Are you getting the most out of your ad account?
Many businesses struggle to get the most out of their ad spend. But don’t worry, there is hope! With a little optimization, you can improve your ad performance and get more conversions from your campaigns.
But first, let’s understand some basic terms related to digital marketing:
Impressions
The total number of times people have viewed the post or ad.
Keywords
Keywords are used in advertising to target a particular audience.
Spends
The total amount of money spent on ads.
CPM
The cost of showing your ad to 1,000 unique people
Clicks
The total number of times people clicked your ad to open it.
CTR
The percentage of the people who clicked the ad or post after seeing it.
CPA
The cost spent by an advertiser for each business, a purchase on a website, or a form submission.
CPC
Cost per click.
Conversion rate
The percentage of visitors who take a desired action.
Conversion
The process of turning a website visitor into a paying customer.
Cost price
The amount of money that is put into a business.
Profit
The amount of money that a business makes after paying its expenses.
ROI
A measure of how well an investment has performed.
A company spent 15,000 INR on a keyword ad, and let’s assume that they get total of 5,000 impressions.
Now we will calculate the CPM of this ad.
CPM = ( spends/impressions ) * 1000
The cost per mile (CPM) for this ad was 3,000 INR, which means that the company spent 3,000 INR to acquire 1,000 impressions.
Suppose we get 150 Clicks i.e. out of 5k impressions, 150 clicked and opened the ad.
Let’s calculate CTR from this data
CTR = ( clicks/impressions ) * 100
The click-through rate (CTR) for the ad was 3%, which means that 3% of the people who saw the ad clicked on it.
Suppose they get a total of 15 conversions from this ad.
The CPA for the above data will be:
CPA = spends/conversion
The cost per acquisition (CPA) for the ad was 1,000 INR, which means that the company spent 1,000 INR to acquire a single conversion.
On the other hand CPC for the same ad will be:
CPC = spends/clicks
The cost per click (CPC) for the ad was 100 INR, which means that the company spent 100 INR to acquire a single click.
The conversion rate for this ad is:
Conversion rate = clicks/conversions
The conversion rate for the ad was 10, which means that 10% of the people who clicked on the ad converted into customers.
The company made a total of 30,000 INR from the ad, which means that they made a profit of 15,000 INR.
The final ROI for the business:
ROI = ( profit/spends ) * 100
The return on investment (ROI) for the ad was 100%, which means that the company made a profit of 1 INR for every INR they spent on the ad.
Let’s give our ad account a makeover now!
With a little bit of work, we can make it more attractive to potential customers and get more clicks
We’re looking for ways to grow our business without blowing our budget.
The special tip is:
Improve your ad quality and watch your CTR soar!
A well-written ad can make all the difference in terms of getting people to click on it.
There are many ways to improve the quality of your ads, but we’ll save those secrets for another post.
So, our expenses will stay at 15k INR.
Let’s assume that the impressions will remain at 5k.
The number of clicks will increase from 150 to 250.
More clicks will lead to more conversions and the total number of conversions will increase from 15 to 25.
The CPA will decrease from 1k INR to 600 INR.
The company reduced its cost per conversion by 40%, from 1,000 INR to 600 INR.
The CPC will also decrease to 60 INR from 100 INR.
NOTE: A higher CTR leads to a lower CPC. Both metrics are closely related.
More conversions will lead to more business.
The total cost price will increase from 30k INR to 50k INR.
The total profit will be 35k INR.
This significant increase in profit was achieved without increasing the total advertising budget, simply by improving the quality of the ads.
The total ROI will be approx 234%.
This is just the tip of the iceberg when it comes to optimizing your ad account.
But I’ve got more tricks up my sleeve.
What if I tell you that you can optimize your account even more?
Don’t be so surprised. Of Course, you can optimize it more.
Remember there is always a score of improvement.
Here comes our hero QUALITY SCORE
You can decrease your bidding amount, and your CPC by improving your quality score.
If you want to know the whole story of quality score you may check out the blog, I dedicated to it.
But let’s not get too distracted, we need to know how to optimize our account even more.
This time budget will be 12.5k INR.
The CPC will decrease to 50 INR from 60 INR because of the improved Quality Score.
The CTR, CPM, clicks, and impressions will remain the same.
The conversion rate will be 10%.
And there will be a total of 25 conversions.
The CPA will decrease to 500 INR from 600 INR.
We will pay 100 INR less for each conversion.
The company will make a business of about 50k INR.
The profit will be approx 37.5k INR, because the spending will be less the profit will be more.
The ROI will be 300%.
The point to keep in mind is that even after reducing the budget we have not faced any loss because of our high CTR and low CPC.
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Now, do you wanna know how to decrease your CPC?
The secret of Quality Score.
The following blog is for you to get some reality check about search ads and how they work.
This is how search ads work.
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