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Generating Leads from Adwords while improving ROI

Discussion in 'Adwords' started by beazt, Jan 10, 2012.

  1. beazt

    beazt Power Member

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    The following guide is for those marketers using Google Adwords for lead generation, and having either basic to intermediate knowledge about the same.

    This would help those who already have a live campaign up and running.

    Although the example campaign below uses stats from a Campaign that was promoting services, the concepts are applicable for marketing products as well.

    Objective of Analysis & Benchmarking
    In a nutshell, what the following analysis show is how to run ROI focussed Adwords campaign, without getting lost in the numbers which might hide the real story.

    In essence, we are looking to do the following:
    ? Reviewing the performance of your existing campaign
    ? Calculating the ideal budget for the campaign
    ? Estimating the number of Clicks & Leads required
    ? Making optimization/improvement changes based on the above findings

    Assumptions:
    1. You already have a Live Adwords campaign up and running
    2. Your campaign optimization is good enough or decent, if not excellent.
    3. You are tracking conversions at Keyword level

    Background: The example stats are based on a real campaign for which I offered Consulting for a period of 14 days.

    Step 1: Revenue Estimate
    Step one is very important, but also rather straightforward. You need to come up with an approximate revenue figure per project. How much is your revenue from each completed project?

    In the example Campaign that I was managing, two services were being promoted that had a fixed revenue figure. For the purpose of this example, I would call them Campaign 1 and Campaign 2

    As per the business owner, the revenue figure per closed project for them was as follows:
    Project Average Revenue Per Project Closed
    • Campaign 1 = 385 USD
    • Campaign 2 = 385 USD

    Step 2: Effort Estimate
    The second step is to determine how many projects you can handle in a month (to streamline marketing accordingly). If you are a Web Designer, Web Developer, SEO services provider or sell any other services ? decide how many you can handle in a month. (Of course, in most cases you would already have figured this out)

    If you run an agency, then one way to arrive at a number is to calculate based on the number of hours your employees work in a week, and the number of man hours it takes to complete a project.

    In my case, the client listed these numbers as follows:

    Max Projects accepted/handled in a month
    • Service 1 = 12
    • Service 2 = 8


    Step 3: Sales Closure Rate
    Step 3 involves estimating the closure rate of your sales team (if exists) or your lead closure/conversion rate (if done by yourself).

    This is again a straightforward calculation: Say you receive 20 calls a month and you close 5. So your leads-to-sale conversion rate is: 25%.

    In my case, the client listed their sales team closure rate as 20%. So basically, out of every 100 queries generated by PPC, 20 are expected to be closed.


    Step 4: Calculate your existing conversion rate from Adwords
    Since this analysis is based on the assumption that your Adwords campaign is already underway and you have decent stats available to work with ? you need to calculate the conversion rate.

    In the example campaign, the stats over a period of 14 days were as follows:
    Campaign 1
    Clicks: 672
    Conversions: 13
    Conversion Rate: 2% Approximate

    Campaign 2
    Clicks: 728
    Conversions: 15
    Conversion Rate: 2% Approximate


    Step 5: How many clicks would you require to generate the target number of leads?


    At this stage, what we are trying to do is to calculate the number of clicks required to generate the target number of leads, based on the existing conversion rate as listed by you in step 4 above.

    In my example campaign, these numbers were as follows:

    Campaign 1:
    12 Leads required a month from PPC. Current Conversion Rate for Logo Campaign: 2%
    Hence, total number of clicks required to generate 12 leads =600 per month

    Campaign 2:
    8 Leads a month. Current Conversion Rate for Brochure Campaign: 2%
    Hence, total number of clicks required to generate 8 leads = 400 per month

    Step 6: Analysis based on actual lead closure and not PPC conversion Rate
    In the above analysis, we have only considered the leads generated from PPC. However, what we need to consider is the actual number of closed sales and not just # of leads generated.


    Since the assumed average Sales team closure rate was 20% each for both Campaigns/Services Leads, the revised number of monthly leads required would be as follows:
    • For 20% conversion rate of Campaign 1: 60 leads are required as opposed to 12. (60*20/100=12)
    • For 20% conversion rate of Campaign 2: 40 leads are required as opposed to 8. (40*20/100=8)

    So the new Target number of leads from PPC per month becomes:
    Target # of PPC Leads
    • Campaign 1 = 60
    • Campaign 2 = 40

    Step 7: Calculating the revised number of Clicks required for generating target number of Leads:
    Campaign 1: 60 Leads a month

    Current Conversion Rate for Campaign 1: 2%

    Hence, total number of clicks required to generate 60 leads = 3000 per month (3000*2/100=60)

    Campaign 2: 40 Leads a month

    Current Conversion Rate for Campaign 2: 2%

    Hence, total number of clicks required to generate 40 leads = 2000 per month (2000*2/100=40)

    Step 8: Calculating Break Even Point

    Based on the above assumptions and analysis, when do we actually make money or when are we losing it? In other words, what is the breakeven point where we are making as much as we are investing? The same calculations are as follows:

    Campaign 1:

    12 Sales*385 Avg. Revenue = 4620 USD

    3000 Clicks*1.54 CPC = 4620 USD

    Hence, if we close 12 sales a month of 385 USD each, then we can afford up to 3000 clicks @ Max CPC of 1.54 USD and still break even. The maximum Cost per Lead becomes 385 USD.

    Campaign 2:

    8 Sales*385 Avg. Revenue = 3080 USD

    2000 Clicks*1.54 CPC = 3080 USD

    If we close 8 sales a month of 385 USD Avg. each, then we can afford up to 2000 clicks @ Max CPC of 1.54 USD and still break even. The maximum Cost per Lead is 385 USD.

    Step 9: Getting past the 0% ROI Stage
    If ROI is 0% we are not running loss, but we are not making any profit either. Since we are not looking to break even but to profit ? the achieved ROI needs to be improved. To start off, let us assume the target ROI as 100%
    At 100% Target ROI, the revised stats would be as follows:

    Campaign 1

    12 Sales*192.5 Avg. Revenue (385/2) = 2346 USD

    Max CPA = 192.5 USD

    3000 Clicks*0.78 CPC = 2346 USD (Approx.)

    So, if we close 12 sales a month of 385 USD each, then we can afford up to 3000 clicks @ Max CPC of 0.78 USD and still get 100% ROI. The maximum Cost per Lead becomes 192.5 USD.

    Campaign 2

    8 Sales*192.5 (385/2) Avg. Revenue = 1540 USD

    Max CPA = 192.5 USD

    2000 Clicks*0.77 CPC = 1540 USD

    So, if we close 8 sales a month of 385 USD each, then we can afford up to 2000 clicks @ Max CPC of 0.77 USD and still get 100% ROI. The maximum Cost per Lead is 192.5 USD.

    Step 10: Comparing Target stats with actual stats to optimize Campaign
    By now, we know what the target number of:
    • Sales we require per month
    • Leads we require per month
    • # Clicks required for generating the target number of leads
    • Max CPC that we can afford in generating those target number of leads

    The next step is to take your campaign?s existing stats and compare to find optimization opportunities.

    In my example Campaign, the stats were as follows:

    Comparing Stats vs Existing Campaign performance

    Current Average CPC
    Campaign 1: 1.60 $
    Campaign 2: 1.75 $

    Max Allowed CPC
    Campaign 1: 0.78 $
    Campaign 2: 0.77 $

    Status
    Campaign 1: -0.82
    Campaign 2: -1.0


    Current Average Daily Clicks
    Campaign 1: 48(672/14)
    Campaign 2: 52 (728/14)

    Required Average Daily Clicks
    Campaign 1: 111(3000/27)
    Campaign 2: 76(2000/27)

    Status
    Campaign 1: -63
    Campaign 2: -24

    Step 11: Conclusions/Findings
    The last step it to arrive at fairly accurate conclusions about what and how your Adwords campaign can be optimized better. For example, as per the above stats we can make the following conclusions:

    Conclusions:
    1. The existing budget needs to be increased to meet the assumed number of target sales per month for the above campaigns.
    2. Campaign 1 Daily Avg. Clicks is 48 as against 111 required daily.
    3. Campaign 1 Avg. CPC is higher by 0.82$
    4. Campaign 2 Daily Avg. Click is 52 as against 72 required
    5. Campaign 2?s Avg. CPC is again higher by 1.0$

    PPC Optimization that can be performed:
    Apart from making the budget changes, the following improvements can be made solely by PPC optimization:
    • Decreasing the Avg. CPC for both Campaigns (increase CTR)
    • Increasing the number of clicks for both campaign at existing budget (Ad Copy changes )
    • Decreasing the number of unqualified clicks (Negative keyword addition)
    • Increasing the number of qualified clicks (Positive keywords addition)
    • Increasing the Landing Page Conversion rate (Landing Page Changes/Tweaking)

    So by following such an analysis, you would have a pretty good grasp of areas in which your Campaign needs more work, where you are making money or where you would be losing money in the long run.
     
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  2. tzim_t

    tzim_t Registered Member

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    really nice guide, thank you