When attempting to lower high conversion cost, it is important that you take all the preceding steps to lower conversion cost before applying match settings. Match setting will likely result in lower traffic and consequently lower sales volume. If you race ahead and apply match settings prematurely, you might forgo the opportunity to lower conversion cost without lowering traffic and sales.

This is disastrous because once you apply the match settings, you won’t be able to receive as much feedback from search query reports that could help you better qualify visitors to start. Also, you will effectively be taking other underlying problems having to do with inefficiencies in the website and just shoving them under the carpet. In other words, if we apply match settings simply to lower conversion cost quickly, you might lower your conversion cost and not be motivated to fix the other lingering inefficiencies in the campaign or on your site.

So when is it a good time to apply match settings? I recommend applying match settings in 2 scenarios:

1) The Conversion Cost is way above your target CPA (cost per acquisition/conversion) AND there are alot of single occurrences of irrelevant variation appearing in the search query reports that is too difficult to control with negative keywords.

2) The budget is extremely limiting compared to available impressions and you want to make sure the clicks you do pay for go toward the exact or phrase match variation of the keyword.

Testing ad variations simultaneously should always be done in the first scenario since the objective is to lower conversion cost. You’ll want to make sure you know which match setting variations are going help you achieve your desired CPA before you rule out any of them.

To run you through a short example, let’s assume the Target CPA is $50 per conversion. Historically, you have been running this particular keyword at $120 per conversion which is totally unprofitable for this product. (You know it is unprofitable because the keyword describes a product that you could never make a profit on by paying $120 to advertise it.) You have tried optimizing your website for a higher conversion rate and also applied necessary keywords but the conversion cost is still too high for the keyword.

It’s time to test out some match settings. You might do this for several keywords with higher conversion costs so be prepared to test multiples.

Keyword Before Match Setting Variations

Keyword = $120 per conversion

Keyword After Match Setting Variations

Keyword (Broad Match) = $170 per conversion (Conversion cost is likely to go up because phrase and exact match settings will trigger most of the very relevant queries and their volume.)

“Keyword” (Phrase Match) = $60 per conversion

[Keyword]  (Exact Match) = $ 48 per conversion

I would advise everyone to let the data population add up before making any official assessment about the new conversion cost stats. The above example portrays the possible outcomes of three different match settings. After enough clicks have accrued and we see numbers like the ones above, I would either pause the broad match version or isolate it into another campaign with a smaller budget. I am always hesitant to simply pause out words because a huge lack in visitors could shock the system resulting in extremely low sales. If you isolate these words, you can lower its spend and try and work on its conversion cost later through other methods.

I would keep the phrase and exact match even though the phrase is still above the target conversion cost. It’s much closer now and you can continue to work on it. You might find you can get it down to the actual target with some more negatives and ad text qualifiers.

With broad match setting out of this campaign, you have effectively freed up some of this keyword’s wasted budget allocation which can now be spent on profitable keyword click costs. The result is more profitable sales and overall net returns.

DISCLAIMER: In my experience, advertisers claim to be focused on conversion cost but tend to be even more sensitive to total sales volume. The above techniques are designed to lower conversion cost but could and probably will result in lower but more profitable sales volumes.

So in our business, the client has passed the dilemma onto us. How are we to manage client expectations with lower conversion costs while increasing the sales revenue?

The trick is to create a separation between strategies that lower conversion cost by lessening exposure levels and strategies that lower conversion cost by weeding out unnecessary ad spend costs.

Ways to lower conversion cost by lowering exposure levels (Lowering Levels of Return):

1. Decrease bid and ranking.

2. Delete or pause keywords, adgroups, and campaigns that do produce some conversions.

3. Add stricter match settings to keywords.

4. Turn on conversion optimizer to lower conversion cost.

5. Turn off search or content networks that convert.

6. Lower producing campaign budgets.

7. Implement position preferences.

The above should be last considered for the purpose of lowering conversion cost.

Ways to lower cost per conversion by weeding out wasted spend and increasing conversion rate:

1. Running Search Query Reports and adding in negative keywords to qualify buyers.

2. Optimizing your adgroups, keywords, ads, and landing pages for higher conversion rates.

3. Optimizing website pages for higher conversion rates.

4. Delete or pause keywords, adgroups, and campaigns that produce no conversions.

5. Turn off networks or network segments that do not convert.

6. Find irrelevant placements in content network. (use site exclusions)

7. Lower CPC by improving quality score.

8. Have competitive pricing.

You might say, “Great! That’s 15 ways to lower conversion cost.” It’s common that advertisers don’t make the above separation between strategies. In fact, we find its more natural to start doing the things that lower conversion cost the fastest. However, it is problematic when you attempt those before trying the techniques that cut wasted spend and increase conversion rate. When that happens, the only result is lower exposure and inevitably lower sales revenue. You’ll need to exhaust the later resources first and then use the other techniques if the conversion cost remains clearly at levels that are unprofitable.

Don’t be pressured into lowering conversion cost the faster, easier way. Take your time to cut the wasteful spend first so it will be easier to infuse growth into you advertising campaigns later. Once you have lowered conversion costs for your unprofitable keywords, it’s time to restore the growth trends back. Below describes that technique in which this is done.

Increasing the Sales Return through Conversion Cost Strategies

Here’s the kicker. This is the part that every advertiser forgets. Only software remembers to do this. It’s the flip side of the coin; the missing link that, if not facilitated, will lead only lead to lower sales volume over time. This is the opposite force that encourages growth. It is actually done mistakenly when you initially start bidding on keywords. Its by mistake because you haven’t looked at conversion cost yet. You mistakenly bid up your keywords only for the purpose of increasing your ranking sales. Now you’ll do it for the same reason but know when to stop.

When analyzing what do do with conversion costs, it is necessary for advertisers to determine a tolerable conversion cost that when achieved, there is considerable profitability.  This is commonly known as Target CPA (cost per acquisition). This is the target marketing cost that when added to COGS (cost of good sold) and subtracted from total revenues, leaves considerable profit. Determining what a reasonable profit margin is will vary between products and services.

Once the target conversion cost or CPA has been established, its important that you increase the bid and ranking as quickly as possible to bring the actual cost per conversion up to the Target CPA level. Here the advertiser recoups lost margins because the return then becomes exponential. More exposure an ad sees at a profitable level, the more profit it can generate. This is why its imperative advertisers choose a happy medium between low profits/high target and high profits/low target.

As soon as advertisers do this, they maximize the profit margins and reverse the trend for lost sales. They stabilize the downward sales trend and reverse the pattern with growth in revenues.