When my daughter turned 1 this past January, my wife and I finally opened up a college savings plan. Tuition will probably be close to half a million dollars by the time Violet is old enough to get admitted, so we’re going to need all the help we can get.
I doubt anyone would argue that the college savings plan is a good investment and I shouldn’t consider that money an expense each year. The money (hopefully) will grow so that later I will be able to take out more money than I put in. I doubt it will be anywhere close to the ridiculous college tuition costs that experts are predicting, but at least I’ll give it the “old college try.” :)
This is basic investing 101. Put money in, and then get more money later.
With that in mind, do you consider Google AdWords advertising an expense or an investment? The answer to that question depends on how your campaign is set up and how you’re analyzing the results each month.
Below are 3 important questions to answer to determine whether or not your AdWords campaign is a costly expense or a profitable investment.
1. Are You Focused on Traffic or Sales?
It’s easy to think of AdWords advertising as simply a tactic to drive traffic to your website. Yes, advertising does drive traffic, but that’s NOT the goal! The goal is to generate leads and sales.
So if the goal is to generate leads and sales, then guess what we need to be measuring? That’s right, leads and sales from the AdWords ads. That means installing conversion tracking so you know exactly how many phone calls, webform submissions, and/or e-Commerce sales were generated directly from your ads.
If you’re tracking the sales, then you can calculate your return on investment (ROI).
2. Do You Know Your Numbers?
Obviously, the most important number to measure is ROI. In the previous section, we talked about how important it is to focus on measuring sales and that allows you to calculate your overall ROI from AdWords. However, that number doesn’t really help when it comes to improving your campaign, month after month.
Think of it like an investor managing a portfolio of investments. The overall ROI doesn’t tell her where the profits and losses are coming from in the portfolio. To do that, you need to dig a little deeper.
The same is true within an AdWords campaign. For a Search campaign, you can calculate ROI per Ad Group, and even down to individual keywords. The goal is to eventually know your optimal cost-per-click per-keyword to hit your ROI goals.
3. Are You Learning?
Up to this point we’ve been focused solely on the monetary value of Google AdWords advertising. But money isn’t everything. By advertising, you’ll also gain invaluable insight into your prospects, your competition, and how to improve other areas of your marketing.
For example, as you test different ads, you’ll start to see what types of messages and offers resonate with your market. Then, once you find an offer that is converting in AdWords, you can leverage this information in other areas of your marketing (email, SEO, social media, direct mail, print, etc.). Even if an AdWords campaign was unprofitable, it’s possible to generate a positive ROI if you use the information to improve other campaigns.
Need Help With Google AdWords?
Click here to request a quote. If you’re just getting started with Google AdWords, I’ll send you a quote to get your campaign up and running. And if you’re already advertising in Google, I’ll review your AdWords campaign and then I’ll give you a quote to manage your campaigns.