November 12, 2020
5 Tips on How to Create a Profitable Google Ads Campaign
Google Ads is a great tool to have in your marketing toolbox if you’re looking for profitability in your business. The tools, techniques, and strategies available allow businesses to grow exponentially in a very short period of time. There’s a reason why companies worldwide collectively spend billions of dollars on Google Ads– if done right, it’s profitable. Here are five tips on how to create a profitable Google Ads campaign.
Understand ROI and ROAS
Having a profitable Google Ads campaign requires you to think mathematically. In a nutshell, it all comes down to how much traffic you generate, how much of that traffic converts, and how much it costs you to make that happen. The name of the game in Google Ads is ROI (Return on Investment) and ROAS (Return on Ad Spend).
ROI = Revenue-Cost / Cost of Ads
*You must know your profit margins to calculate your true ROI. This means keeping in mind things like associated costs with onboarding new leads or making a sale.
ROAS = Total Revenue / Cost of Ads
It’s important to recognize which model you should use for your campaigns and how they can affect your perception of their performance. If you have associated costs with your marketing, you may want to consider the ROI model.
Calculate Your Break-Even Point
The understanding of ROI and ROAS is crucial in effectively tracking your profitability in Google Ads and can be the difference between good vs. great. Calculating your break-even point gives you an excellent benchmark and goal to aim towards for your Google Ads campaigns. So how do you know what your ROI should be to break even? The answer is fairly simple. Divide your profit margin by one. So for the above example, our break-even point would be calculated by the following formula:
Break-Even Point: 1/.4 = 2.5 or 250%
What this means is that in order to be break-even, you need to make $2.50 on every dollar spent on advertising. Why? It’s because, for every $2.50 in revenue, you’re only generating a dollar (40%). Thus, you net zero dollars.
Verify Search Volume and Gain Keyword Insight
Before you start advertising on Google, it’s essential to research the space you are entering. Take a look at key metrics like how much the historic average CPC has been for your target keywords and much search volume there is. One way to do this is by using Google’s keyword planner. This tool even gives you some more insight into how much you can spend to expect specific results. It also allows you to see how your max CPC bid and conversion rate will affect the performance of your campaigns. Doing this research also will enable you to understand whether your budget is optimal for a profitable campaign or not. Sometimes as little as an extra $5 a day can be the difference between a profitable campaign and one that is not.
One thing to note though, Google’s predictions are not always accurate and will not ensure any such performance for your campaigns. It’s merely Google’s best insight based on the data that they have on hand. Use these insights as a general guide and helping hand during your planning. Don’t let it influence too much of your expectations and judgment. It’s best to start slow and a bit cautious while carefully monitoring your data as it comes in instead of relying on the keyword plan’s overview.
Another resource for Google ads insight is Wordstream’s Google ads benchmarks, which are updated annually. These reports provide information on many industry’s average cost per click, conversion rate, and cost per action.
Utilize Conversion Rate Optimization
Increasing your conversion rate is another key component in how to create a profitable Google Ads campaign. This can include a variety of different things, including your ad copy, having the right CTA’S, and optimizing your landing pages. This aspect of Google Ads is where you should spend considerable time on and continue to improve. It’s also where you can get very creative and utilize A/B testing and data to increase your conversion rates further.
Maximize Extensions To Gain SERP Real Estate and Increase Relevancy
You can also increase your conversion rate in Google Ads by simply aiming to be helpful to the user. This means that you should give them everything they need to solve their issue and provide as much value as possible.
A way to be more helpful is to maximize your extensions. The SERP (Search Engine Results Page) has four limited spots for text ads at the top of the page. Once you get there, use that space wisely and take advantage of it. You also want your ad to take up as much space on that page as possible.
Utilize ad extensions of all types. Here’s a brief overview of what they are and what they’re best used for:
Read more about Google Ads extensions here.
Many businesses struggle with focusing on what they know works for them. Don’t make things too complicated. If you know something has worked well for your business in the past, continue to promote and refine it. If you know that targeting a certain persona leads to a larger order value, then put more advertising dollars towards that persona. Think about what conversion actions are most important and will have the most impact. Working within your budget means that you need to make the most out of it. So treat every last dollar with care, purpose, and a vision.
Interested in learning more about how to create a profitable Google Ads campaign? Talk with one of our experts today.