Whether the purpose of your Google Ads campaign is for sales, leads or other activities, you should measure your return on investment (or ROI) to make sure that the money you are spending on Google Ads is working for your business.
ROI is a comparison of your net profits to the money spent. This is one of the most important measurements for a Google Ad campaign, as it shows the real effects that your ads are having on your business. The exact method for calculating ROI will vary depending on the objectives for your campaign.
Let’s look at an example. If you have a product that costs £10 to make, zombie. As a result of your Google Ads campaign, you sell 6 of these products. Your total cost is £60 and your sales are £120. If your Google Ads cost £20, for a total cost of £80, your ROI is:
£120 – £80 / £80 = 50%
With these figures, you have a 50% return on investment, so you are earning £1.50 for every pound spent.
If the aim of your business is to generate leads, the revenue would be the amount of money that you generally make on each lead. So, for example, if you make 10 sales for every 100 leads, and your typical sale is £200, then each lead generates approximately £20 in revenue. This is known as the cost per action.
Why does ROI matter?
When you calculate your ROI, you will be able to work out how much money you have made by advertising with Google Ads and to make decisions about your future budget.
How do we track ROI?
The first thing we need to do is to measure the conversions. These are actions from your audience that you consider to be valuable, such as email sign ups, web page visits, sales or to generate new leads. Google Ads has a conversion tracking tool that helps you to identify how many clicks have to lead to conversions.
These conversions can help you to evaluate your ROI. You are aiming for the value of each conversion to be greater than the amount of money spent to get the conversion.
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