AdWords Perth: How To Calculate REAL ROI from Your Campaign

 With access to a mind-boggling amount of daily users, comprehensive targeting ability and unsurpassable knowledge of online buyer behaviour it’s no surprise that Google Adwords is an essential digital marketing tool in Perth – and one of the best ways to super boost your businesses profit margins (check out our case study on how we used it to generated 100 leads per week here).

“…advertising on Google with AdWords is a very easy way to [sic] often obtaining an ROI of hundreds of percentage points.” Neil Pattel

However, nothing is perfect. And (no matter how amazing a platform) Adwords is no exception.

One of the biggest problems we’ve found many business owners face with Google Adwords in Perth is finding relevant information about profits. All you need is one quick look at an Adwords suit to see that there are A LOT of numbers. And for most people this looks scary and overwhelming.

**In fact a lot of sneaky marketing companies will use this to their advantage – plying customers with good looking stats that at the end of the day mean very little.

And that’s where people come unstuck – we know you’re not interested in how many people from Botswana viewed your Ad at 3am on Sunday (a claim we actually heard from one of our clients who came to us from another agency and wondered how – or why  – this person was googling ‘Best Coffee Suppliers in Perth‘) , you want the bottom line ie: How much profit is my Adwords investment making.

** NOTE – if someone from Botswana is viewing your ads at 3am on a Sunday, you might need to make a few changes (starting with your digital marketing agency)…

But don’t fret!

At Summit Web our Perth Adwords Experts are always on the lookout for ways to make online growth easier for Perth business, and so we’ve put together a sure-fire way that you can quickly and easily measure your ROI and see exactly how much profit your Adwords campaign is making.

PART 1 – ROI vs ROAS (and how to calculate both).

The first thing we need to look at when breaking down Adwords numbers is Return On Investment (ROI) vs Return On Ad Spend (ROAS). Now while they may appear similar they are in fact quite different – and when it comes to your precious marketing budget, it’s a difference that can’t be ignored.

So what is the difference? Let’s start with the easier of the two:

Return On Ad Spend.

As far as maths goes ROAS is actually pretty straightforward (pheeeew) as it only requires 2 numbers:

1. How much you’ve spent on Adwords (cost) and

2. How much you’ve made from that spend (revenue).

With these two stats you can easily work out your ROAS with the formula:

ROAS = (REVENUE ÷ COST) x 100

Simple enough, but it’s not always easy. In fact sometimes it can be downright confusing (even for us experts). So to give you a hand with your calculations, let’s look at an example from a Summit Web client who we’re helping boost leads and grow online using Google Adwords Perth.

I know what you’re thinking!! And yes, in the screen shot above you can see a bunch of numbers and tricky looking scales. But ignore pretty much all of that because what we really want to looking at is COST & CONVERSIONS – in this case 23 for 1.73K:

So is this ROAS?

Not quite – this is simply cost per conversion. In the above case a conversion is a phone call – of which 10% become clients. Meaning 2.3 customers for $1.73k.

WOW, that’s a little low right?

Wrong.

Before you start thinking about throwing in the towel and moving back to the parents, what you need to do is figure out how much 1 conversion is worth. For this particular business the average customer is worth $5000. Which means our figures above look like: 2.3 x $5000 = $11,500. A bit better hey?

And now we can calculate ROAS:

ROAS = (REVENUE ÷ COST) x 100

In our clients case: ROAS = ($11,500 ÷ $1,730) x 100 = 665%

Meaning every single dollar spent on Adwords returned our client a whopping $6.65.

Some amazing numbers!

RETURN ON INVESTMENT

While ROAS may be easy enough to calculate, unfortunately ROI is not as straightforward. And that’s because it’s not about simply how much your ads cost. To achieve an accurate ROI means taking the time to consider all facets of your online business spend, not simply advertising.

For example while the above ROAS is 665%, what’s not taken into account is everything needed to get those conversions. For most Adwords campaigns this include things such as:

• Reporting Tools

• Third Party Apps & Services (Callrail, Hub Spot etc)

• Marketing Staff Wages

• Marketing Agency Fees

Once you consider the total amount spent on your Adwords campaign, you can then use the following formula to calculate ROI:

ROI = (Your Revenue ÷ Your Total Investment) x 100

While it definitely takes more effort, using this method you’re certain to get a more detailed and accurate figure of how much bang you’re getting for your buck.

PART 2 – WHICH IS BETTER?

Well it depends, the fact is ROAS produces better looking numbers and so at Summit Web we tend to see a lot of cowboys and sheepish marketing managers using it to impress their clients. And while this isn’t totally terrible (I mean, it does give you a calculated return) it’s not completely accurate either.

“ ROAS does not measure the true impact of one channel on another, such as display’s impact on search, or offer an understanding of the incrementality of media dollar investment, which the ROI metric provides.” Zaid Dabbas – Senior Digital Supervisor, Xcite.

So that’s why at Summit Web our Adwords and PPC Team always strive to provide our clients with accurate ROI, which we calculate after extensive conversations with our clients and some heavy number crunching. 

Do I have to do it?

Of course not! But as you can see it definitely pays to be aware of the differences and if you’re working with an Adwords agency making sure you’re getting the right figures. Yes It’s certainly more time consuming but if you really want to get a full overview of how your Adwords investment is performing it’s the only way.

But, if you’re thinking of launching a Perth Google Adwords campaign to generate a heap of leads to your Perth business or not seeing the results you want with your current Adwords campaign, don’t hesitate to drop us a line or a comment below, we’d be happy to have a chat to see how we could help.