How AdWords Profit-driven Marketing Works
All businesses spending advertising dollars on AdWords share typically interested in one goal: Profit. That needs a profit-driven marketer who knows what the goal actually looks like, your profits now, what profits can be, and how to optimize your AdWords campaign(s) to get there.
Marketers must strike a balance between your profit and your bidding.The individuals that steward company resources and turn them into higher profits will always be in demand. And this is what the profit driven Marketer has the potential to do: double conversion rates and business revenue.
It Takes Broad & Bold Thinking to be a Profit-Driven Marketer
One of the chief benefits of using the Google AdWords advertising platform is that Marketers can measure just about anything they want: from the number of clicks, number of impressions, details on click-through rate (CTR), number of conversions, percentage of conversion rate, cost per click (CPC), cost per acquisition (CPA), etc. Many AdWords managers do a great job of keeping up with AdWords optimization by fine tuning your keyword bids, negative keywords, Ad Groups and Ads copy at regular intervals for better ROI. Top performing Profit- Driven Marketing Managers keep an eye on even more.
Businesses that succeed in gaining higher profits from paid advertising are often those that have a profit-driven mindset on Ad Spend to reach customers who are searching for their products. Good business practice has always been, is, and will be, about excellent service and wise marketing choices to let customers know about it. Use predictive data and personalized ad targeting to empathize with your customer’s frustrations, aspirations, and align solutions to answer their unmet needs. PPC advertising can powerfully offer products and user experiences that offer solutions.
Sufficient Sales Volume Drives Profits in AdWords Profit-driven Marketing
Matt Lawson, Director of Performance Marketing, stated at the Google All-Stars Summit: “As your cost per acquisition increases your profits can rise dramatically, as long as your increase in volume is enough to offset increase in unit cost”.
You get what you measure, so, logically, exactly what a Marketer measures important.
The profit-driven Marketer is a bold way of thinking, setting budgets, bids, and KPI’s. It turns the tables on how conversion reports look at first blush. In search marketing, you could be leaving big dollars on the table in you don’t factor in your volume of sales. For example, a 20:1 ROI can be beaten by a 10:1 ROI when the critical factor of the volume is added into the equation. Efficiency and cost per acquisition are only half the equation to factor in. More conversions can over shine increased SEM costs and make a business come out significantly ahead.
Profit is the only metric that allows AdWords Account Managers to measure both volume and efficiency at the same time. Increased AdWords spends can pay for the additional cost with gains by keeping a close eye on multiple factors. Businesses which understand that by subtracting the SEM costs from the gross margin, they can win a hefty increase in ROI when there is a sufficient volume of sales.
Limited AdWords Budget Vs Flexible Budgets
When your AdWords budget is set, you may be missing profitability because that requires a flexible budget.
According to Lawson, the difference between an industry leader and an industry laggard is their mindsets. The leading business who is winning in Google AdWords has a growth mindset; the laggard has an efficiency mindset. Scale back in spend when clients scale back on purchasing, but rather spend as much as you can afford to when there are profitable sales to be gained. Aspire to the mindset of growth so that is possible to obtain those profits, versus efficiency that misses relevant search queries.
With the number of shoppers increasing from smartphones, how your bids are set for the mobile-first world can gain more of your audience making purchases on the go. Your conversion rates may improve significantly by using the latest AdWords features that focus on reaching consumers at key moments across devices. If you haven’t already started mobile advertising, consumer purchasing preferences have changed and it is time for your campaign strategies to update too. Both text and display ads can be optimized for mobile viewers.
Your new advertising results may reflect the adoption of the approach to multi-screen marketing. Once improved, you can reinvest a percentage of your incremental profit back into the change to make it even better. With an improved customer experience and a stronger focus on mobile advertising, you may seize the full potential of your ad spend. We aren’t afraid of seeking to achieve an ambitious new revenue benchmark.
What the Profit Driven Marketer Must Do
Measure volume and efficiency in paid AdWords campaign at the same time.
1. Recognize the full value of digital investments.
2. Able to target outcomes
3. Can capture demand
We need to increasingly think about taking the full picture into account. And then, we need to not only understanding the total impact of our AdWords advertising but how to take decisive and best actions on that account. This profit-driven AdWords marketing process drives more sales both online and offline.
Grow from a focus on leads to leads volume, to knowing the full profit of the leads your business is generating. Analyze customer data to understand what is more profitable. Look for signals that point to predictive buyer intent and then up your campaign bids to reach more individuals at the ready-to-buy stage. When you learn how profitability varies by dimensions like; geographies, device, and time of day. This knowledge is what drives better than average returns in investment and creates higher profits.
Test to find your campaigns sweet spot by scrutinizing keywords in positions in the mid-range like 4 – 6 and try to move them up. Then see how volume grows. Measure if the cost of volume growth surpasses the increase in unit cost. You don’t want constraints of campaign efficiency, like a lower CPC being a must when that can make you lose extra conversions. Those conversions can easily make up the difference. Keep the perspective of gross profits as a higher value.
AdWords Profit-Driven Marketing model is vastly different than the AdWords Cost-Allocation Marketing model.
6 Hallmarks of Profit-Driven Marketing (PDM):
1. The PDM model seeks to builds and refines your AdWords account by tracking value, Return on Ad Spend, ROI, profit per customer, unit costs, volume impact, value of sales leads versus cost etc.
2. The PDM model adheres to a mindset on profit and your business goals as central for campaign decisions rather than the amount spent.
3. The PDM model is both flexible and scalable to take advantage of adjustments the yield higher profits. Many of our clients are interested in acquiring as many sales as they can, as long as each sale is profitable. The Profit-Driven Marketer has the go-ahead to INCREASE spend as long as ad costs are PROFITABLE. The ad costs are covered by the profits, and the business increases overall profit levels in the end.
4. The PDM model entails more up-front account analysis, time to establish correct KPIs, ad group segmentation, and involves an evergreen improvement cycle of analysis and tweaking.
5. The PDM model requires closer account management, which while it may have a higher price-tag, that serves to create greater accountability and profit potential.
6. The PDM model will increase ad spend where there is a higher probability of reaching ideal customers with the scope of increased overall profits. Ad spend is held with the mindset of being an investment, with predictive data affirming expectations of ROI.
Factors that Impact Paid Marketing Profit Margins
PPC managers have the task of knowing how additional conversions impact the average maximum cost per conversion (CPA). It is possible for that will keeping the average CPA under the maximum allow CPA, that last conversion may actually be too costly, perhaps even generating a loss. To really know what is happening, paid search managers need to know the full details to establish profit margins. These include an increase in market share, the lifetime value of a client, the number of mobile buyers engaged, and branding value. The statistical face of PPC marketing is very much about numbers and examining bottom lines.
Now that you can conceptualize how profit-driven marketing and how it looks, let’s consider how you can leverage AdWords to start conversations with your target audience to increase profitable sales.
3 Steps to AdWords Profit-Driven Marketing
Start conversations using AdWords to reach new profits. We can help you create an actionable plan to will help your company gain the advantage of profit-driven marketing:
1. Recognize the value of your digital marketing. Engage professional guidance to uncover the full profit return from your digital advertising investment.
2. Target outcomes with the correct KPIs. Align your campaigns KPIs for useful measurements that your team has agreed upon for identifying what success looks like for you. Adjust your CPA or ROI targets with a view of total profits.
3. Capture demand. Help you entire marketing team to pool resources and prioritize budget spend to follow and nurture all potentially profitable customers.
4 Hallmarks of Cost-Allocation AdWord Marketing
1. It is easier for the business who hopes (mistakenly) that by “setting it and forgetting it”, their AdWords campaigns will serve up profits. You can always find an AdWords Manager who is willing to simply spend your budget, and report on the basic existing indicators.
2. AdWords campaigns may feel more secure that run narrowly on fixed budgets and traditional advertising metrics. They frequently miss advanced and new strategies as well as the deeply-rooted Key Performance Indicators that require close tracking with profit.
3. Cost-allocated AdWords marketing can get off the ground faster since they require only basic skills to implement. No business or deep competitive analysis is necessary, little effort or talent is a requisite as KPIs are little analyzed and poorly defined.
4. Budget limits constrain the time needed for continuous improvement processes so this is often skipped. A straightforward mindset just focuses on spending money on ads – often until red flags are raised when profits are missed.
HOW THE PROFIT DRIVEN ADWORDS MINDSET COMPARES
MAXIMIZING REVENUE MINDSET: With the mindset of maximizing revenue, an AdWords Manager is likely to bid for position one.
PROBLEM: When the ad spending to achieve being in first position is tremendous, it can leads to profit losses.
COST-TURNOVER RATIO MINDSET: If you’re primarily focusing on the campaigns cost-turnover ratio, then low position might in the Marketers favor.
PROBLEM: If business revenue and profit margins are at the very bottom rung in on that position, you are likely losing.
MAXIMUM PROFIT MINDSET: When a business frees up a Marketer to apply AdWords strategies aimed for the maximum profit, it may mean bidding for a position in the middle. If your business is breaking even or making profit, then invest more dollars and watch your data like a hawk.
BENEFIT: More dollars in the bank.
The Profit-Driven Marketer Bids for Profit Vs Efficiency
When businesses seek to hire an AdWords campaign Marketer, they may ask what the individual’s approach to bidding strategy is. It is important to align on expectations and goals. If the end business goal is to maximize profits, the bidding strategy will only be hampered or skewed if entwined to cost per acquisition (CPA). A profit-driven marketer understands that if the campaign focus must be on a rigid CPA goal, it is quite likely to limit the level of profit that can be achieved. This mindset measures the efficiency of individual transactions or units versus the profit from the total volume of transactions.
Anyone might quickly opt for a lower $70 CPA or a $100 CPA at first blush. The profit-driven marketer will prefer to gather sufficient enough information to make a profit-driven choice. If the more expensive CPA is positioned in a manner on a search results page that increases sales volume over the lower-priced CPA unit, then, the right step is to spend more to make more profit.
We track actual revenue values from your shopping cart to determine profits and then use this formula: Return on Ad Spend = total conversion value (revenue)/total ad cost.
It is also important to keep in mind that as your return on ad spend increases, and bidding is less, this means that your ad position will fall. This in turn typically means a lower number of clicks and conversion opportunities. That is why it is so pivotal to establish the best balance between profit and bidding.
Pull Off-line Conversions into AdWords
At times, a prospective buyer clicks on your ad, goes to your website, and is impressed but doesn’t buy from you right away. At the same time, due to your paid search advertising, you have made a key introduction that you wouldn’t otherwise have. This same person may be in route to becoming a customer and has started the journey that will ultimately lead to a sale offline. They may save your phone number and call after talking it over with someone, or drive to purchase it at your store front location after giving it more thought.
To truly measure how your AdWords campaign is producing profits, you can import offline conversions to better measure successes after clicks on your ad.
Gems in Historical Data of your Niche AdWords Campaign Reveal Profit Potential
Refine your AdWords campaigns until they move from break-even to profitable.
Target CPA is an automated bid strategy that Google offers to help marketers obtain as many conversions as achievable at the target cost-per-acquisition (CPA) set in the campaign. Target CPA can be selected at the standard strategy level or as a portfolio strategy. Before adjusting bids in your target CPA, analysis the historical data of your niche campaign after generating reports of various dimensions like: geolocations, devices, day of the week, time of the day, etc. Here you will gain insights about the type of group that comprises your core of site visitors as well as who doesn’t convert as well as wanted. Then try biding down towards them, while at the same time bidding up to your “newer” pool of individuals with determined criteria.
Test, re-analyze and make fresh campaign adjustments. To learn how much profit your investment in running AdWords campaigns can deliver, going over both AdWords and Analytics reports reveals the profits possible. Gems that produce higher returns of profit may otherwise be hidden. Understanding the full customer journey and setting up proper attribution is critical.
Consider this example: If your business obtains 1 sale for every 10 leads, and the average of each sale brings in 100$ profit, and your cost involved is 5$ per lead, then for an investment of 50$, you can make100$! Now your campaign saturation can be amended to reach the number of sales you would like to complete from your Google paid search marketing efforts.
How Brand AdWords Campaigns Drive Profits
Some business focus all their AdWords account optimization around campaign structure, compelling ad copy, and keyword targeting; however, the one thing that is hard to observe is leaving money on the table when not bidding on their own brand.
Some key benefits of running a brand campaign include:
1. The ability to control the messaging that searchers view versus how an SEO listing will be rendered in earned search.
2. Building our with ad extensions will point prospective clients to other relevant web pages, highlight product features, reviews, or make it even easier for searchers to call your business.
3. Business can win best on their own brand terms before a competitor does. We have seen well-executed brand campaigns can that earn near 70% of a multi-million dollar business’s revenue from their brand campaigns. By not bidding on your brand terms, you may be leaving a lot of profits untouched.
Our philosophy on paid ad spend is to not major on cost as much as gaining additional profit. It is easy to understand why the “cost-focused mindset” is natural as businesses want to know they can pay for it and the money will come back. Your online spend differs profoundly from the advertising sphere of the previous 5-10 years, which many professionals are most familiar with. Adopting fresh habits and mindsets doesn’t come easy for many individuals. Some AdWords Managers and agencies may take advantage of this and earn an income doing a lesser job for AdWords clients than we like to see. This is why Hill Web Marketing believes that an informed client and transparent communications lead to both trust and your ultimate success. We want to build long-term relationships with clients who understand the power of what we do.
Simply put – we want to be a chief advocate for your business. Our success is when you see higher profit margins. Our focus is to best understand and establish your AdWords account by tracking profitability of paid marketing investments and manage paid campaign activities to see you have more profit.
Our intent is that in the long-run our services pay for themselves and leave you with more money. Our AdWords management fees should be covered by profit from the advertising we manage, with you receiving a return on that investment on top of what you spend. While we, nor anyone, can ever guarantee that, we work hard to achieve it.
4 Step Profit-Driven Bidding Strategy
They are listed below exactly as found on Google under the heading of Adjusting Bids to Maximize Profits: Google Best Practices
1. Define a formula that calculates total profits from AdWords.
Why: You need the formula to measure and optimize for profit in AdWords.
2. Run a broad-scale manual bid test.
Why: Get an edge in the auction by finding profitable bid opportunities faster than others can.
3. Evaluate results and measure your profit.
Why: Identify areas for improvement as you analyze results.
4. Use automation to adjust your bids.
Why: Free up your time so that you can focus on other strategic priorities.
Gaining Higher Profits Requires a Relentless Devotion to Managing Your AdWords Account
Paid search requires an often relentless devotion to watching campaign metrics to see what opportunities exist to trim CPAs and increase ROIs. Given what all that takes, a day can quickly pass with microscopic dives into minute details meaning, the clock runs out of day and it is too often that the most important factor of all – your total profits – was grayed in the shuffle.
The final result must be, higher profits for a successful business to have funds for future growth. So how do you make sure your AdWords campaigns achieve what really matters to your business? Increasingly, paid search advertisers are using a profit-based bid scheme to achieve the results clients want. To do so, it is best to optimize for total campaign profits instead of solely crunching CPA numbers or target ROIs. Only here can the coveted spot between volume and efficiency be attained. Then go a step further and better integrate your earned and paid search efforts to integrate your maketing effeciently with Google Maps.
“The problem is that many advertisers rely on commonly used, widespread optimisation strategies, working with variables such as the return on investment (ROI) or the cost-turnover ratio. But to get the optimal results one has to “ignore traditional efficiency metrics” and focus on the essential KPI – the profit!” – Crealytics
“There’s a new trend driving successful digital advertising campaigns: profit-driven marketing. It flips digital tradition on its head by approaching marketing as a profit center instead of as a cost center. A profit-driven approach means spinning familiar problems in new ways.” – Think with Google
“You should spend as much with AdWords as you can to generate profitable sales for your business. You will find that your profitability scales fairly well with AdWords. As you spend more, you can generate more business. Our budgets may be the first thing we think about when it comes to advertising, but it is something we should establish last.” – Jeff Sauer, owner of PPC Mastery Course
“Advertisers can significantly grow their customers by optimizing for total profits instead of focusing on a target CPA or ROI.” – kathleen Garrity, Google Advertiser Community
Conclusion on the Profit-Driven AdWords Account
Every AdWords Marketer should be looking to see how online orders relate to existing customer profiles to determine what types of purchase orders that individual digital marketing channel provide. A profit-driven model for paid search campaigns involves segmenting prospective buyers versus current customer share by keyword attributes, various devices; right down to ad position. Once sufficient data is obtained, it is easier to more accurately access valuable direction in terms of creating better key performance indicators (KPIs) and optimizing each part of a paid search account. Business can meet goals regarding customer retention, lead generation, acquisition, and ROI when profits are focused on over spend.
For other marketers, read Google’s Best Practices Guide for AdWords Profit-Driven Tactics which details ways to set-up manual bid tests for opportunities to maximize profits from AdWords.
Statistical Proof that Investing in AdWords can be Profitable
On May 21, 2017, an article titled 15 Stats That Prove Google Adwords Is A Great Investment For Your Business takes a factual approach to why AdWords marketing is profitable. Mainstreet ROI provies the following PPC statistics:
* Google display campaigns reach 80% of global internet users.
* Consumers exposed to display ads are, on average, 155% more likely to search for brand- and segment-specific terms.
* 89% of the traffic generated by search ads is not replaced by organic clicks when ads are paused.
* Businesses make an average of $2 in revenue for every $1 they spend on AdWords.
Annually Google’s revenue stream from AdWords is nearly 97 percent of its total advertising revenue. In this light, one quickly assesses just how core Google AdWords to Google’s business strategy. Since the company relies so greatly on Google AdWords, it is safe to assume that its focus and priority remains dedicated to continuous improvements to its AdWords platform.
How Hill Web Marketing can help you gain profits from Paid Search
* Personalized Google AdWords Approach: we recognize that your business is unique.
* Experienced AdWords Management: staying current with industry trends.
* Ensuring You Have the Best Experience: no tangles long-term contracts, full partnership transparency and you own your account. No unpleasant surprises!
* Profit-Driven: avoid the more-clicks-is-better mentality
An increasing number of AdWords advertisers are optimizing their bid performance for total profits to account for deviations in volume at different CPA or ROI targets. When paid search results increase in profitability, then we test higher bids to see if further improvement scan be gained. Segments of an account that fell short of increased profits may respond better to partial lower bids.
The fun is monitoring at an account level to achieve more granular adjustments. A hands-on approach is often needed to see the top results you want. Businesses that are overtaxed time wise may be tempted to simply “set it and forget it” or “hope for the best”, often miss gaining progress. The AdWords platform offers a ton of flexibility that can be used to your advantage. Skill and time are necessary to see significant profit gains.
Get to know your account’s strengths and weaknesses with a live assessment. We dig deep and find out what you can do better as well as what our proposal for helping you getting the most profit out of Your PPC Advertising