How Good is Your Paid Advertising, Really?

How does your paid advertising stack up, compared to your competitors? Where does it fall compared to other businesses where your customers spend money?

Whether you’re doing PPC for the first time or your company has been running campaigns for years, it can be daunting to know whether or not you’re doing a good job. In fact, benchmarking against other companies can be more complicated than measuring the results of your own efforts.

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Here’s a simple 3-step process for creating your a benchmarking report:

1. Understand the metrics that matter most

Earlier this year, Wordstream dug into their clients PPC data and compiled Google AdWords benchmarks across 20 different industries.

They evaluated their accounts based on the following metrics:

  • Average Click-Through Rate (CTR) in AdWords by industry, for Search and Display

  • Average Cost per Click (CPC) in AdWords by industry, for Search and Display

  • Average Conversion Rate (CVR) in AdWords by industry, for Search and Display

  • Average Cost per Action (CPA) in AdWords by industry, for Search and Display

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These metrics vary depending on industry. A useful metric for one industry isn’t necessarily helpful for another. What’s important is that you don’t need to compare every possible metric. With the four metrics above, you’ll have a good sense of what is working and what isn't and how you can improve.

2. Collect data

Now that you have target metrics for your industry, the next step is the execute your campaigns. Once you’ve hit “enable”, your campaigns will start running and the data will begin to populate in your account.

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Instead of focusing on a short window of time, we like to focus on at least 30 days. You don’t want to get buried in too much data, but you do need enough data for your evaluation to be statistically relevant.

3. Analyze the results

At this stage, you’ll map your internal scores for the same metrics against your collected data. Where are you doing well? Where are you falling behind? What smart ideas can you quickly implement? How can you improve?

Let’s look at two different Tuff client accounts and walk through different ways you can analyze and understand your results.

eCommerce

Tuff has been partnering with a high-end jeweler in the US for over 2 years. Working closely with their marketing team, we manage their paid YouTube, Instagram, Facebook, Bing and Adwords account, spending around $150,000 per month in media allocations. In the chart below, we’ve compared their Q1 Search Performance with the industry average. Here’s how our team tackled the assessment:

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Ah, so much red (my first reaction)!! Let’s review...

CTR: We’re only slightly above the average on CTR which made this feel like a key opportunity to improve. Using this info, we sorted our ads from top performing to lowest performing. We kept our top 50% and generated a new set of ads to replace to lower CTR ads. We also layered on two new ad formats: Call Only Ads and Responsive Search Ads.

CPC: Our cost per click is higher than average so we can tackle this in a few ways. We started by asking two fundamental questions: Can we identify keywords that have a high number of impressions and clicks, but zero conversions, orders, or sales? If so, let’s kill them. And can we use more restrictive match types (modified broad and exact) to filter out unqualified traffic? If so, let’s tighten up our match types so we can eliminate waste.

CVR: For now, no action items within the account. We’ll continue to monitor and tackle this next benchmark report.

CTA: This is one of our favorite metrics. How much did it cost you to acquire a lead, sale, conversion? This account has 56 search campaigns with a different CPA for each. We know exactly how many leads we need to convert a sale and what are ROI targets are at each campaign. Compared to the industry we’re $18.57 above average. However, we know that our products, at a higher price point than traditional eCommerce, still have a positive return. Since the campaigns are still very profitable at a $63.84 CPA, this metric isn’t super concerning. That said, one way to get this down would be to consider offering a promotion or deal with our retargeting efforts on display. This won’t lower the Search CPA, but it should help increase post-view conversions from Search.  

B2B

Here’s another example from one of our B2B clients. This company is relatively new to the market but growing fast in the small business bookkeeping and accounting space. We manage both Facebook and Adwords efforts for this client and allocate 20k per month across both channels. In the chart below, we’ve compared their Q1 Search Performance with the industry average. Here’s how our team tackled the assessment:

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CTR: Nice! We’re up significantly here. This could mean that our positioning is relevant and unique to our competition in the space. While we didn’t make any adjustments to the ads in this account, we did pull the top performing ads for the entire marketing team so that we could leverage that positioning in other channels such as email, Facebook, Instagram, and landing pages.

CPC: We’re spending 3x more than the industry average on clicks, so it was important to dig in here. The first thing we did was look at our keyword position and the required minimum bid to stay on the first page of results. The keywords in this industry are expensive and in order to stay in the top 3 positions, not the first but an average of 2, we had to bid pretty high. The account quality score is high, so we know that spend is one of the best ways to keep us on page 1. One of the tools we use to see keyword bid trends is Google’s Keyword Planner. We use this before we launch campaigns and during optimization so we know an estimate on what things will cost.

CVR: Wow! Big high five to our client on creating high-converting landing pages. While there were no direct actions to take on this one, we did analyze which campaigns had the highest and lowest conversion rates. For any campaigns that we’re budget capped and converting at a high-rate, we increased budget.

CTA: Over by $5 and working to bring this down. Since this is an average and the account has 31 search campaigns, can we identify any campaigns that are 2x over the CPA average? If so, how do we bring them down? This benchmark was helpful in understanding which campaigns we need to focus on the most to see the most significant change in results.

Key takeaways:

  • Use the data to understand your account metrics but not to shut things down immediately if you don’t hit it out of the park on your first swing. As you can see from our eCommerce example, things look pretty red. The benchmark report gives you a chance to identify focus areas and improve.

  • Understand where you fall on the industry spectrum. These benchmarks are averages, and it’s important to know where you fall on the spectrum. In our eCommerce example, the average product price is $10,000. This account sees very different results than a lower price product account.

  • Benchmarks give you a place to focus but aren’t the only indicator of success or failure. We always go back to one key metric: ROI. When you understand which campaigns and channels are actually generating revenue, you’ll know where you’re making or losing money and how to move forward.

Over to you! 

We’re excited to share our strategies, open up conversations on PPC and learn all together. What benchmarking strategies do you lean on when looking to evaluate results?

If you’re short on capacity, you can get some of the benefit of benchmarking with significantly less effort by contacting Tuff for a free growth plan. We’ll analyze your paid advertising and present your top growth opportunities in a PDF.

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