Google Ads has great solutions to reach out to customers online. Whether to advertise on the search, video or display networks, Google’s advertising platform gives marketers great tools to invest where is the most likely to convert. On the other hand, though appealing, Google Ads is not costless for business, by far. Indeed, depending on the sector, the business risk to pay a significant “toll” before actually getting customers.
Evaluate the cost of acquisition
Which kinds of cost of acquisition?
In today’s article, we’ll only be using a straightforward approach regarding the cost of acquisition of E-commerce and lead generation websites. We’ll develop more advanced solutions in our next blog articles.
E-commerce Websites.
Cost of Acquisition = Average Cost per Clicks / Average Conversion rate
Lead Generation Websites
Cost of Acquisition = (Average Cost per Clicks / Average Lead conversion rate) / Average sale conversion rate
How to find the different variables of these equations?
Average Cost per Click
Knowing your average cost per click after a certain period is easy to identify on Google Ads. The question becomes more difficult if you want to have an accurate forecast before launching your campaigns.
Which tools can help you?
You can choose from a wide range of solutions to help you define the potential average CPC.
Google keyword planner
Google Ads includes, by default, a tool that allows you to mine keywords and their potential costs. Combining the different keywords, their search volumes and their costs per click, you can reach a rough approximation for the average cost per click you might expect. Although this tool is great, it might only reflect Google “numbers” which might not be sufficient for you.
Extra Tools?
Depending on the size of your business, we would advise you to add at least one extra platform (SEMRush, WordStream, Spyfu…) to help you get numbers. Most of these tools grant a freemium option that might give you enough data to confirm or refute Google.
Similarly, we would advise you to use benchmarks on vertical markets. Updated roughly every 6 months, they should give you valuable data to get your forecasts.
Would it be enough?
This approach should be enough if you focus on the search network. Nonetheless, if you use display, remarketing or video campaigns, you might need to use extra layers to create more accurate forecasts. Do not hesitate to get in touch if you have any questions on this specific point.
Average Lead & Sale conversion rates
The benchmarks mentioned earlier give rough approximations for average conversion rates for lead generation and E-commerce websites. If you can’t find your vertical market, we would suggest that you use similar data from your organic results. This won’t be 100% accurate but it should be sufficient to get started on Google Ads.
How to enhance these variables?
Once you get your values, we would advise you to plan ahead and create a thorough strategy to get the best out of each variable.
How to adjust your keywords?
Whether to raise awareness on your brand or target specific niches, some keywords will always be more profitable for you. Identifying them as soon as possible will allow you to often lower your cost of acquisitions. According to us, the three most common mistakes regarding the use of keywords on Google Ads are:
- Keyword match types: Not using appropriate or irrelevant match types.
- Localisation and language: Not identifying and targeting the proper markets.
- Negative Keywords: Not getting rid of irrelevant queries.
How to improve your conversion rates?
Improving Google Ads on its own will often not be enough for your business. Driving traffic on your website might be unsuccessful unless your website is well optimized: Copywriting, Lead Generation, User experience (those are often only the tip of the iceberg).
Evaluate the cost of acquisition – Shared Tool
To sensibilise clients to the challenges waiting for them on Google Ads, we frequently use a tool that we share with you today (Link to document). We’ve pulled some numbers from the Google keyword planner (you can naturally add your own) and created a basic calculator on which you can find out about your expected costs of acquisition.
Although this tool is quite straightforward, it should give you a useful snapshot of what kind of costs per sale you can expect.
What are the next steps?
Although the cost of acquisition can be a valuable KPI, it lacks some credibility if analyzed or used on its own. Indeed, what would mean a cost of acquisition of €1000 if the final sale equals to 10, 20 or 50 times this amount? That’s the reason why we would advise you to always associate the analysis of your cost of acquisition with the following KPIs:
- Cost of acquisition vs Average Sale Value
- Cost of acquisition vs Life-Time Value (LTV)
- Cost of acquisition of Google Ads vs contribution Cross-channel/Multi-channel/Cross-device
- Cost of acquisition across times (Weeks, months, years)
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