by Zoe Huden on January 16, 2013
Measuring ROI is one of the most important aspects of any paid search campaign. Advertisers often refer to paid search ROI as ROAS (return on ad spend) or ROMI (return on marketing investment), here’s a basic equation for how ROAS is calculated:
(Profit – Cost) / Cost
Regardless of which acronym you use, the equation is the same. The tricky part is figuring out what to include in your cost. Because paid search is often referred to as pay-per-click or cost-per-click, people often think that the cost of paid search is solely the media spend on the clicks your campaign gets. However, there are a couple of other costs you must take into account:
The cost of the person managing the paid search campaigns (if it’s you, how much money is your time worth?)
The cost of developing landing pages for your paid search campaign (having the right landing pages for your ads is crucial in driving conversions, if the landing page isn’t relevant to the ad, expect there to be a very low conversion rate)
Assuming that you are already calculating your paid search ROI based on true costs, you may not be tracking your offline conversions as well as your online ones, and you may not realize just how much return you are getting for your investment in paid search.
Most people these days are researching products and services online, however, if your business is not an eCommerce, online sales account for only a portion of your overall business revenue. This isn’t because customers aren’t being influenced to spend by online ads (in fact the research shows that people are absolutely influenced by the ads they see online), but instead this finding speaks more to how people make purchases.
In this blog post we will explore how people make purchasing decisions both online and offline and how you can track online and offline conversions in order to more efficiently measure your paid search ROI.
Online conversions in paid search refer to the customers who see your ad, click on it, and complete a desired action (e.g. a purchase, a download or a sign-up) online as well. Because the entire transaction is taking place online, it’s much easier to track impressions (the number of times your ad is displayed for a relevant keyword search), clicks and conversions (purchases or leads), and so (assuming you are set up to track conversions) measuring ROI in paid search for online conversions is a pretty straightforward process.
If you’re an eCommerce, it’s pretty simple: monitor how many impressions your ads are getting, track which ads are getting clicks, and see if customers are converting after clicking the ads, then divide that revenue by the cost of running the ad, plus eCommerce costs, plus the time you or your team spent managing the program (because time = money, people!) .
If you’re not an eCommerce but a lead gen business tracking conversions can be difficult unless you are tracking end to end as “conversions” are defined differently (a “conversion” in eCommerce = a sale, a “conversion” in lead gen = a lead). If your business is a lead gen then measuring online conversions can be measured by: monitoring how many impressions your ads are getting, tracking which ads get clicks, watching which ads produce leads (for example: getting a visitor –lead – to fill out a contact form), then compare sales against that lead information.
Obviously an eCommerce business like Amazon is going to have 100% of their profit coming from online, but more and more brick-and-mortar businesses are starting to advertise online as well, and for many of them, eCommerce just isn’t a viable option (a fine-dining restaurant would be a good example). Also many people like to do their research online before making in-store purchases, so how do we measure the ROI of paid search that is influencing people to buy, but not necessarily to buy online?
Measuring offline conversions can seem impossible or at the very least extremely difficult and time consuming, however, that does not need to be the case!
There are several ways to track offline conversions in paid search, including the following three:
1. Store location pages
If you’re a business with a physical store location, the last page a customer is going to visit on your website before coming in to make a purchase is probably the store location page. Tracking how many people are visiting that page or offering printable directions to store locations and tracking how many times it is downloaded and printed is one way of measuring offline conversions.
2. Unique toll-free phone numbers
If your business offers a service like pizza delivery or teeth cleanings and your goal is to have people call and make an appointment, use unique phone numbers in your online advertisements. With unique phone numbers that you display in online ads you can figure out exactly where your customers are finding your information.
3. Test! Test! Test!
Perhaps the most important aspect of paid search marketing is testing, testing, and testing! If you are doing nothing else you need to be testing ads: running them for a period of time, pausing the campaign and measuring the in-store differences. Testing even applies to different types of ads, how do you know which ads are driving the most traffic if you aren’t testing them out and comparing results?
Measuring paid search ROI for offline conversions is a bit more difficult than online as tracking 100% of offline conversions is nearly impossible. Even if you are doing onsite SEO, if your site isn’t being displayed in the first page of Google search results (for relevant searches), the odds of someone finding your product/service online, decreases significantly. With a paid search campaign you can pay for your ads to be displayed on the first page of Google search results pages.
Come back tomorrow and we’ll share with you our predictions for paid search in 2013!