The best basis to manage your AdWords account is on the profit it generates. But first you need to calculate profit.
Start by having a set Break Even point (BE) across the entire account. The Break Even is the point at which you’d start to lose money by running ads – also called the ‘Maximum Allowable CPA’. If you’re tracking multiple conversions over different campaigns, you might want to set a different BE for each campaign.
Lets look at a real example from a recent client (rounded nicely to prevent calculator related injuries). Their Break Even point is $100, with a CPA of $30 and getting about 50 conversions a week.
Their weekly profit is around $3500. Great, they’re making money. This is where measuring for profit really excels. We wanted to make more money for our client (strange I know, but it’s what we do).
We started testing different leverage points.
We could see that average position was low & ads were showing on the right side of Google far too often. So by increasing bids, we could get into a higher position. Meaning more clicks and more traffic to the site. And more profit.
In this case the CPA went up $10 to $40 per conversion, but due to the higher position the volume of clicks increased & the weekly conversions doubled to 100. What does that do for the profit?
It generates $6000 overall profit, or a %71 increase. Over the year, that’s a very nice return. A return that would have never existed if we were an agency focused on keeping our clients CPA low.
This is just part of a WebSavvy metric we call the SavvyNumber™ which looks at various moving averages and the variables that affect them. This gives an almost prophetic ability to guide our clients accounts to profitable results.
If you’d like your AdWords to be steered by profit, get in touch.