How to predict your AdWords ROI

This post has been contributed to 9thCO, and does not necessarily reflect the views or opinions of 9thCO Inc.

PPC (Pay-Per-Click) marketing has become one of the most targeted and measurable marketing strategies of our time because every single key performance indicator (KPI) can be easily measured and quantified.

eople are often turned off from PPC networks such as AdWords because the cost per click may appear to be high at first glance - as high as $500+ in some industries.

However, when you do the math, PPC marketing might not be such a bad idea. In fact, as a SEO consultant, I oftentimes suggest that a potential SEO client implement a Google AdWords or a Hybrid (SEO and AdWords) campaign instead of a straight SEO campaign if they are looking for quick results.

The reason for this is because the money spent over a four to six month period on SEO can be used to drive a positive ROI in as little as one to two months. This ROI can then be reinvested into the SEO campaign.

Through this article, I’ll share with you how to predict a positive ROI through Google AdWords and also show you why AdWords might not be such a bad option for your business after all.

Getting Your Industry Numbers Right

Ideally, there are about five different values you need to help with your prediction.

Search Volume
Search volume is the number of people searching for keywords related to your business. You can get numbers like this from Google’s Keyword Planner. You can start by just entering your domain name, like the example outlined below.

After you click “Get ideas,” you’ll be taken to a page which gives you a variety of suggestions for the keywords you’re targeting.

By adding together the search volumes for all the keywords above, we get a total monthly search volume of about 5,000.

Search Engine Click Through Rate
The search engine click through rate can vary depending on the industry you’re in but in most cases, it varies from about 1.5% to about 2.5%. For the purposes of this example, we’ll estimate the click through rate to be about 2%.

Website Lead Conversion Rate
The website conversion rate is the percentage of website visitors that fill out a form on your site or pick up the phone and call you. This really depends on how appealing your website is and the overall user-experience. we’ll set the conversion rate at 1.5% for this example.

Lead Conversion Rate
The lead conversion rate depends on the skills of your sales team. Unfortunately, this is probably the most overlooked part of a digital marketing campaign.

If you don’t have a pleasant receptionist on the other line to answer the call or your phone is always busy, this can be devastating to your digital marketing strategy.

However, for purposes of this example, we’ll assume your team at least 50% of the inbound leads.

Cost Per Click
Cost per click is the amount you have to pay Google for each click sent to your website. In this example, the average cost per click is about $11.10.

Revenue per conversion.
This really depends on your business. In this example, we’ll say the average lifetime revenue/conversion is $10,000.

Let’s do the math

So now we have five different values.

  • Search volume: 5,000 searches per month.
  • Search engine click through rate: 2%
  • Website visitor-to-lead conversion lead rate: 1.5%
  • Lead-to-sale conversion rate: 50%
  • Average cost per click: $9.61
  • Revenue per conversion: $10,000

Website traffic: 5,000 * 2% = 100 Website Visitors
Website leads: 100* 2% = 2 Leads
Potential sales: 2 * 50% = 1 New Client
Revenue: $10,000
Cost / Client: 100*$11.10 = $1,100.
ROI = ($10,000 - $1,100)/$1,100 = 809% ROI

Bottom Line

Seeing a click through rate of a few dollars to a few hundred dollars can be intimidating, but if you have your numbers right and continuously tweak your campaign, you can achieve a huge positive ROI for your campaign in the first month. So if you’re looking for quick results for your business, perhaps you should consider a Google AdWords campaign.

About the Author

Andre is a passionate Digital Marketing Consultant with Thunder Rank, a small marketing agency based in Toronto. His personal specialties include SEO and PPC Management.

 

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