Establishing Your AdWords Foundation: Goals & KPIs (Part 1/5)
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New to AdWords? You’ve come to the right place. Over the next five articles we will be covering the key steps of setting up and managing your AdWords account, from account structure to testing and everything in between. I’m going to start by covering one of the most important steps, setting goals & KPIs.
So, you’ve stumbled upon this post because you’re trying to work out the best way to use Google AdWords. I know what you’re thinking and the answer is no. AdWords is NOT easy and reading this article is not going to turn you into an AdWords extraordinaire overnight. However, hopefully it will give you the tools you need to form a solid AdWords foundation.
I know you’re ready and eager to play with your shiny new toy, but before you go bull-out-of-the-gate and begin doing so, you need to define the reason why you’ve chosen to invest in this toy in the first place.
Ask yourself these questions:
What is my objective? And what does success look like?
Is it to increase brand awareness?
Is it to boost my revenue?
Say your objective is to increase brand awareness. A primary KPI for you may be Site Visits. Therefore, you might set a goal to increase traffic to your site for lesser media spend.
Taking from this, you will need a process that will allow you to increase clicks & click-through-rate whilst decreasing your cost-per-click & your cost-per-acquisition.
There are many different metrics within AdWords that you can use as KPIs. The top 4 metrics that I recommend tracking are:
1. Quality Score (QS)
2. Click-through-rate (CTR)
3. Cost-per-click (CPC)
4. Cost-per-acquisition (CPA)
QS = Quality Score
Quality score is Google’s rating of the quality and relevance of both your keywords and ads. By aiming for high quality scores, you will not only bring your cost-per-click & cost-per-acquisition down, you will also be setting your account up for a much higher return on investment. The average QS is five. If you reach a QS of ten, your CPC will decrease by 50%.
CPC = Cost-per-click
CPC is how much you are paying for each click. CPC will determine how much you are spending on your AdWords. It will also determine your return on investment. The average cost-per-click across all industries is $2.32*. It Is important to watch your CPC to ensure you aren’t bidding too high and wasting too much money on keywords that don’t convert.
CTR = Click-through-rate
Click-through-rate is the amount of people that have clicked on your ad divided by the amount of people that have seen your ad. It is important to keep an eye on your CTR performance because your CTR effects your quality score. The average click-through-rate across all industries is 1.91% (SOURCE: Wordstream). Higher Click-through-rates lead to higher quality scores and higher quality scores lead to a better ad position in the search results & lower costs.
What is a high CTR? It all depends on the industry you are advertising in. The average click-through-rate across all industries is 1.91% (SOURCE: Wordstream), so as long as your CTR is equal to or above, then it’s a good CTR.
CPA = Cost-per-acquisition
Cost-per-acquisition is how much you are paying for a sale. This is the most important metric that you most definitely must be focusing on. CPA is important to track because, for example, if you are selling a product for $50, and your CPA is $65, you’re $15 out of pocket. You want to make sure you optimize to decrease your CPA to allow for you to receive a return on your investment. The average cost-per-acquisition across all industries is $59.18*.
KPIs are a really important factor when managing an AdWords account, because, if you don’t have KPIs, then what are you supposed to optimize against? If you can’t measure something, how are you suppose to manage it?
Check our next AdWords account structure post, where we’ll cover off the best way to structure your AdWords account in order of achieving the best quality scores possible.