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.

Directing buyers is one of the easiest things to do when writing ads because you only have so many choices of where to direct them to. When you edit ads, you have your option for destination URL. This is where you will direct your visitors once they click on the ads.

Where you direct them is for the most part, a no-brainer. Most advertisers choose to point them to the landing that has the most relevant information for their buyer. However you might run into a traffic snag here or there if you don’t mind a few things. Just as you review Bounce Rates in the Analytics settings; it is good to contemplate your landing pages if you are seeing higher percentages.

Higher bounce rate percentages doesn’t necessarily mean you have unqualified buyers or have chosen an ineffective landing page. I often find high bounce rates in adgroups where the keywords are very product specific (brands and model types) usually because they point to a very product specific landing pages. This is because all the information they are looking for surrounding that keyword and inquiry is clearly on that product landing page. They get the information they want and they leave without any need to navigate the site any further.

This is inherently dangerous. If they leave your website and they haven’t purchased anything, it might be because they received their information and realized they didn’t want that product after all. So when you see high bounce rates and low sales, you might consider changing the destination URL to something with more options. This could be a product group or category page. This way they see more options and are more likely to buy because of it. You should not always assume because you have an extensive navigation feature that visitors will always use it. Believe it or not, sometimes they don’t even recognize it as an option. You should try putting options in front of them so they are forced to pick one.

This isn’t always the right answer so testing landing pages is always a good idea. In Analytics, go to Traffic Sources> Ad Versions, you will be able to look your ads bounce rates. Remember high bounce rates can be caused by many things; some of which have nothing to do with the ad itself. So look for patterns such as the one I mentioned to decide your best course of action. If it is indeed an outside issue, it will become more apparent when you test your ads’ landing pages this way.

Testing Ad Variations (Part 4/4)

Not only should we test for landing pages, we should test the ads themselves. Writing the most effective ads will always require testing. Some things that you might test for are CTR, bounce rates, conversion rates, conversion cost, and quality score. Advertisers are often very surprised at how much a difference a minor variation in the ad structure can make. When testing ads, you can make larger, more impactful changes or you can make small changes that capitalize on previous ad performance strengths. It really all depends on the feedback you get from historical ad data. If you are getting very poor performance out of an ad, you might consider changing more of the ad’s structure. If you are already getting decent to good performance, you would probably make a minor change to improve it further.

Advertisers always ask me about how to test ads. They want to know how many ads they should run at a time and how long to test before trying new ad variations. My answer will depend on a few variables including overall traffic volume and how much data I have for those ads. The more volume an ad sees, the more impactful a new variation can be on the overall business returns. The less volume an ad sees, the longer it will take to get sufficient data used for making decisions about an ads performance.

If I have a high traffic Adgroup, I will test only 2 variations at a time and continue the test for however long it takes to get reliable information back. I want to get back a large enough population of visits and impressions to justify a change. On a high traffic ad I might wait until I have at least 100 visits.

In lower traffic Adgroups, I might try 3 ad variations so we can get more data about all the ads faster. The reason for only 2 ads is because you can’t get a true assessment of ad performance when you have more than 2.

For instance, if 45% of people prefer or purchase on AD1, 35% on AD2, and 20% on AD3, AD2 could potentially be a better performer than AD1. You would not know that the people who preferred AD3, would have chosen AD2 if AD3 weren’t an option. Less is better. But when it’s going to take a long time to gather performance data, might as well test 3 to get the answers quickly. Plus, there is only a limited effect on the total business performance when the changes are made to an Adgroup that sees little volume. On a slower traffic ad, I might make a decision after 20 accrued clicks because I don’t have weeks to wait for the other 80 clicks.

For Adgroups that see much higher volume, I will test 2 variations but clone out the existing ad 3 or 4 times so to insure the competing ad doesn’t corrupt the account performance by any noticeable standard. So in the Adgroup you will see AD1, AD1, AD1, AD1, and AD2. As you accrue ad performance data, all the AD1s should be relatively even and you can compare the AD2 with all the others. It’s important that you do it this way if there is significant volume. Say you don’t clone the ads and you write an underperforming ad which could be served 50% of the time depending on how you have your serving options set. This underperformer might sabotage the Adgroup especially if it doesn’t qualify the buys well.

I have seen terrible results happen in accounts where the advertiser was doing fine but then added a poor ad in the most important Adgroup. Sales will tank. The phone will stop ringing. And most of the time, the advertiser made several campaign changes so they don’t know what is happening. Protect yourself. Take the insurance and clone existing ads.

Finally, low CTR doesn’t mean you have a bad ad. It could just mean that you have really done a good job of qualifying your visitors. If you turn away a lot of irrelevant traffic because you have a good qualifying ad, then you are saving lots of money but you are also getting lower CTRs. The best way to look at CTR is to simply look at it, be aware of it, and take in all the other performance metrics until you get the entire story. This will lead you to making better informed decisions about your ads. At no time should you make ad decisions solely based on CTR data. It doesn’t always tell the obvious truth.

Speaking about serving options: Optimized Ad Serving vs. Rotating Ad Serving? Rotating will get you a better measurement of performance quicker and Optimized will often give you the same indications by serving certain ads more. So which should we use?

How much time you spend looking at the ads should decide which you use. If you are in the account looking every day, you can rotate them without creating a significant danger to the account. Just don’t wait too long to pull out an underperforming ad. If you are likely to just let ads run without any routine management, then I advise you to put it on the Optimized setting. And if you clone ads, use the Rotating setting to get accurate feedback without creating a risk to the account. The purpose of creating clones is so you don’t have to use Optimized settings.

I hope you enjoyed the series on writing ads. Stay tuned for more valuable lessons in SEM.