3 Ways To Use ROAS In PPC Lead Gen Optimization
March 6, 2017
“In any PPC campaign, whether eCommerce or lead generation, return is the ultimate indicator of success.” –Matt Umbro
Naturally, we all want to be successful. We want to know that the money we are putting into paid search, social, and display—or the investment we are managing on behalf of our clients—is being utilized in the most efficient way. That’s why we love data, why we pore over ad reports, why we diligently test new bidding strategies and messaging, and work to communicate all of that to the higher-ups with whom we engage.
It’s no surprise, then, that choosing the right metrics and KPIs for every account is essential. Ecommerce accounts may optimize for ROAS or ROI, while lead generation accounts might choose to set CPA or lead volume goals based on observed closing rates. In their own way, each of these goals, or KPI strategies, is rooted in profitability and return.
Today, as a lead-gen-focused PPC-er, I would like to share three ways I’ve been able to use ROAS metrics to identify wins and opportunities in lead generation accounts.
1. Trailing ROAS for Long Sales Cycles or Recurring Revenue
For a client that rarely sees same month return on PPC leads, our team maintains an ongoing log of closed leads and revenue generated. While most leads tend to close within a 90-day window, we frequently see leads closing or new revenue generated from clicks and conversions up to 2 years old.
Given this lag, and the variability in revenue generated by each PPC campaign and platform, optimizing only toward a CPA goal is incomplete. Tracking monthly and trailing ROAS allows us to identify campaigns which contribute most to overall return, even if CPA for those campaigns may be higher than other less profitable ones.
In 2016, we used ROAS to reduce non-converting spend and improve overall profitability. At the end of the second quarter, CPA was nearly 18% over our $20 goal. To address this, we examined our highest CPA campaigns and noted that one campaign (“Campaign 1”) was at nearly twice our CPA goal for the past year, but had also generated the most revenue relative to its spend. On the other hand, we could see that our poorest converting campaign (“Campaign 6”) had not closed any leads in the past 12 months.
While Campaign 6 already faced a lower budget due to its CPA performance, looking at ROAS reaffirmed the decision to pause it entirely. After doing so, we saw an increase in quarter-over-quarter revenue (+28%) and return (+36%), and a 10% decrease in overall CPA.
April 1 – June 30
July 1 – September 30
Using ROAS in coordination with CPA goals can provide a more complete picture of account performance and health. Much as the Great British Baking Show considers both the technical skills and natural talent of contestants, so should we consider both the technical performance (CPA) and inherent quality (ROAS) of our PPC campaigns.
2. Assessing Lead Quality with Variable Revenue per Lead
Some clients do not see fixed revenue per lead, such as those that sell contracts, subscriptions, or customizable package deals. These businesses highlight the familiar truth that “all leads are not created equal.” In such cases, ROAS analyses can prove to be more insightful than a strict CPA assessment.
Working in an industry with variable revenue-per-lead, and not having direct access to that client’s revenue data, I was surprised during an EOY debriefing to learn that PPC saw a 500% ROI in the previous year. Meanwhile, I had spent months stressing about a climbing CPA and shifting conversion rates. This revelation instigated a deeper conversation about ROI and opened the door to request data about lead quality on an ongoing basis.
Information about Market Qualified Leads (i.e. inquiries that progress to sales discussions), and the revenue attributed to closing those leads, completely transformed the story our numbers were telling. Looking at the first two months of 2016 vs 2017, we saw a significant increase in spend, yet a decrease in conversion volume and increased CPA. It was not until considering the Qualification Rate of inquiries (conversions) to MQL that we began to understand what was really happening.
Yes, we had seen a decrease in total lead volume YoY. However, because of ongoing optimizations within the account, the leads that did come in were more likely to be interested in the product being offered. Ultimately, this translated to a 73% increase in MQL at a cost 5% lower than the same two months in the previous year.
Not only did this information give a more accurate picture of lead cost, but it identified another side-effect of optimization that neither we nor the client had previously anticipated: PPC was playing a much larger role in driving revenue than ever before! More qualified leads were coming in at a lower cost, but the revenue-to-lead ratio also jumped significantly. As a result, ROAS for PPC had nearly doubled with the increased spend in 2017.
Considering ROAS alongside CPA trends helped us understand the true effect of our PPC efforts. Just as we could recognize how our past CPA-based optimizations impacted MQL, we are continuing to consider both the quality and quantity of ensuing leads as we strategize for the future.
3. Conversion Value / Cost Metric for More Robust Diagnoses
If you are fortunate enough to have access to lead revenue data within AdWords, either by Salesforce linking or some other conversion import means, there are even more options available to you. You may not yet have discovered, or may not yet have taken advantage of the “All conv value / cost” column in AdWords. Available at the campaign, ad group, keyword, and search term level, this metric serves as a close substitute for ROAS, easily accessible within the interface.
This metric can aid everything from budget allocations to search term inclusion and exclusion. We recently used the “All conv. value / cost” metric to identify queries that were converting most frequently and qualifying at the highest rates. These queries have since been applied as exact match keywords in a series of “Top Performers” campaigns, and are already generating new leads.
“If working in lead gen has taught me nothing else, it is that communication is key. I have never found an account that can exist without some client-side input.” – Carrie Albright
PPC thrives when decisions are based on the most complete and accurate view available. For lead gen, as well as ecommerce accounts, this may require additional effort and data not always readily available. But if you have access to revenue data, I hope that this post has given you some ideas about how it can be used to strengthen your PPC strategy and tactics. And if you don’t have direct access to revenue data, that is a conversation you may want to get started. Having concrete examples (like those above) of the potential value of that information is a good place to start.
While not every client agrees to share revenue or qualification rate of accepted leads, it is assuredly worth the ask. As Wayne Gretzky (and Michael Scott) taught us: “You miss 100% of the shots you don’t take.”
Cover photo by John Watson
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