth look at what goes between the click and conversion, like your landing page for example.

 

[Peter Bowen]

Hi @Phil.

There are two ways of getting your cost per conversion down:

- decrease what you pay per click.
- increase the conversion rate.

You have less control over the cost per click - because of the competition - than you do over the page conversion rate so that's where I'd start.

From your latest set of numbers it looks like your conversion rate is about 0.14%. I specialise in using Google Ads for lead generation rather than for ecommerce so I could be wrong about it expected conversion rates, but, it seems low to me.

Conversion rate is a two-sided problem. It's a function of the traffic you put on the page and the page itself. It'd seem like one or more of these is worth looking at as the potential source of the problem of paying more than the conversion is worth.

 

[antropy]

Another way to look upon it is if you do pull back spend on Adwords, then what other methods of marketing can to ramp up? You may have hit a ceiling with Adwords, then you could put more money into Facebook Advertising? However of course you are able to gauge your customer base better than me but it is worth a thought. Alex

 

[Nochexman]

We can split our spend increases into 3 distinct timescales, as below:

Jan 18 - June 18 = 25p cpc, 57% BR, 2.61 page sessions and £361 cost per conversion.

July 18 - Mid October 18 = 37p cpc, 60% BR, 2.49 page sessions and £454 cost per conversion.

Mid October 18 - Dec 18 = 71p cpc, 52% BR, 3.12 page sessions and £506 cost per conversion.

So... my question is, should we pull back spend, we don't appear to be really getting much extra bang for our book. I get the feeling as long as we're on the first page our actual position doesn't have a huge affect on our conversions, fyi, we're in a niche area and are the go to in the UK market.

Any comments or feedback would be really appreciated.

Hello Phil. while cost per conversion is really important I would be interested in two other criteria:

1. Click through rate (CTR) - it depends on the nature of your business, but I would expect to achieve 3% or greater
2. Conversion rate - ditto the above, but I would expect to achieve 4% of clicks into conversions.

If I was not getting one or both of the above, I would look at improving CTR to my target or above, and then look at conversion. CTR is relatively easy to improve. Conversion is more complex. Would be interested to know what you are achieving now and what type of industry you are in.

 

[justleads]

Jan 18 - June 18 = 25p cpc, 57% BR, 2.61 page sessions and £361 cost per conversion.

July 18 - Mid October 18 = 37p cpc, 60% BR, 2.49 page sessions and £454 cost per conversion.

Mid October 18 - Dec 18 = 71p cpc, 52% BR, 3.12 page sessions and £506 cost per conversion.

So... my question is, should we pull back spend, we don't appear to be really getting much extra bang for our book. I get the feeling as long as we're on the first page our actual position doesn't have a huge affect on our conversions, fyi, we're in a niche area and are the go to in the UK market.

P

Your data looks not very encouraging. Something went wrong…

Possible action: to hire an expert who is ready to work on the following two aims, and nothing else:

1) To systematically decrease cost per conversion,

2) While systematically increasing the number of conversions.

You should agree the fee structure directly related to achieving these two aims. You've already tried "standard" fee payments, and got nowhere. Yes, I know it is difficult to find such experts. Usually business-owners are not aware of how to construct a profit related fee. I can only hint, that 10% of increased sales and 25% of decreased expenses is an average you should think about. And you can include any bonus on achieving this or that goal. Of course, it will depend on the value of your actual orders, therefore the 10% and 25% are indicative.

Is it achievable? Definitely. Why should you pay if no results achieved?

Besides, several experts have already commented and asked about the relation between "conversion" and "sales", and the unknown cost/value of a single "sale". They are absolutely right. In a simple model, a customer clicks on an order button online (so conversion =order), but in many situations a "conversion" is actually a phone enquiry. So you need N enquiries to get 1 sale. Obviously, your cost of sale is N times higher!

Does this all make sense?

 

[abbones]

If you're niche why aren't you concentrating on organic search?

 

[Taobao agent]

We should consider the question is this way. Have you calculated the ROI. Continue it if the ROI is OK. Sometimes it is noraml the cost is more and more expensive, competition is high.

 

[Guy Incognito]

£500 + per conversion? What is the average order value? Must be in the thousands otherwise surely you are losing money?

 

[Graham Tyers]

As a rule, the higher you are in the Adwords listings the better your conversion rate will be. So you obviously have a product that the visitors are looking hard to find. The Page Bounce rates seem to back that up.

That's completely at odds with a strategy of maximum clicks at a low rate though.

Given that you've muddled on at £500+ per conversion for a while, I'd personally be looking to be bidding £10+ per click, and get keywords right and make sure you are converting 1:10 and not 1:1000

 

[justleads]

You got several very good suggestions from several members here. I'd try to summarise it this way:

1) Your Adword account and its budget appear to be out of control.

2) Decide what is a reasonable cost for conversion, and how many of these conversions you need

3) After that, hire an expert to get these results, and refuse to listen to any other metrics (state it very clearly that you care only for the cost per conversion, and for the number of these conversions per month).

4) From my experience, a reasonably good expert should get you at least 50% off the cost per conversion, and still be able to increase the number of conversions. As this is a gradual process which can take some time, negotiate fee directly related to achieving these gradual improvements, not just "hourly fee".

5) For avoidance of any doubt: do not pay for any other metrics, only cost per conversion, and the number of them.

If you are not in a hurry, I can have a look at your account ("audit") within a week or two, free of charge, and advise you more specifically.

 

[Guy Incognito]

Just looked up our stats for the year thus far:

We've spent £17,000 on Ad Words (we moved to a new agency this year so we're still doing a lot of AB testing). January was a bad month as we switched the Ad Words account over, Feb was a very good month. We're up 171% in sales compared to this point last year and Feb was an increase of 328%.

190 orders so that works out at £89 per conversion. We've had 33,000 visitors. Conversion rate down to 0.4% when it's historically been around 1% but we expect this to increase over the next month or two as we work out which ads work best, and we're aiming to get the cost per conversion to around the £40 mark later in the year as we optimise the ads. We are also in a niche market but are considered the market leader at what we do.

Last year we spent about 15% of our turnover on Ad Words and we'd like to stay at around this level.

 

[justleads]

Just looked up our stats for the year thus far:

We've spent £17,000 on Ad Words

Is it per year?

I am used to see quite a few good businesses who suffer from too modest targets. Why not aim to double the income (at least), while reducing cost per conversion? Why not triple? Unless there are simply not enough potential customers in existence, in which case there is no potential for growth, and the main objective is limited to minimizing the costs.

Working for "biggies", I conducted many thousands of PPC audits and have yet to see an account which is impossible to improve a lot...

The truth is, it is extremely difficult to find a good pro for account which is under £10,000 per month. Unfortunately, only really good pros have skills to propel your business into multimillion enterprise, but they will not consider even touching a low pay account. So there is a catch 22 situation here…

 

[Guy Incognito]

Is it per year?

I am used to see quite a few good businesses who suffer from too modest targets. Why not aim to double the income (at least), while reducing cost per conversion? Why not triple? Unless there are simply not enough potential customers in existence, in which case there is no potential for growth, and the main objective is limited to minimizing the costs.

Working for "biggies", I conducted many thousands of PPC audits and have yet to see an account which is impossible to improve a lot...

The truth is, it is extremely difficult to find a good pro for account which is under £10,000 per month. Unfortunately, only really good pros have skills to propel your business into multimillion enterprise, but they will not consider even touching a low pay account. So there is a catch 22 situation here…

Last year (which was out first full year) we spent £60k on adwords. We've spent £17k thus far this year and plan to increase it to around £20k per month around the summer time. Our major problem is that we've grown almost too quickly and have trouble making enough stock to keep up with demand, so money from sales has to go into making product. We've put our savings in and are now looking at getting some finance (maybe £250k) so we can both make more product and increase ad spend to do what you describe.

Our target this year is £1.25m turnover and then £3m next year.

 

[justleads]

This sounds a nice plan. If at any stage you will want to check your account, there are experts here who will love the challenge. And it can be done with (or without) your current agency knowledge. Some agencies don't mind, others become hysterical. I recommend external audit at least 3-4 times per year, and request the agency to accept it as a standard condition of work. It costs very little compared to huge potential earnings. And there are quite a few experts who like the challenge of identifying hidden and lost opportunity. (If I could get 10% of what I saved to the clients, I would be multimillionaire )

 

[Nochexman]

Conversion rate down to 0.4% when it's historically been around 1% but we expect this to increase over the next month or two as we work out which ads work best

Just to be clear - a conversion = turning a click into a sale?

1% conversion seems very low to me. If this is the case you need to look at the quality of those clicks and the quality of the landing page. Good luck.

 

[justleads]

[QUOTE="Nochexman, post: 2915318, member: 114386"1% conversion seems very low to me. [/QUOTE]
The conversion rate can differ significantly, depends on many factors. If a client searched for a specific car battery from a specific brand, and the price is "normal", the conversion rate can be >20%. But a special garment for wedding, here the same client might visit your website 5 times, and at the end buy from another place, so conversion rate of 1% is very good. (I am referring to real cases!).

Plus, the marketer might prefer low conversion rate, provided the branding is achieved, and catch the same clients on remarketing, retargeting, social media, and endless other ways. Therefore, a the end of the day, for the business owner only two numbers are really important in the digital marketing: how much I spend to get 1 customer (partially corresponds to cost of conversion), and how many customers I get (it parallels to conversions number). All the rest is unreliable and may be very misleading.

 

[wayzgoose]

Is it per year?
The truth is, it is extremely difficult to find a good pro for account which is under £10,000 per month. Unfortunately, only really good pros have skills to propel your business into multimillion enterprise, but they will not consider even touching a low pay account. So there is a catch 22 situation here…

So nobody would be interested in my 3p per click/£40 per month account then?

 

[justleads]

So nobody would be interested in my 3p per click/£40 per month account then?

You will be surprised how many people keep low budget accounts, which are just loosing their money. They do not realise that loosing mean loosing, even on a low budget!

Obviously, if one has a well performing account, it means low cost per conversion/order, which automatically invites increase in budget to the max possibility to dispatch orders. Therefore well performing account naturally has a tendency to increase the budget up and up… with profits going through the roof…

On average, I find 90% of DIY accounts and 50% of "professionally managed" accounts to have gross errors, with potential to improve profitability at least 50% (usually 100%).

 

[wayzgoose]

We have an average 7% conversion rate so quite happy with the results. It's just that with such a low spend it's difficult to get any help or advice on it. Had a couple of sessions with Google adwords specialists but they have gone through things at such speed both times, it's very difficult to take all the information in.

 

[Peter Bowen]

@wayzgoose

I have a client who's Google ad budget is about £50 per month. He's in a market where, like you, he's happy with his spend. There is nothing wrong with not spending a lot of money.

You wouldn't be able to attract the interest of a large agency but I'm sure there are people who'd be happy to take you on as a client.

 

[Nochexman]

...my question is, should we pull back spend, we don't appear to be really getting much extra bang for our book. I get the feeling as long as we're on the first page our actual position doesn't have a huge affect on our conversions, fyi, we're in a niche area and are the go to in the UK market.

Hello Phil, you received a lot of good feedback - wondering what you made of it?

 

[Guy Incognito]

[QUOTE="Nochexman, post: 2915318, member: 114386"1% conversion seems very low to me.

The conversion rate can differ significantly, depends on many factors. If a client searched for a specific car battery from a specific brand, and the price is "normal", the conversion rate can be >20%. But a special garment for wedding, here the same client might visit your website 5 times, and at the end buy from another place, so conversion rate of 1% is very good. (I am referring to real cases!).

Plus, the marketer might prefer low conversion rate, provided the branding is achieved, and catch the same clients on remarketing, retargeting, social media, and endless other ways. Therefore, a the end of the day, for the business owner only two numbers are really important in the digital marketing: how much I spend to get 1 customer (partially corresponds to cost of conversion), and how many customers I get (it parallels to conversions number). All the rest is unreliable and may be very misleading.[/QUOTE]

Our product is a niche product. We effectively started the sector we are in. It is rare for someone to instantly buy from us, it's a considered purchase so often people return days / weeks / months later and buy. Our brand is very important to us, and the value of the brand is likely to be part of the exit strategy. You cannot buy our products anywhere else online except through us.

We have a high repeat customer rate of approximately 15%. We previously used an online agency and they just pushed our best selling items - which made the conversion rate and cost per order better, but meant we had excess stock sitting around. We're now seeing a much broader mix of product sales which should mean more profit (despite a currently increased cost per order). We are also expanding our product line.

I'm sure we are getting some things wrong, but we will get it audited in a couple of months once we're fully up and running with this new company. Ultimately we want as many orders as we can at the cheapest cost!

 

[wayzgoose]

From someone that probably looks at things far to simply - you started the sector you're in and nobody else sells it, it has to be bought through you. Why do you need Google ads at all? Why not just good seo on your site and be top of the organic rankings?

 

[Guy Incognito]

From someone that probably looks at things far to simply - you started the sector you're in and nobody else sells it, it has to be bought through you. Why do you need Google ads at all? Why not just good seo on your site and be top of the organic rankings?

We do SEO as well however as it's a niche we need to raise awareness of the product. So we need to advertise to people who we think will end up buying it (even if they are not looking for what we offer). We're on the first page and 6th in ranking for the usual search term however we have something different to others in terms of the material we use and the benefits of it.

We want to get to the top of the first page but there are some national companies there who don't offer what we do but use the generic term.

We see the greatest conversion from the shopping image ads, but the main thing we're trying to do is to raise awareness - we know it is usually a considered purchase, but it often leads to repeat business.