Quality Score & How It Affects the Bottom Line For Ecommerce Advertisers
August 28, 2012
Developing a solid pay-per-click campaign takes time. Unfortunately, you can’t just launch a new campaign and forget about it, which is one of the many reasons we take so much pride in what we do for our clients. One of the key metrics we tend to focus on in paid search is Quality Score. Essentially, Quality Score measures the relevancy between your keywords, ads, landing pages and consumer search queries. Google places a lot of emphasis on providing the best user search experience possible, so Quality Score helps them achieve that.
For ecommerce advertisers, paying close attention to Quality Score becomes particularly important because it affects your keyword costs and returns on ad spend (ROAS). On one hand, higher Quality Scores will yield lesser click costs and therefore lead to an increase in ROAS. On the other hand, lower Quality Scores will likely decrease your ROAS as a result of higher click costs. For the purpose of this post, we will go into more detail as to exactly how Quality Score affects ecommerce advertisers.
KNOW THE VALUE OF EACH CLICK
Typically, advertisers have a goal in mind when starting a PPC campaign. Lead generation clients tend to be focused more on lead volume and an overall CPA goal. Ecommerce advertisers, however, tend to focus on volume as well, but varying CPA goals for each product. This is why it becomes so important to pay attention to performance at the keyword level since they are trying to manage multiple CPA targets.
A good place to start analyzing keyword performance for ecommerce clients is to know the value of each click. First, determine your revenue per click by taking your PPC revenue and dividing it by the total number of clicks over the same timeframe. Then divide revenue per click by your goal ROAS to get a feel for the highest amount you should bid on a keyword to maintain that ROAS. This strategy assumes that all keywords are equal, but nonetheless provides a good framework for determining if your CPC bids are below, on par, or exceeding what you should be paying.
HOW QS AFFECTS CLICK COSTS & AD POSITION
Now that we know the value of each click, we can take a more in-depth look at how Quality Score affects your click costs and ad position. Since we know that Google ad rank is calculated as the product of your maximum CPC bid and Quality Score, you can see that QS will influence your click costs, and therefore ad position as well. Consider the following table, using our suggested keyword bid from the previous example:
Assuming our keyword bids remain constant, Quality Score becomes the variable that influences ad rank. This is the formula that Google uses to determine the position of your ad on the search results pages. Obviously, the higher the ad rank, the better off you will be.
Taking this a step further, let’s compare the click costs of two advertisers in the same ad auction with different Quality Scores:
As you can see, the lower Quality Score for Advertiser A forces that individual to bid much higher to achieve an ad rank of 5. On the other hand, Advertiser B has a much higher Quality Score and therefore ends up paying much less to maintain the same ad rank. Let’s see how this ties into overall ROAS:
Assuming that everything in the table above is constant (except CPC), you can see from the calculations above that lower Quality Scores can be detrimental to overall ROAS performance. Whereas Advertiser B’s ROAS is looking pretty good here, Advertiser A’s suffered as a result of more expensive click costs, originating from poor Quality Scores.
In closing, this is why it becomes very important for ecommerce advertisers to pay close attention to Quality Score. Not only will you provide a better search experience for your potential customers, but you can also free up extra budget by saving on click costs. So, how have you used QS for optimizing your own ecommerce campaigns? Feel free to leave any feedback below, and as always, thanks for reading.
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