What does it mean to optimize a PPC campaign?
In the abstract sense, optimizing a PPC advertising campaign is simply making changes so that the campaign performs better. But then, what exactly is “better”?
It’s a tricky and complicated equation. Your optimization practices will require tweaks to your advertising, your targets, your landing pages, and possibly even what you sell to your customers.
Most optimizers make all of these changes in pursuit of one or a small handful of different metrics. But I’m here to make the case that if you optimize for CPC, CPA, CPL, or even ROI, you might be missing out on your true potential.
Instead, you need to optimize for profit.
Part of the problem here is that there are so many different metrics you can track in a PPC campaign. We live in an era where data is abundant, and where even inexperienced marketing managers must take on the role of a data analyst at least occasionally.
When there are so many different variables and metrics to juggle, it can become overwhelming.
Just take a look at the following:
All of these metrics can tell you how your campaign is performing, and all of them are worth optimizing for. But when it comes down to it, are some of these superior to the others? If you have high marks in each area, does that really mean you’re performing to your fullest potential?
Let’s explore this idea.
Now let’s make the case for why profit should be your number one concern when optimizing a PPC campaign.
Let’s say we have two different businesses, Alpha and Beta.
Alpha is currently operating with a $100 CPA and an impressive ROI of 10x, ultimately earning 10 times their initial investment.
Beta is currently operating with a $200 CPA and an ROI of 5x, ultimately earning 5 times their initial investment.
Which business is doing better overall?
Your first instinct should tell you that Alpha is doing better. Getting your CPA lower is a mark of higher efficiency, and many advertisers treat ROI as the gold standard for measuring campaign effectiveness. With both a higher CPA and a higher ROI, we should expect Alpha to be better.
But of course, we wouldn’t present a hypothetical situation like this if the answer was so obvious.
The reality is, either one of these advertisers could be doing better; we simply don’t have enough information to tell.
We’re already using our imaginations, so let’s imagine a few more details.
Let’s say Alpha currently gets 15 conversions with a per-conversion margin of $1,000.
Beta, however, currently gets 40 conversions with a per-conversion margin of $1,000.
The margins are the same – but which company is doing better?
Alpha’s gross margin with 15 conversions should be $15,000.
Beta’s gross margin with 40 conversions should be $40,000.
Alpha spent $1,500 to get there, leading to an ROI of 10x.
Beta spent $8,000 to get there, leading to an ROI of 5x.
Cool! Alpha still has better overall metrics than Beta.
But let’s look at their total profitability. Alpha made $15,000 and spent $1,500, giving them $13,500 in profit. Beta made $40,000 and spent $8,000, giving them $32,000 in profit.
Now tell me – would you rather have a $13,500 profit or a $32,000 profit?
In this scenario, Beta is actually doing better. Are you surprised?
Seeing this scenario unfold is like witnessing a magic trick. It feels like there’s something wrong or something missing in this equation, but the crux of the trick is actually quite simple.
The big difference is volume. Though the efficiency metrics of Alpha are far superior, Beta is securing more conversions. Assuming the profit margins are the same, Beta is doing better because the company is ultimately seeing more conversions from their campaign.
If you choose to optimize for profit, rather than optimizing for other metrics, you can see similarly powerful results. Instead of trying to chase peak efficiency metrics or brag about your low CPA, you’ll be maximizing the profitability of your advertising – and greatly benefiting in the long run.
Too often, PPC ad managers suffer from status quo thinking.
They believe that as long as they’re getting clicks with a positive ROI, the campaign is worth continuing to run as is.
Part of this is a fear of loss; if you tinker with too many variables, you could end up compromising your results rather than improving them. Another part of this is sheer laziness; why bother trying to improve your PPC campaign if it’s already performing decently enough?
In any case, it’s your responsibility to step up and continue optimizing your campaign for better performance. That doesn’t mean you can’t be satisfied with good results – it just means that you have to keep pushing for better results.
So, how do you see those better results?
What actionable steps can you take to optimize for profit in your PPC campaign?
Are you interested in optimizing your PPC advertising campaign for profit?
Or are you struggling to get your PPC engine up and running?
PPC.co could be the perfect partner for you. Contact us today for a free consultation or to learn more about our PPC advertising services!