Why ROI on your Google Adwords spend is so important

Why ROI on your Google Adwords spend is so important

If you’re trying to improve your digital marketing campaigns and measure how well your online business is really doing, you’re probably already aware how important Return on Investment – ROI is, especially the return on advertising spend on platforms like Google Adwords. The reality is – the most important metric for Google Ads is ROI. Not impressions, not clicks, not CTR, but ROI. Because in digital advertising, it all comes down to money spent vs money generated. Everything else is secondary.

Far too many people get caught up trying to increase clicks or looking trying to tweak user experiences to that they spend a few more seconds on a certain page, without taking a step back to look at the bigger picture. When looking at analytics, you’ll be presented with a lot of raw data, and lots of this can be useful in optimizing your site – but don’t get lost in the data. Make ROI on ad spend your priority – it’s the most important metric you’ve got.

In this article, we’re going to look at some of the issues associated with calculating ROI and how to measure ROI on your advertising spend – specifically on Google Adwords. While Google does give you it’s own ROI – you’ll come to see how this calculation isn’t accurate for most normal business, so it probably isn’t accurate for you, either. We’ll give you the information you need to calculate your ROI effectively and easily – so you can start making changes to grow your business.

How other metrics might mislead you

How other metrics might mislead you

The trouble with good reporting tools like Google Analytics is that they sometimes provide you with too much data. While some people might be able to make use of all of it – most don’t, and nor do they need to. But there’s one metric you really need to take seriously when analyzing how well your business is doing – and that’s your ROI for advertising spend – or return on advertising investment. This can also be known as ROAS.

Other metrics, like CTR and conversion rates are useful – but they can also be misleading. You see, getting obsessed with how many clicks a page or site is getting is a mistake many businesses make. While more clicks are generally better for your business – they don’t give you an accurate ideaof how well you’re really doing. They especially don’t give you a good idea of how well your search engine advertising is really doing – because they don’t take into account the money they generate.

CTR Google Ads

 

To really know how well your marketing is doing, you need to analyze how much money your Adwords advertising spend is really generating. That’ll take into account your advertising costs and the profit that’s gained from it.

While you can simply subtract your advertising spend from your generated sales total – there’s a problem with this sort of calculation. It’s too crude. You won’t know exactly which of your adverts have done well, and which haven’t. You might have an overall total, but you won’t know where it came from and how you got to it. You won’t know where to increase advertising spend and where to cut back.

Revenue stats in Google Analytics

That’s why you need a detailed and clear way of looking at your advertising spend and integrating the right tools and techniques into your reporting. That way you can ignore irrelevant metrics and only get the information that’s most relevant to you when spending your marketing dollars.

There’s also another problem with simply trying to increase clickthrough rates rather than improving your advertising ROI metrics. You could be getting more and more worthless clicks that aren’t really valuable to your business. If you target the wrong (passive) keywords and wrong target audience you might get tons of hits – but they might be a complete waste of time and money. Some traffic sources simply provide more of the wrong sort of visitor that’s never really likely to spend money on your site.

Why ROI is the most important metric for Google Ads

Why ROI is the most important metric for Google Ads

If you haven’t integrated the right tools and strategies into your backend – you won’t really know where your sales are coming from. Especially if people opt-in and then a member of your team phones them back later. It’s hard to prove a link or even have any idea how and why someone arrived at your site. That means you won’t really know which adverts are working for you and which aren’t – but this is vital information that’s crucial to the success of your business.

That’s why ROI on Adwords spend is so important.

You need to know which adverts are performing for you, and which aren’t. When you only look at broad profit margins compared to advertising spend, you won’t get the whole picture. Some of your adverts might actually be performing really well, and some might be a complete waste of money.

Once you know the details, you’ll be able to stop those under-performing ads (or make dramatic changes to them), while increasing spend where it’s really working. This sort of information could make a huge difference to how well your business does, and could reshape growth for the better.

How to measure your Google Ads ROI

How to measure your Google Ads ROI

Firstly, Google Analytics data does actually give you an ROI figure – but this is incorrect. It doesn’t know what your other costs are and assumes everything is profit. To get a more realistic figure, you need to include your other costs so that the ROI figure you see is even more accurate. There are a few different calculations you can do to make your marketing ROI figure more accurate, let’s have a look at them:

To calculate your real Adwords ROI, simply use the following ROI formula:

ROI = (revenue x margin – cost) / cost

This gives you a much more accurate figure than Google’s calculation, as it takes your costs and margins fully into account. You can integrate this info manually yourself, but there are also tools (like advertising ROI calculators) out there that can help you without you having to manipulate and edit spreadsheets yourself.

But perhaps more importantly, you won’t know exactly which keywords are performing well for you unless you make a few tweaks to how things are reported. This is important, as you need to know where you’re doing well, and where you aren’t – as we’ve already looked at.

You need to know the exact dollar value of not only each Adwords campaign, but also each individual keyword and advert. It’s the only way to really know what is and isn’t working in your campaigns. And to do it, you need to start using UTM parameters. This will help improve your monitoring so that you can get the data that’s most useful to you.

Google Ads UTM parameters

Simply add these UTM parameters to your destination URLs. After that, your developers can write a script that retrieves these UTMs and saves it alongside each form submission.

You can then use all this information to have a better idea about what people are doing on your site, why they arrived there – and any changes that might need to be made. You can make sure you know which keywords bring you the best customers, the highest spenders, or people that become long-term clients.

You can even find out which customers came from a different channel while still being influenced by one of your Adwords ads. Ultimately, you can calculate a clear and precise advertising ROI for every single advert or keyword, which is one of the most powerful pieces of information you can have in your marketing communications at all.

But fiddling around with UTM parameters isn’t always easy – that’s why the right tools could help integrate everything effortlessly so you can get the exact results you need within seconds.

GA Connector logo

Our software tool called GA Connector can help integrate your analytics into CRMs (customer relationship management tools) like Salesforce. – That means you can have even more precise information about your advertising ROI analysis along with a whole host of more detailed reports and metrics.

Ga Connector lets you easily integrate your advertising campaigns with Salesforce CRM so that you can make the most of a wide range of analytical data. With GA Connector, you can look at a range of important and useful metrics so that you can make the best decision about the direction of your marketing campaign:

Google Analytics metrics in CRM

Want to have the most detailed information on advertising spend available, across multiple platforms, with real-time data and all the tools you need to analyze them? You can by integrating your Adwords campaigns into your CRM platform with tools like GA Connector.

Conclusion

Hopefully, you’ve now seen how important calculating ROI of Google Ads is for your business. You should also be aware of how this digital advertising ROI can sometimes be calculated incorrectly and how other metrics might be misleading. If you want to make the most of your marketing efforts and hopefully grow your business in the long-term – you need to know exactly how people are arriving at your site and why.
Ultimately, you need to know which adverts are working for you and which aren’t – and you can find this out more easily than you might think. Make Adwords ROI your priority, and take your business to the next level.

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