Hey there guys. Welcome back to this module. Now, in this module, what I want to do is walk you through some of the basic principles of digital marketing and setting goals and objectives for your campaigns. PPC is no different to any other marketing method. Be that even newspaper and print, be that SEO, be that blogging and content marketing.
At the end of the day, the reason you do marketing is for a measurable success in your business. In this module, I’m going to show you how to set measurable and specific campaign objectives based partly on your business’s data. Again, I can’t stress enough how important this is, because if you don’t know where you’re going, how are you going to be able to measure success? You need to understand what it is we’re trying to do with paid search.
Of course, you now know the basic principles of paid search, how it works and what to do. However, you first need to set objectives. What I’m going do right now, is jump onto my objective setting checklist and walk you guys through what I do to set a campaign up and understanding how to measure the success of a campaign. Sure, it sounds good if clicks are rolling in and conversions are rolling in.
Sometimes you have to make tweaks and optimizations to your campaigns in order for them to perform these. I’m going to talk you through all of that coming up right now. In this session, what I want to cover is understanding how you set PPC campaign objectives. As it says in the subtitle, how to know what the hell you actually want to achieve, because PPC like any other kind of marketing, you need to know where you’re going and where you are, to understand the success of your campaigns.
PPC is no different from any other form of marketing in that regard. The first thing you need to understand is your business metrics. What I mean by metrics are the numbers within your business. The number of sales et cetera, the number of leads you generate currently. Really understanding how your business performs before starting PPC in order to measure how successful your campaigns are.
These are the three key questions you need to ask yourself when you’re doing PPC before you start. They are, first of all, how many leads you currently generate. In obviously, PPC terms we call a lead a conversion and we look at conversion rates. In your business right now, when you’re generating leads, when somebody gets in contact with your business, how many are you generating now before you actually start PPC?
If you’ve started PPC already, that’s okay. You can get an understanding of the benchmark of how you’ve done PPC now. Then obviously, once you’ve completed my course, you can measure the difference in what you’ve achieved from learning from my course. The second question is, what is your conversion rate from lead to sale? What this means is, when somebody contacts your business, what’s the conversion rate of when somebody actually gets in touch to actually becoming a paid customer?
How many times do you have to speak to a lead in terms of the volume of leads that come through to your business before they become a customer? Is it 1 in 10? Is it 1 in 5? It’s understanding that number. Finally, what is the average value of a sale? Look at all the sales you make in your business and understand what’s the average per customer? You might have a product where the average sale value might be £5 because it’s a small e-commerce store.
You might have a bespoke, b2b service where you can offer anything from £1,000 to £10,000. Understanding the average value of customers is really going to help you make decisions within your PPC campaigns and understand where the benchmark of profitability is. Let’s jump into these three questions separately. Why do we ask these questions? Let’s start off with why we ask how many conversions you currently generate?
First of all, it sets a benchmark of your current business performance which is as I say again, is really important in helping you understand what PPC will do for you when the campaign is up and running. It also allows you to see the impact of PPC on your business. It might not necessarily just be benchmarking the gap in the current performance, it will also allow you to see actually, I’ve generated a lot more sales than it normally would have done. They’ve all come as a result of the paid search.
It also allows you to forecast budgets leads and sales. If you understand how many leads you’re generating now and how many sales you’re making, if your PPC campaigns early performance gives you an understanding as to how many leads you generate from the PPC campaign, you can start to forecast and say, “If I spent this much more budget, I can potentially get this many more leads.” It really helps forecasting for your business based on your advertising budget.
Next question was, what is your conversion rate from lead to sale? Again, it’s all about forecasting. Marketing and PPC are all about forecasting and understanding where you want to take your business. This question lets you forecast how many PPC leads you can turn into actual sales. If you know for example, that your conversion rate is, if 10 customers contacted me generally speaking, I’d manage to turn two of them into paying customers.
If that’s the ratio you are looking at, then it gives you a good understanding as to your conversion rates. It’ll tell you how many leads from a PPC point of view you will need to be able to make your campaigns profitable. If your PPC campaign generated 10 leads and you know you’re going to sell two of them, then you know what your maximum cost per lead would need to be.
The next thing is looking at the average value of sale. Now this again, allows you to forecast profitability. Because it puts into a situation where you can actually build out a model where you could say, “Based on the number of leads that have come in and the number of sales I generally make, the average value of sale is a specific amount.” Therefore, you can start working backward and saying, “If I generated 50 leads and I convert at 50% and the average sale value is £20, then you can start working backward from there.” Saying, “If I spent this much more money, then I know I’m going to get these many more sales based on the model I’ve created, based on my average value of sale.”
Again, just to reiterate this point, it sets a maximum cost per lead benchmark for your PPC campaigns. Because you want them to be profitable. You want them to make sure that they generate revenue for your business and not taking away. You don’t want to pay too much for your leads if you know your conversion rate of lead to sale isn’t great or your average sale value doesn’t match up when it comes to generating leads.
Let’s look at a real-time live example of why these metrics matters. Let’s take a look at a business use case. Example Scenario. I’m a plumber fixing boilers or water heaters as they say in America. I currently generate about three leads per day from my current marketing channels. I don’t do PPC yet, but I generate three leads a day from marketing. From those leads, I usually get one new customer from those three that come in per day.
My conversion rate means is one in three. From the three leads that come in, I generate one sale. That’s my conversion rate from lead to sale. My average sale value is £400. Looking at the example of information on this screen, you can start to build a picture of how we could potentially model PPC campaigns. If my average sale value is £400 and my conversion rate is one in three, that means I should never ever pay more than £133 per conversion, because my £400 average sale value divided by my conversion rate of three in one means that my maximum, absolute maximum break-even point for my campaigns is £133.
Now, of course, you don’t want to run a campaign targeting a break-even point. You obviously want to be really profitable and get 100%, 200%, 300% ROI from pay-per-click. This number gives you an indication as the maximum that you can actually pay for your leads. Again, this is the break-even point. If you’re paying more for your leads than £133 based on that example scenario, your campaign is unfortunately unsuccessful.
Again, the campaign will not be profitable if you do that unless you improve your conversion rate. Say, for example, I have a one-in-three conversion rate, then I do pay over £133 per lead, if I started looking at my business operation and looked at my sales team or whatever it might be, I could improve that function so that I convert two in three customers who come in. Then all of a sudden, that £133 cost per conversion max cap isn’t that bad. Because I convert two in three. Therefore, it becomes a lot better for my business.
Again, just to summarize, I can’t summarize this enough in and push this point enough. You have to ask yourself these three questions. I’m going to mention them again because they’re so important. Make sure you do look at these questions before you start PPC. I know it’s quite exciting to say, “I want to jump onto AdWords straightaway and start working on campaigns.” You need to know where you’re going.
How many leads or conversions do you currently generate? What is your conversion rate of lead to sale? What is the average value of sale. Think about this for your business, write it down, get the numbers you need. Because I know how difficult it can be to surface data from your business if you haven’t looked at your business from a data point of view. Definitely look at this and really understand these numbers because they’re going to really set your campaign objectives in the future when you do PPC.