What happens if you choose the wrong metrics?

Google AdWords – How does it work and How to use it?

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In the space of Digital Marketing, Display ads and Search ads, Google AdWords holds a high importance. It is very effective if you do it Correctly. The key to how Google AdWords works is the Quality Score. Quality Score is generally how well an ad group, keywords, ad and landing page relate to what a person is searching for, and how likely someone is to click on the ad. Here is Google’s page for “Check and understand Quality Score.” Now let’s get into some basics and learn how Google AdWords works.

What is Google AdWords?

Google AdWords is an online advertising service where advertisers pay to display brief advertising copy to web users. It is Google’s own advertising service through which you can place search results for your website on a search engine results page (SERP) by paying for them. Earlier, New sites needed to wait a lot to increase their ranking organically. Now with AdWords, you can see immediate results in your ranking and conversion goals.

Paid Searches

Broadly speaking, paid search marketing is, as the name suggests, when you pay to get search results. Those search results which have been displayed under caption “Ad” for some specific search query. For these type of searches, a user needs to pay Google some amount of bucks based on PPC, CPC, etc. campaign running under Google Adwords. These paid results are always displayed above the organic results.

How does Google AdWords work?

Suppose you are an entrepreneur or have a business, you will have some specific, highly relevant keywords to your particular business. These keywords or phrase are those queries which a searcher puts in a search engine to find you. There are a lot of other business/companies with the similar keywords competing for the search result. Now, what basically happens is that you bid for those keywords in Google AdWords. The whole process goes through an auction within a fraction of seconds and winner’s ads are shown on top of the results.

Understanding auction process

Now every time someone does a search on Google, an AdWords auction is created. Every advertiser who has a keyword match to the search query competes in the auction. How well each advertiser competes is based on their Ad Rank. Again, using a slightly simplified version:

Ad Rank = Quality Score * Bid

Ads are placed in order based on Ad Rank. The highest Ad Rank gets the top spot and so on down to either the last ad qualifying for the auction or the last position on the page.

Bidding price is the highest amount an advertiser is willing to pay. But, in reality, What an advertiser actually pays is the lowest amount necessary to beat the Ad Rank of the competitor below them. You can learn more on best bidding Strategy and practices in our upcoming blogs.

Do you pay exactly what you bid?

No, Bidding price is the highest amount an advertiser is willing to pay. But, in reality, What an advertiser actually pays is the lowest amount necessary to beat the Ad Rank of the competitor below them. For a winner, it is always less than what he bids for. In a nutshell, if you have the best Quality Score, you control the auction unless others outbid you. You can learn more about how final bidding price is calculated and how much a bidder actually pay.

How to use Google AdWords effectively?

  • Know the Basics
  • Define goals for sales, traffic, subscriptions and accordingly deploy your budget.
  • Negative keywords are must avoid, focus on marketing keywords.
  • You need to focus on all levels of your campaign creation:
    • Targeted audience
    • Location
    • Campaign keywords
    • Ad Groups
    • Ad copy
    • Budget adjustments
    • Landing Pages
What happens if you choose the wrong metrics?

How much a bidder actually pay in Google AdWords?

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In our previous blogs, we have learned what is Google AdWords, how does it work and what is a bidding process. Now let’s understand how much AdWords charges a bidder.

We already know that how well each advertiser competes is based on their Ad Rank. Ads are then listed in descending order based on the result of the equation.

Ad Rank = Quality Score * Bid

Now, understanding how Ad Rank is influenced, will make more sense when we learn basics.

What is Quality Score?

Quality Score is a variable used by Google, that can influence both the rank and cost per click (CPC) of ads. To determine the order in which ads are listed, each ad has the following formula run against it: bid * Quality Score.

Why Quality Score?

The purpose of introducing Quality Score is to improve the experience of users who click on paid advertising links. It is reasonable to assume that users who have a great experience when clicking on ads will click on them more frequently, thus increasing advertising revenues for the search engine.

Factors affecting Quality Score

  • Your click-through rate (CTR).
  • The relevance of each keyword to its ad group.
  • Landing page quality and relevance.
  • The relevance of your ad text.
  • Your historical AdWords account performance.

The exact weight of Quality Score versus bid has not been revealed by any of the major search engines, and each company has stated that they reserve the right to continually adjust their ranking methodologies.

Understand how much winners pay?

In a way, understanding this process is the key to really unlocking AdWords.

Let’s understand it with practical examples:

Suppose, Company A has a website named meetironman.com and has a QS = 8. Now, A, participated in a bid for a phrase say, “get iron man caricature”.

Let’s say company A want to show up in the 1st position on the page no matter what. We can’t guarantee this, but we can certainly be pretty certain by over bidding the keyword to say $100/click with:

Ad Rank of A = 800 = (QS 8 * $100 Bid)

To beat A, a competitor (Company B) would have to get an ad rank > 800. This means even if they had a QS10 keyword, they would have to bid $80.01/click to get the top spot. Assuming they have a more realistic bid (generally $100 bid is high enough) of $10/click

Ad Rank of B = 100 = (QS 10 * $10 Bid)

And the amount A would pay in the auction is calculated as follows:

(100 Ad Rank to beat / our QS 8 + $0.01) = 100 / 8 + $0.01 = $12.51

So even though A bid $100, A only pay $12.51.

If Quality Score of A on that keyword in that auction was 10, then the amount A would pay is:

(100 Ad Rank to beat / our QS 10 + $0.01) = 100 / 10 + $0.01 =$10.00

Here’s where it really gets interesting; the person in the top spot could actually pay LESS than the people in the spots below them.

Unexpected, right? Here’s why that happens.

Assume the same crazy $100 bid for the top spot, but now let’s say the next competitor (Company C) only has a Quality Score 5 keyword on a $10 bid, the position 3 (Company D) has a QS 7 keyword on a $7 bid and the position 4 (Company E) has a QS 5 keyword on a $9 bid.

Position 1:

Ad Rank to beat C = 50 = (QS 5 * $10 Bid)

Position 1 pays= (50 Ad Rank to beat / (QS of A) 8 + $0.01) = 50 / 8 + $0.01 = $6.26

Position 2:

Ad Rank to beat D = 49 = (QS 7 * $7 Bid)

Position 2 pays= (49 Ad Rank to beat / (QS of C) 5 + $0.01) = 49 / 5 + $0.01 = $9.81

Position 3:

Ad Rank to beat E = 45 = (QS 5 * $9 Bid)

Position 3 pays= (45 Ad Rank to beat / (QS of D) 7 + $0.01) = 45 / 7 + $0.01 = $6.44

In this example, our QS 8 keyword in position 1 actually pays less than positions 2 and position 3. This same calculation holds true no matter what position you show up in, so the person in position 3 could pay less than position 4 and so on.

If you have a Quality Score 10 keyword, you control the auction.

With a Quality Score 10 keyword, you know that not only are you paying the least amount possible for the position you are getting, you are forcing EVERYONE above you to pay the MOST!

What happens if you choose the wrong metrics?

How to Use Google AdWords Effectively?

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We already know how Google AdWords works and how much the bidder actually pay. These are the fundamentals and key for a successful AdWords campaign. If you don’t know you may refer to our blog Google Adwords – How does it work. How to use it? and How much the bidder actually pay?

Know Your Customers

To quote Douglas Adams “a common mistake people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.”

You may think that you have an idea of your customer’s search habits, you may be surprised by the variety and complexity of the behavior of a typical internet user. A broad customer profiling is very important to determine the type of keywords he or she may be searching.

  • Know who they are.
  • Know what they are searching for.

Relevance

Know what is in your store! Sort your keyword according to relevance and their search volume. Selecting the final keywords depends on your budget and goals. For example: If you have a large budget and lofty goals, you may use an ad group with high volume keywords (although they can be expensive).

If your budget is tight, you may refrain from general keywords. There is another problem with the high crowded group is that, if your CTR is low (which mostly is the case with new websites) your Quality Score decreases and so is your ranking.

Negative Keywords list

Know what is not in your store! Update and extend your negative keyword lists at least once a week. After few weeks you’ll have good data about searches that lead to your site. Download actual search data, and in excel search for keywords/phrases, you don’t want to appear, highlight them. Filter them and add them to the relevant negative keyword list. You can use exact match negative keywords if it’s needed.

Irresistible offer

Know what your competitors are offering! There is nothing better than providing relevant offers to customers for campaign effectiveness. This has dual benefit as it gets you higher CTR and also, google gets pleased as well. This is where the magic happens.

Call To Action

Know what do you want your customers to do! If you don’t have a pre-designed proper call to action, the searcher will be confused after the click and eventually will leave. This will harm your conversion rate and Quality Score. Remember, always send the traffic to the most relevant page.

ROI based Optimization

Know what do you want out of your ad campaign! Do ROI based optimization for effective results.Always make bidding strategy and campaigns keeping your return goals in mind. You can add column cost/value, determine what is the minimum ROI you want to reach e.g. 10, and increase bids for those keywords which have better cost/value than 10 and lower where metric doesn’t reach 10.

Conversion Tracking

Know what is going on your website! It is very important to track activities of your users on your website. Where are they coming from? What are they searching for? Put tracking mechanism in your website before running a campaign. Make a proper plan for CTA (call to action) where you want to send your customers, subscriptions or downloads.

Work Smarter

The end result of your ad campaigns is to increase your ROI. You should already be prepared with some homework and budgeting. Here are few things you should focus to get most out of your money.

  • Know your budget! Monitor your budget allocation and determine how much you spent on certain devices. Focus on the device which gives you more conversion. For example: if you have a high conversion on mobile and low on the desktop, lower your bid on the desktop and focus more on mobile.
  • Know when it is enough! If you find out some low-performing keywords that have low CTR and are costly at the same time, remove and refrain investing on them.
  • Don’t get paranoid over updating your campaign. Update your “negative keyword” list so that you get a relevant audience to your business and improved quality score. But, remember too many changes may diminish your campaign effectiveness. So optimize your campaign in moderation.
customer engagement

Why do we love Customer Retention? And you should, Too!

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What is Customer Retention after all?

Few may call it loyalty of customers, few may name it under customer success and life cycle. Names and methods might be different but the end goal is same and in the end, it all boils down to keeping the customer happy and engaged so that they keep coming.

Changing landscape of Marketing

With the changing landscape of the digital space, marketing has evolved in multitudes. Footprints of businesses are not limited to just a few folks in the neighborhood, the whole world has become a single marketplace. With a global audience, handling needs and requirements of the thousands and millions of customer becomes very challenging.

Digital marketing has changed the prior equations and will continue to be so dynamic. We have multiple of marketing channels to reach our audience and also multiple of platforms for customers to interact with. Ease and simplicity of marketing is a complex web now leading to a very fragmented customer journey.

Why is Customer Retention important?

In a business, acquisition, and retention go hand in hand, but the development phase of your business decides which area you should focus on more. Of Course, the acquisition is the building block of your user database, without a customer in your store, there is no one to keep onboard.

Generally, it costs less to keep a customer than to acquire one. But, the problem is the majority of companies especially e-commerce companies, invest most of their resources in acquisition despite the fact that repeat customers bring them the majority of revenue.

Companies need to establish their brand, run various marketing campaigns, giving more lucrative offers compared to their competitors, expenses on sales reps etc all add up to their acquisition expenses while retention is more profitable to them. Let’s see a simple example:

You can see the profit margin from an existing customer is 100% more.

Some facts about Customer Retention

  • According to the Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers.
  • Marketing Metrics report says the probability of selling to an existing customer is 60-70% while the probability of selling to a new customer is 5-20%.
  • According to Bain & Co, A 5% increase in customer retention can increase a company’s profitability by 75%.
  • It costs 6-7 times more to acquire a new customer than to retain an existing one.

How can you improve your Customer Retention?

“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” – Steve Jobs

A Few years back retention marketing was like the loose fitted brick in the wall. Companies knew retention was much of their need to make the strong walls of a profitable business but the “how?” part was a major stumbling block. How to personalize the interactions, touchpoints for growing customer base? How to personalize the offers to the customers need?

Now, with the swiftness of technology, we almost have answers to all the questions. The tools needed to achieve this level of individualized communication are all available. Customer’s demographic, transactional, behavioral and social data helps companies in a big way to understand their customers. Customers can be given personalized and unique experience so that they happily keep flocking to your website over and over.