Tryin’ to make a dollar outta fifteen cent!

- April 4, 2008

After I revealed through a reference in my last blog post that I like Star Trek, I thought I would use today’s post to earn back whatever “cool” or “hip” points that I possibly can. Because trust me, I need all the cool points that I can get.

I don’t listen to rap or hip-hop. It’s not that I have anything against it – it just isn’t my thing. I’m more of a hard rock and even classic rock guy. But over the years, I’ve heard one particular phrase (or a part of the phrase) used in several different rap or hip-hop songs:

“…I’m tryin’ to make a dollar outta fifteen cent…”

I must have heard it again somewhere in some song, because I can’t get it out of my brain recently. Of course, what’s the first thing I think of when I hear it?

“…wow, that’s over a 600% ROI!”

I know, I need some help, and lot’s of it. But before I turn on MTV and catch up to the last 15 years, I’d like to help you be able to see if YOU are making that dollar from those fifteen cents, and getting a pretty good return on your cost-per-click marketing investments. This isn’t something that is a metric or a statistic in Google Analytics, or any Web Analytics platform by default – this is what’s called a Key Performance Indicator, or a KPI. A KPI is usually a ratio or a percentage that, like the term says, is a KEY for you and your business. You can use this KPI to keep track of the true performance of your cost-per-click initiatives – not just an Ad’s click-through rate, but whether or not that campaign, ad, or keyword actually sold something for you – and made you some money.

Let’s use Google Analytics and take a look at a few reports where we can get this KPI, which I’m currently calling “PPC Dollars Spent to PPC Revenue Earned”.

1. Traffic Sources >> All Traffic Sources (Ecommerce Tab)

All Traffic Sources (Ecommerce Tab)

Here, it’s pretty simple: does the revenue amount that you’re seeing for each CPC traffic source meet or exceed your expectations, in comparison to the amount of money you spent with each CPC traffic source for that same time period? If the answer is “Yes”, then the combination of your keywords, ads, targeting, landing page, and so on are doing their job – bringing you revenue! If the answer is “No”, you have two general options: consider not advertising with that particular CPC traffic source, or find a way to refine and optimize it to improve your return on investment.

2. Traffic Sources >> AdWords >> AdWords Campaigns (Clicks Tab)

If your Google AdWords and Google Analytics accounts are properly synched, you will be able to see your AdWords data right within the “Clicks” tab within that report. There, you can see your AdWords Costs, and all you have to do is click on the “Ecommerce” tab to see the revenue generated by your AdWords efforts. You can also use the ROI and Margin metrics within the Clicks tab to give you even more validation if your AdWords Campaigns are working (I can safely say that if you’re making a lot of money, your AdWords Campaigns are “working”).

3. Goals >> Goal Value (And several other reports)

Your Potential Goal Value! :)

This report is perfect for those of you who are not “Ecommerce” oriented, and don’t sell anything through your website, and have inquiry or lead generation forms as a means of a Conversion Point instead. All you need to do is assign a Goal Value, and you should be able to get a pretty close idea if your CPC efforts are doing what they are supposed to be doing. You should also read my blog post about Goal Values, and how to calculate them.

So, what’s a good “Dollars Spent to Dollars Earned” Ratio?
Of course, this depends on several factors, including what you’re selling, what your expectations are, etc. You can (and should) set your own benchmark – find out what your “Dollars Spent to Dollars Earned” Ratio is, and go back a few months to see how it has fluctuated over time, and track its progress into next month.

But I know what you’re asking – you’d like for me to give you a hard number, like “400%” or “1:5”. This would actually break cardinal rule #1 of being a good Web Analyst if I were to simply throw out an arbitrary percentage or ratio for you to use. However, in the spirit of this blog post, I am going to give you a number. (Sorry Web Analytics community!). The number is 1:6.6667. In lay terms, that roughly equates to making one dollar for every fifteen cents that you spend. Hey, dozens of successful hip-hop stars and multi-billion dollar rap moguls can’t be wrong, can they? 🙂

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