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)
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)
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? 🙂
Google Analytics uses the Goal Value of each Conversion Goal to calculate the Return on Investment (ROI) metric, as well as other currency-oriented figures that you see almost every day. Often, the Goal Value – which is optional – is left blank, leaving over 40 different reports in GA without this very important piece of the puzzle.
The most common reason I hear regarding why this is done is “…because I am not an Ecommerce website, so my Goals don’t have a monetary value…”. In my opinion, this is exactly when you need to insert a Goal Value, so that you can attach some kind of Dollar, Euro, or other currency to the actions that you want your website’s visitors to take. For profiles in Google Analytics that have Ecommerce enabled, the Goal Value is automatically populated into the reports (if that Goal is where the Ecommerce code happens to be processed). For any non-Ecommerce goals, you’re going to have to enter the value in yourself.
“…but how do I know what my Goals are worth? How do I calculate my Goal Value?”
There are a few different ways that you can determine your Goal Value. First, there’s the common approach taken by most people with non-Ecommerce goals. For example, let’s say that you have an inquiry form on your website, and the “Thank You” page of that inquiry form is a non-Ecommerce goal. These leads get sent to your sales team, and your sales team can close 10% of those leads. Let’s also say that the average sale amount for each closed lead is $2,000. You can take $200 (10% of $2,000), and use that as your Goal Value (don’t worry, Google Analytics will do all of the math for you in its reports).
Another way that I’ve seen Goal Value being used is by taking the amount given to a customer on a coupon or promotion code. If you have a “Print this $50 off Coupon” page as Goal, you can use $50 as your Goal Value. You would just need to constantly remind yourself of how you came about using $50 as your Goal Value when looking at reports, so that ROI and Margin figures don’t appear to be ridiculously low (or high) for you.
Finally, you can even make up a number! Does $25 sound good to you? How about $82.15? Perhaps $150,000 works for you? If your website or your online business structure / purpose doesn’t allow the flexibility of calculating a monetary value for a Conversion Goal, then you can just make up your own, so that you can get the most comprehensive set of data to look at and analyze.
Knowing how valuable your Goals are can let you know where you stand, and whether or not they are performing well or worth your efforts. Honestly, it doesn’t matter whether your Goal Value was invented out of thin air, or if it was precisely calculated – as long as you have a number in there, you can begin to evaluate your Goals with a greater level of intelligence than you could before.
One of the things that I always find that people have difficulties with when starting off on their Web Analytics journey is when they discover what’s known as “The Hotel Problem”. Wikipedia’s has a good explanation about it, and also notes its origins.
Unique Visitors for each day in a period of time DO NOT add up to the same total as Unique Visitors for that entire period of time.
Let’s say you kept a daily track of all of the Unique Visitors to your website for every day of this week. Here’s what that would look like:
Sunday: 5 Unique Visitors
Monday: 10 Unique Visitors
Tuesday: 5 Unique Visitors
Wednesday: 10 Unique Visitors
Thursday: 5 Unique Visitors
Friday: 10 Unique Visitors
Saturday: 15 Unique Visitors
So, that’s 5+10+5+10+5+10+15 = 60 Unique Visitors (Don’t be afraid to double-check that math, lol :))
But then let’s say that you go back in your Web Analytics program and look at the Unique Visitors for that same week that you kept track of (So, instead of looking at Unique Visitors only by that single day, you’re now looking at Unique Visitors by that whole entire week). Chances are extremely high that you will see something like this:
Unique Visitors: 37
– “Which number is correct?”
– “My Web Analytics system must be broken…”
Most every Web Analytics program tabulates statistics based upon your date-range. Even though you added up 60 Unique Visitors to your website manually, your Web Analytics system won’t, when showing you the Unique Visitors for that entire week combined. The reason? Because during that week, you probably received repeat unique visitors to your website on separate days, and your Web Analytics program won’t show you those “repeat unique visitors” when looking at that week combined.
The best possible explanation available is thinking about it as a Hotel, hence the term “The Hotel Problem”. Let’s say that I’m a guest at your Hotel. I stay on Monday (1 Unique Visitor on Monday), I stay on Wednesday (1 Unique Visitor on Wednesday), and I also stay on Friday (1 Unique Visitor on Friday). If you add them up manually, that’s 3 Unique Visitors total…but there can only be one of me, so looking at that week as a whole, you’d only see 1 Unique Visitor total.
So, which one is “right”? They both are. But you’ll need to know why you’re looking at your Unique Visitors in the first place, and then go from there.
Again, I recommend checking out the Wikipedia Article on it, as it has a nice table that visually explains it the best.