How to Manage PPC Campaigns by Conversion Value Metrics

We manage our clients' PPC campaigns to very strict ROAS (return on ad spend) targets.  As long as we successfully hit our targets, we are not hindered by monthly budgets.  While this is somewhat liberating, it requires us to have a clear understanding of our client's products, sales funnel and the role of each PPC campaign in driving or assisting online conversions and revenue.

Needless to say, we delve deeply into Google Analytics reports for ecommerce data for important insights into actual product sales by Campaign.  For one client, online sales range from low cost samples ($12 each) to high cost project orders ($2000 or more).  This disparity in "value per sale" presents significant challenges in managing bids to our cost per conversion target.

While our "top of the funnel" campaigns frequently have CPAs higher than our target, they play a crucial role in "discovering" the customers who make the sample purchases and then return weeks or months later on Brand or long-tail campaigns to place their order for the desired product.  These campaigns naturally have lower than average CPA.

If we were to manage bids strictly by CPA measures, we could inadvertently shut off the top of the funnel which will soon be felt in fewer conversions on Brand and long-tail campaigns.  So, what is the best way to establish bid rules for complex buying cycles?

We rely heavily on the AdWords "Conversion Value/Click" metric.  This metric divides the total value of your conversions by the total number of clicks.  In order to gain value from this metric your AdWords conversion tracking code must be modified to pass back Total Conversion Value.  You can find more information on how to modify the tracking code to capture ecommerce revenue here.

Here is an example of a "discovery" campaign targeting buyers looking for a product for a specific home remodeling project.  They don't yet know what type of product they will purchase, but are looking for "ideas".  These shoppers are most likely going to order samples, then return on Brand or another campaign within the account.  However, they may return via this same campaign on a refined query relating to their project and the type of material they've decided to use.

Note that this particular Campaign's actual CPA of $112 is much higher than our account level target of $75.  If we were to simply set bid rules based on CPA, we would disrupt the buying cycle for this Campaign (which also interacts with other campaigns in the account to drive conversions, like Product Listing Ads and Brand campaign).  

 Conversion Value per Click vs. Cost Per Conversion (click to enlarge)

Note how the adgroup highlighted in yellow has a CPA much higher than our target, but the associated revenue reveals that it has the highest Conversion Value per Click over this time period.  This adgroup has more refined, i.e., "long-tail" keywords designed to capture customers ready to convert.  The other adgroups find customers early in the sales cycle who are interested in just samples (notice the lower Value / Conv. 1 per click). 

Each campaign will have a different "story" to tell in terms of the relationship between CPA and Conversion Value per Click, so a deep understanding of the client's customers and products is absolutely essential to define a target for each campaign.

Once we understand this relationship for each campaign, we set automated rules for keywords in each campaign or even each adgroup, understanding it's role in the buying cycle and relationship to the entire account level CPA.  

AdWords Automated Bid Rule on Conversion Value per Click (click to enlarge)

With automated bid rules, it's important to set an appropriate look back period based on the product's sales cycle.  In the example above, we would also have a counter rule to raise bids if the Conv Value/Click exceeded a particular target.

Have questions about this post?  Contact us and we'll be happy to help!