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How to Measure ROI from AdWords if you Are a Local Business

White Shark Media

9 years ago



Marketing genius and pioneer John Wanamaker once declared that half of his advertising budget goes to waste. The problem is, he doesn’t know which half.

Thankfully for businesses, those days are long gone with the advent of more controllable and quantifiable means of targeting your audience through data-driven online advertising platforms.

Google AdWords and Yahoo-Bing ads naturally are the first ones that come to mind in large part due to their market shares in North America.

Business owners, both big and small, nowadays must look to establish a solid mechanism for determining returns for every dollar spent prior to initiating advertising efforts. Whether your goals are lead generation, e-commerce sales, or brand awareness, not having a handle on this metric will prove disastrous and not very different from a crapshoot.

SMBs Can Do This Too Without many hullabaloos

Don’t be discouraged by the specter of additional expenditures for setting up complicated and costly software for tracking your intended conversions. There are many features and tools readily available in both channels mentioned that can do just this for free.

There’s also a plethora of resources in the AdWords or Yahoo-Bing portals or the interfaces themselves that can guide you on how to set this up, test, and troubleshoot. You can also easily ring up their customer support lines and get expert guidance in a jiffy. Both companies understand the value of getting a conversion tracking set up perfectly to match the needs of business owners. This in turn drives more adoption for online advertising and therefore revenue.

If, on the other hand,  you prefer to outsource to an agency so you can focus on your business, they are more than savvy to have these in place. This must, in fact, be non-negotiable in order for you to measure their performance and justify any additional expense going towards them.

First Define Your Macro and Micro Conversions

Though there are many actions that you want your potential customers to take after clicking an ad, only focus on the ones we need them to do. In other words, the ones that are at the end of your buying or transactional funnel. This way, we’re sure that we will only be paying attention to real-world conversions when calculating ROI.

Macro conversions are usually phone calls, contact form submissions, completed purchases, downloaded apps or brochures, and other key events that advertisers would normally equate to money in the bag. These events are normally at the end of your sales or service cycle, or very close to it at least.

Smaller nice-to-have actions like the view of key pages, time on site, very short phone calls, or download of secondary materials can still be tracked but should be treated as micro conversions. Even if these smaller actions still provide good insight on potential customers’ level of interest, these should not be muddled with the rest when calculating how much your actual return on ad spend is. They are simply not the same in value, pound for pound.

How Much is That Conversion in the Window?

For e-commerce sites, this is pretty straight forward as you will see the exact dollar value brought by a click. For other business types, each conversion value differs greatly. Having a very frank and ongoing inspection and evaluation of what it ought to be is critical to getting a more precise return on investment rate.

You need to ask yourself this question as to the absolute insider who would know how much every interaction is worth it. With calls for example, if it takes about 10 calls before you can close a deal and your average ticket price for a service after all expenses considered is $100, a cost per conversion of $10 is simply breaking even. The same concept follows for form submissions and similar.

Figuring Out Your ROI – Let Me Count the Ways

Listed below are some of the ways that advertisers use to keep tabs on what ad spend is bringing back in return. We will elaborate on the most common means to get you started quickly on the lowest hanging fruits.

The ones that don’t make the cut, for more explanations, are either more recent and have far lower advocates for campaign application. This might be due to their inexact nature and debatable degree on how much you can directly attribute them as responsible for your desired actions.

The first three have stood the test of time, and most advertisers and agencies utilize them as their bread and butter for ROI estimations. App download tracking is also quickly gaining ground due to the increasingly mobile world that we live in. Feel free to look into the other means mentioned here for more advanced conversion logging techniques. The last four have been hyperlinked to relevant digital search marketing portals for your reference.

Conversion Tracking

This is as easy as 1-2-3. Some codes must first be installed on specific pages of the backend of your site. When a conversion is completed on your sites, such as a form submission, appointment booking, or quote request, the site visitor is then directed to that final transaction completed or Thank You page. The codes then report that activity back to AdWords or Bing so it can show up as a conversion in the ad dashboard.

Depending on the complexity of your business, you can also make use of varied conversion codes and differently named conversion types. Maybe set up a page for service requests, another for calendar reservations, and so on. This can be further segmented in the ad reports to pinpoint which particular codes were triggered.

Call Tracking

This gives you insights on how your online presence directly translates to real-world actions like phone calls. This is especially important for businesses that rely on well on lit up switchboards for revenues like roofers, plumbers, transport operators, and other service-oriented companies where customers usually call in for immediate needs.

It’s worth noting that before you were only able to get useful and detailed reporting by signing up with a call tracking provider like Call Tracking Metrics, DialogTech or CallRail. Now, SMBS are more empowered to take control of their own advertising as the native call detail reporting in AdWords via the use of Google Forwarding Numbers (GFNs). Google, in fact, just added Canada to the fast-growing list of countries where this is available.

As the likelihood of a closed sale increases with the duration, you can also define how many minimum minutes you want to count as conversions depending on your industry experience. Some very quick short and/or misplaced calls are just not worth any attention.

Ecommerce Tracking

For sites that allow purchases, this is a must. Instead of counting conversions and debating their values, this solution directly pins how much each sale was worth. It really doesn’t get much clearer than that in terms of return on ad spend.

App Downloads Tracking

For entrepreneurs that use or sell apps, you can also monitor adoption and interaction rates to weigh if your ad investment versus actual download or service value makes financial sense.  Having Google Mobile App Analytics is exactly what you need for this purpose.

Watch out for ROI Pitfalls

Be wary of the factors below that may skew how you look at your actual return on investment. These link up to other industry sources that deep-dives into each item:

1) Mind the attribution models

2) Take into account lifetime customer values

3) Do not discount the full value of mobile

4) Consider seasonality, industry trends, and competition

5) Trusting but not verifying

6) Counting too many or too few conversions

7) Not waiting for data to settle, conversion windows

You Can’t Afford to Drop This Ball

With all the resources available to small businesses, staying uninformed on or guesstimating your direct returns from ads is unthinkable and irresponsible. This can only get cheaper and smarter in the fast-paced universe of online marketing. A time will come in which we will be asking ourselves how we ever relied on more traditional means of advertising.

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