Are you getting the most out of your ad account?
Many businesses struggle to get the most out of their ad spend. But don’t worry, there is hope! With a little optimization, you can improve your ad performance and get more conversions from your campaigns.
But first, let’s understand some basic terms related to digital marketing:
⚠️CAUTION⚠️
This blog is not for the faint of heart. 💯
It’s for the experts who are willing to dig deep ⛏️ and learn something new.
So grab a cup of coffee ☕️, sit back, and take your time.⏳
This is not a blog that you can skim through 🏃♀️.
You need to read each and every line, savoring the words 😋 and letting them sink in 💡.
Only then will you truly understand what this blog is about 🧐.
Impressions
The total number of times people have viewed the post or ad.
Impressions = Cost / (CPM x 1,000)
Unit = Number
Keywords
Keywords are used in advertising to target a particular audience.
Spends
The total amount of money spent on ads.
Unit = Currency
CPM
The cost of showing your ad to 1,000 unique people
CPM = (Total Cost of Campaign / Total Impressions) x 1000
Unit = Currency
Clicks
The total number of times people clicked your ad to open it.
CTR
The percentage of the people who clicked the ad or post after seeing it.
CTR = clicks / impressions * 100
Unit = Percentage
CPA
The cost spent by an advertiser for each business, a purchase on a website, or a form submission.
CPA = Total Cost / Number of Acquisitions
Unit = Currency
CPC
Cost per click.
CPC = Total Cost of Ad Campaign / Number of Clicks
Unit = Currency
Conversion rate
The percentage of visitors who take a desired action.
Conversion rate = (Number of conversions / Total number of visitors) * 100%
Unit = Percentage
Conversion
The process of turning a website visitor into a paying customer.
Cost price
The amount of money that is put into a business.
Profit
The amount of money that a business makes after paying its expenses.
Profit = Revenue – Cost
Unit = Currency
ROI
A measure of how well an investment has performed.
ROI = (Return – Cost) / Cost
Unit = Percentage
A company spent ₹15,000 on a keyword ad, and let’s assume that they get a total of 5,000 impressions.
Now we will calculate the CPM of this ad.
CPM = ( spends/impressions ) * 1000
We calculate CPM to measure the reach of an advertising campaign.
CPM can tell how many people saw the ad, which is important for brand awareness campaigns.
The cost per mile (CPM) for this ad was ₹3,000, which means that the company spent 3,000 INR to acquire 1,000 impressions.
Suppose we get 150 Clicks i.e. out of 5k impressions, 150 clicked and opened the ad.
Let’s calculate CTR from this data
CTR = ( clicks/impressions ) * 100
We calculate CTR to compare the performance of different ads or keywords to see which ones are more effective.
The click-through rate (CTR) for the ad was 3%, which means that 3% of the people who saw the ad clicked on it.
Suppose they get a total of 15 conversions from this ad.
The CPA for the above data will be:
CPA = spends/conversion
We calculate CPA to set and track marketing budgets. We can estimate how much we need to spend on marketing to acquire a certain number of customers.
The cost per acquisition (CPA) for the ad was ₹1,000, which means that the company spent 1,000 INR to acquire a single conversion.
On the other hand CPC for the same ad will be:
CPC = spends/clicks
We calculate CPC to optimize campaigns. By tracking CPC, advertisers can see which keywords or ad placements are performing well and which ones are not
The cost per click (CPC) for the ad was ₹100, which means that the company spent 100 INR to acquire a single click.
The conversion rate for this ad is:
Conversion rate = clicks/conversions
We calculate the Conversion rate to set goals for the website or marketing campaigns.
By tracking the conversion rate over time, one can see how they are progressing toward their goals.
The conversion rate for the ad was 10, which means that 10% of the people who clicked on the ad converted into customers.
The company made a total of ₹30,000 from the ad, which means that they made a profit of ₹15,000.
The final ROI for the business:
ROI = ( profit/spends ) * 100
We calculate the ROI to make better investment decisions.
By understanding the potential ROI of different marketing campaigns, one can allocate their marketing budget more effectively.
The return on investment (ROI) for the ad was 100%, which means that the company made a profit of ₹1for every rupee they spent on the ad.
Let’s give our ad account a makeover now!
With a little bit of work, we can make it more attractive to potential customers and get more clicks
We’re looking for ways to grow our business without blowing our budget.
The special tip is:
Improve your ad quality and watch your CTR soar!
A well-written ad can make all the difference in terms of getting people to click on it.
There are many ways to improve the quality of your ads, but we’ll save those secrets for another post.
So, our expenses will stay at ₹15,000.
Let’s assume that the impressions will remain at 5000.
The number of clicks will increase from 150 to 250.
More clicks will lead to more conversions and the total number of conversions will increase from 15 to 25.
The CPA will decrease from ₹1000 to ₹600.
The company reduced its cost per conversion by 40%, from ₹1,000 to ₹600.
The CPC will also decrease to ₹60 from ₹100.
NOTE: A higher CTR leads to a lower CPC. Both metrics are closely related.
More conversions will lead to more business.
The total cost price will increase from ₹30,000 to ₹50,000.
The total profit will be ₹35,000.
This significant increase in profit was achieved without increasing the total advertising budget, simply by improving the quality of the ads.
The total ROI will be approx 234%.
This is just the tip of the iceberg when it comes to optimizing your ad account.
But I’ve got more tricks up my sleeve.
What if I tell you that you can optimize your account even more?
Don’t be so surprised. Of Course, you can optimize it more.
Remember there is always a score of improvement.
Here comes our hero QUALITY SCORE
You can decrease your bidding amount, and your CPC by improving your quality score.
If you want to know the whole story of quality score you may check out the blog, I dedicated to it.
But let’s not get too distracted, we need to know how to optimize our account even more.
This time budget will be ₹12,500.
The CPC will decrease to ₹50 from ₹60 because of the improved Quality Score.
The CTR, CPM, clicks, and impressions will remain the same.
The conversion rate will be 10%.
And there will be a total of 25 conversions.
The CPA will decrease to ₹500 from ₹600.
We will pay ₹100 less for each conversion.
The company will make a business of about ₹50,000.
The profit will be approx ₹37,500 because the spending will be less the profit will be more.
The ROI will be 300%.
The point to keep in mind is that even after reducing the budget we have not faced any loss because of our high CTR and low CPC.
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Now, do you wanna know how to decrease your CPC?
The secret of Quality Score.
The following blog is for you to get some reality check about search ads and how they work.
This is how search ads work.
It is really helpful you are the best sir
Thanks sir for these blogs these are really helpful for me i am grateful for that.