January 9, 2013
In the world of ecommerce one idea is king: profit. As the old saying goes ‘revenue is vanity, profit is sanity’ and it is for this reason that properly optimized PPC can help keep all e-commerce website owners very sane and very happy. By setting up Google Analytics’ e-commerce tracking to integrate with your PPC data you can track the exact amount of revenue made on your site and work out down to the keyword level where that revenue was generated within your Google AdWords account.
So what are you losing out on by not implementing it? Well firstly, Analytics e-commerce tracking isn’t just useful for PPC. I’m sure most website owners out there have some way of tracking the sales you are driving, most likely through your own back-end system or through your cart program’s own analytics package, such as through PayPal, WorldPay or whoever.
What Analytics tracking adds to those is a way to look more in depth at the data and typical customer behaviours associated with making a sale. For example, you can see exactly which SEO keywords, landing pages, referring websites, social media campaigns or searches on your website are generating the most sales and revenue. Information you can use to inform where you spend your marketing budget: If you find that social media is generating a ton of clicks, but very little revenue and that your PPC traffic is actually bringing in a lot of sales, you know to redirect some of that budget invested in pushing your social media campaigns back to PPC.
Even if you aren’t thinking of starting up any PPC campaigns until next year, we’d still thoroughly recommend getting your Analytics e-commerce tracking up and running now. That’s because you can gain valuable insights about how to focus a new PPC account from old e-commerce data. Let’s say you sell software packages worldwide – by implementing e-commerce tracking early, by the time it comes to launching your PPC campaigns you can already have an estimated value per visitor for a variety of potential segments. For example you might be able to say a visitor from the US generates on average $1 of revenue, whereas a visitor from Europe generates $0.50. With this data you would be able to know to set bids twice as high for your US PPC campaigns as for ones targeting European countries.
You will need to take care of a couple of things if you want to use it to track PPC performance. First, make sure that your AdWords and Analytics accounts are linked. You can do this by going into your ‘Tools and Analysis’ tab in AdWords and selecting ‘link accounts’ under the Admin->Data Sources tab. You will also want to make sure that Google Analytics Profile is set to ‘Yes, an E-Commerce Site/App’.
Once it is all set up you can find your e-commerce information in Analytics under the ‘Conversions’ tab.
From here you can see a number of different reports:
- Overview – Top level stats of your revenue by category, source or product.
- Product performance – how well individual products are selling.
- Sales performance – how much revenue you generated per day over a certain period of time.
- Transactions – the value of each individual transaction that took place on your site.
- Time to purchase – find out how many days or visits it takes your average customer to complete a transaction.
As a word of caution, Analytics won’t be 100% accurate with your transaction and revenue data. It won’t be able to figure out orders cancelled at a later time, or orders where the customer bailed from your site after completing the transaction, but before the thank you page had time to load.
Now you have your Google Analytics set up to handle your e-commerce tracking let’s look at the ways you can use all your new data to make tangible improvements to your AdWords account. We can start to be more advanced with the way we think of conversions – no longer should we judge our PPC campaign success on a cost per acquisition (CPA), but rather on a return on ad spend (ROAS). ROAS tells you how much revenue you generate per dollar of advertising spend. If your average profit margin on your products is 20% you’ll need every dollar you spend to make you at least $5 in revenue to be profitable.
ROAS = ((Revenue – Advertising Cost) / Advertising Cost)
The easiest way to set up your Analytics e-commerce data in a way which will help you to make improvements to your PPC campaigns is with custom reporting. What we want to know is how much revenue each keyword in AdWords is generating compared with the amount spent on it – any with a ROAS higher than our goal, we can increase bids on and be more aggressive, any with a low ROAS we need to drop bids on as they are losing money.
To create a custom report go into your ‘Custom Reporting’ tab in Analytics and select ‘+New Custom Report’. Now name your report ‘Profit per PPC keyword’ or something similar. You’ll want to add ‘Revenue’ and ‘Cost’ to your Metric Groups and ‘Keyword’ to your Dimension Drilldowns. To make sure you are seeing PPC-only keywords, select ‘add filter’ and select Medium equals cpc. You can make a similar report for organic keywords revenue by removing the Cost metric and changing the medium to ‘organic’.
Setting up your custom report should look something like this:
Once you save this report you should be able to pull some valuable information from it straight away – is your PPC profitable? The below is an example of a poorly optimized e-commerce account. As you can see, while revenues are higher than costs, it is only generating a 10.6% ROAS, which would only be profitable if the products being sold had a 95% profit margin.
The point of the custom report we just created was to find individual keywords to optimize for profit – below you can see how our new report lists this data.
Exporting this data into Excel will enable us to work out our current ROAS by keyword and also how much we need to adjust our current bid levels to hit our ROAS targets. Add columns to your exported table for ‘ROAS’, ‘Desired Profit Margin’, ‘Desired Cost’ and ‘Change Bids’.
- To calculate ROAS you will need to add a formula for revenue minus cost divided by cost.
- Your desired profit margin is simply whatever margin you want to work to.
- Cost to be profitable is your revenue divided by your profit margin.
- Change bids is the amount you will need to change your current bids to hit your desired ROAS – it is calculated by dividing your cost to be profitable by your current cost.
Thanks to e-commerce tracking in Analytics you now have an actionable list of keyword bid changes that you can make to increase your PPC profitability. From the table above I know that Anon KW 1 needs to be reduced by 82 percent, and that Anon KW 10 needs to be increased 143 percent. As these numbers will fluctuate, by running this report and making bid changes on a weekly basis you can work towards an optimal bid and ultimately, PPC profitability.