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Seeing through the figures

When I do my introductory seminar on effective Google AdWords advertising, I do my best to convince people that although managing an AdWords account is intricate and takes a lot of time, it’s not conceptually difficult. I show how it’s important to measure conversions (the number of responders to the adverts who take actions), rather than just the number of responses. “Cost per conversion” becomes an extremely important measurement, and is what usually makes Google AdWords so much better value than other forms of advertising.

But is the better advert the one with the lowest cost per conversion? You might think so, but it may not be the case. It’s all about profitability. Supposing you run one advert which gets you 10 conversions (let’s say brochure requests) and costs you £250. That’s £25 per conversion, obviously. Now you take out a much more expensive advert, which costs £2,000, and it gets 20 enquiries. That’s a massive £100 per conversion; not nearly as good, right?

Well, it depends on how much you value the conversion at. If you find that you typically eventually sell products to 10% of enquirers, at an average profitability of £5,000, then the lower-cost advert will have found you one customer, and the return is £5,000 less £250, which is £4,750. The expensive advert’s return is £10,000 less £2,000, which is £8,000. The moral of the story is not to lose your marketing instincts when confronted with pages of daunting statistics.

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