Here’s a detailed ready-to-use guide designed for you to learn and understand the basic elements of PPC and recognize some of the advanced methods that can help you to significantly improve your company’s paid marketing performance.
The article is divided into 6 main topics:
- Ad Groups Structuring
Structuring your ad groups to have a clear understanding of what categories are performing or not, which elements (location, device, age, etc.) needs what type of bid adjustment and end of the week/month/year to have a clear report to analyze.
- Ad Copy
Write ads with understanding the psychology behind the users’ intent, and knowing what would drive them to read your ad and visit your page.
- Keyword Match Types
Not all keyword combinations related to your business bring conversions. Even though some of them do, you still might lose money. Avoid irrelevant search traffic and discover new keywords by learning how to use keyword match type. Don’t miss the keywords that increase the performance of your ad groups!
- The Ads Auction
Why is the bid high for this keyword? Who competes for this search? Is it possible to pay less for the same search term and be on the top of the page? In this section, you can learn how the ads auction works and how to beat the competitors with less budget.
- The Forms of Remarketing
Common situation—a user visited your page, added an item to the cart, reached the checkout or the last stage of your monthly subscription service, but left. There could be various reasons for that, but there’s still a chance to bring them back and successfully convert into a customer/client. Understand the forms of remarketing to drive valuable users back to your website.
- Calculating Profits
Not knowing how much profit you make by running ads can be frustrating. You might think—there’s already ROAS column on Google Ads interface so we can see how it goes. Well, unfortunately, Google doesn’t know your product cost (shipping, storing, etc.), you’re the one knowing the real margins on the products you sell. See the real ROI with proper calculation methods in this part of the article.
Whether you have your own online business or not, or you work as a digital marketer, or simply want to improve your skills in paid marketing—this article is for you.
If you make it till the end, you’ll be much more in control of your campaigns. Guaranteed! 🙂
1. Ad Group Structure Organization
First of all, it’s important to keep in mind your overall campaign structure ideas when structuring your ad groups. Begin with themes, as it’s an essential step. There should be thematically related groups of keywords inside an ad group. A really good way to make sure you do that is following the navigational structure of your website.
Remember, you can always change your ad group structure as you optimize your account. In fact, that’s something you should anticipate doing. There will always be a difference between the way you structure ad groups in the research and analysis phase of your campaigns, and how you structure them afterward.
It all starts with the organization. Collecting good and practical data in Google Ads and Google Analytics is essential at the beginning stage of the campaign. To do that, you want to understand the performance of:
- the search network,
- match types,
- the ad copy.
Be prepared, your account won’t perform as good as it could the first time you launch a new campaign, even if it has a lot of historical data. Campaigns get better over time with good optimization strategies. I can assure, your campaign performance will improve. The only way to figure out a good optimization strategy, though, is making sure there’s clean data you understand in each ad group.
Ad group structure ideas
To kick-off ad group level structuring, you need to come up with themes. The themes could be:
- product categories,
- brands you sell,
- colors of a product,
- different parts of the services,
you can get creative here. Because there’s a bunch of different keywords under top-level categories that are all sort of similar, the idea is that each category represents a theme. I’d highly recommend themes being the first thing you think about if you’re struggling with ad group structure.
BTW, some good ideas can be found by googling. Do Google searches of your competition to see how they’re structuring their ad groups. You’re not going to get access to their account but from the info that you do see you’ll know—if they’re writing specific things in the ad text for specific searches then they’re probably structuring their ad groups in that specific way. You can also return to add extensions, price, promotion and look at Google’s list of categories as a header. These are all theme examples that you can potentially use to structure your ad groups.
Match type is another ad group structure technique that works rather well. A specific way of matching your keywords to the search term usually yield better results, i.e., broad match gives you the most volume but also the lowest clickthrough and conversion rate since not all the search terms will be highly relevant to your ad. And vice versa—a more exact match gives you the least volume, and typically the most expensive clicks, but the highest conversion rate.
So, why section ad groups by match type? It allows you to bid differently at the ad group level. Let’s say you want to bid using target CPA for exact match campaigns, and you might use manual CPC bidding for more control, phrase, broad match and broad match modified. That way by using ad level structuring by match type you can bid differently.
A third technique I’ll mention is structuring top performers. It’s not something that you’re going to have in your account right away, but you’ll be able to create ad groups for your top-performing keywords eventually. When it’s done, you’re going to have thematically related groups of keywords that show which of those are performing the best.
Hang in there, you might need to read the next sentence more than once. Ready? Imagine you have an ad group with 5 keywords, and this ad group is a part of a campaign that has other ad groups in it, and the campaign has $100 budget a day. Google’s going to try to spread out that $100 evenly across all ad groups and keywords in each ad group. So, if you take out the top-performing keywords and make a new ad group called ‘top performers’, you could give this ad group a more aggressive bidding strategy. This deliberate bid setup will result in Google giving the top-performing keywords more volume automatically.
This method can be used either on a brand new campaign or account or tried out by analyzing your current account structure and possible ways to improve it.
2. Writing Effective Ads in Google Ads
The BJ Fogg behavior model
Dr. BJ Fogg, Stanford research psychologist, the founder of the behavior design lab at Stanford University focuses mainly on human behavior and applying it to the web. His 5 behavior model is a simple and elegant formula to understand human action and behavior. It states as follows:
Behavior (B) equals motivation, ability, and trigger (MAT). Fundamentally, what he’s saying is that for anybody to do anything, there needs to be a trigger or prompt, the ability and the motivation to act.
When applied to marketing, the trigger for behavior is quite straightforward, it’s our ad. A person is searching for something, sees the ad with a trigger in it—a call to action, a click-through, a ‘buy from us now’, or ‘check out our catalog’, etc. If you don’t get that click, the motivation or ability was lacking.
As marketers, our job is about influencing human behavior and trying to get people performing desired actions. Whether it is converting or clicking on a catalog, or anything that’ll ultimately lead to revenue.
Essentially our goal is to increase the ability/decrease the difficulty of a task and increase motivation to act.
Here’s an everyday example. Let’s say you’re at home and the doorbell rings. You get up to answer it because you had a trigger to prompt that behavior. Wanting to let someone in serves as motivation, plus you can stand up and go to the door. But let’s assume you have a very annoying neighbor, therefore your motivation is low, or you don’t have the ability, because even if you wanted to answer the door, you’re sleeping and don’t hear the trigger.
Any action you see somebody perform can be broken down into having a trigger and a sufficient amount of motivation and ability. Now, you need to apply this formula in the context of your business.
For example, you have a software service company and your conversion action is trying to get newsletter sign-ups. What you’re asking for is an email address to add to your mailing list for sending out a monthly newsletter, and it’s valuable. So, what is the perceived ability or the difficulty of the task? It’s a very high perceived ability. How motivated do you think people are to enter their email just to get spam from a company? Very low. You need to make them more motivated so instead of just asking for an email address, offer a 20% coupon for their next order, or 3 months free use of the software, or extending the trial by 2 months.
You have to analyze your business and users who search for your products or services. Are they motivated? Do they understand what they can gain by using your product? If they do they have higher motivation. Your job as a marketer is to provide triggers in your ad copy that help offset the component of the BJ Fogg model that’s causing the behavior or putting it at risk. You need to word your call to action so it addresses that specific point.
As you’re writing the ads you need to make sure that your CTA includes the features of your product or what is there to be gained by using it. If the perceived ability is lacking you need to highlight “how easy the sign-up process is”, “how many other people are doing this”, etc. in your CTA.
3. Understand Your Keyword Match Types
|Match Type||Symbol||Example Keyword||Ads Can Show When||Example Search Term|
|Broad||None||pure wool blanket||synonyms, variants, related terms, different|
phrases, different words, different concepts
|natural wool blankets, pure wool cover, free wool blanket|
|Broad Match Modifier||+Keyword||+pure +wool +blanket||contains the modified terms, plus any other terms and in any order||free pure wool blanket, blanket made of pure wool|
|Phrase||“Keyword”||“pure wool blanket”||enclosed phrase with appended and/or prepended words and phrases||pure wool blanket for sale near me|
|Exact||[Keyword]||[pure wool blanket]||exact term phrase enclosed in brackets|
(Google still retains some freedom here)
|pure wool blanket|
|Negative||-Keyword||-pure, -free, -[blanket]||searches without the negative term||wool blankets online|
3.1 Broad match
It’s the default match type that captures the most clicks and impressions. You should use it with caution and care.
Negative keywords are a must. You should review the search term reports frequently.
Pros of broad match
Helps to discover new ideas
Cheaper cost per click in most cases
Cons of broad match
- A lot of money spent very fast on irrelevant search terms
- You will get a lot of irrelevant clicks/traffic
- Low CTR can hurt your quality score
3.2 Broad match modified
This type can also generate a lot of bad clicks for irrelevant queries. The query must include all your modified terms, not necessarily in order, with additional terms that are not modified.
Pros of broad match modified
- A good way to discover new ideas while controlling irrelevant queries
- Improved click-through rate over broad match
- Cheaper cost per click than phrase and exact match
Cons of broad match modified
- It’ll not get you out of negative keywords
- If the order of your keywords is crucial, don’t use broad match type, use phrase match instead
- It’ll be hard to generate a good click-through rate; your quality score can be impacted negatively
3.3 Phrase match
It makes sure your ad only appears for searches containing your exact keyword (and close variants), with additional words or phrases before or after your keyword. It still can generate bad clicks for irrelevant queries.
The query must include your entire keyword in the correct order.
Pros of phrase match
- More control over your search terms, less insecurity than broad and broad match modified
- Allows you to catch new ideas
- Enhanced click-through rate over broad match modified
- Cheaper cost per click than exact match, mostly
Cons of phrase match
- Need to monitor for negative keywords
- Limits search traffic for search terms in a different order than your keywords
- Limits having bigger data to analyze
- IT can cost more than broad and broad match modified
3.4 Exact match
It ensures your ad will only show for queries containing your exact keyword. There won’t be any additional words or phrases appended/prepended.
Negative keywords aren’t needed to complement the exact match. Exact match brings out the highest click-through rate and cost per click.
Pros of exact match
- There’s no chance of getting any irrelevant traffic
- Fully control your bids on the keywords you want
- Create more relevant ads
Cons of exact match
- Higher cost comparing to the other match types
- Doesn’t allow you to catch new search terms
- Less search volume comparing to the other match types
- Same search intent
- Singular or plural forms
- Stemming (like … likely)
- Abbreviations (Los Angeles … LA)
- Reordered words with the same meaning (women shoes, shoes women)
- Not reordering phrases like LAA to JFK to JFK to LAA
- Addition or removal of function words (in, to, for, but, a, the)
- Synonyms (swimming suit = bathing suit)
4. The Ads Auction
The google ads auction focuses on relevancy and bids. Relevancy is an overreaching concept in Google ads.
Let’s say there are 3 entities involved in the google ads auction. Google, the advertiser, and the searcher. The first one is bridging the gap by bringing the other two together. Google cares a lot about the user experience with the ads and their relevancy. It’s essentially a referral network. Google’s job is to send the searcher to the most relevant and useful page that contains the most relevant and useful information—the answer to the question or the solutions to the problem they’re looking for.
There are a few different subcategories of relevancy.
First of all, Google encourages the text of your ad to be very relevant to the keywords the user is searching for. Search query to add text relevance is one of the fundamental aspects of relevancy. This match tells Google’s algorithms that your ad is going to help the user. What Google doesn’t want is a big company with a huge advertising budget taking over all the different search options.
Google also cares a lot about the user experience on your landing page:
- how well does your landing page match with the questions the user was looking for
- how relevant are the keywords on the landing page
- how fast does your page load
Google uses a second-price auction model that means you only need to pay the amount that the advertiser below you is bidding, plus a cent.
Every single search triggers another auction if there’s an active ad related to that search term. This might seem simple but I want you to really focus on that. Every single search triggers another live auction. If there are three billion Google searches a day, there are three billion auctions, providing that each of those searches is eligible for ads.
A live auction means that there are a lot of live variables. Such as your/ your competitors’ bids on a certain keyword, age, gender, device, time of the day, etc. So, your account might show you keyword-level quality score 7 out of 10 but that’s not necessarily the live keyword-level quality score. Every single time a query is entered into Google and somebody hits enter, there goes another live auction.
Your quality score might change due to:
- certain advertisers during certain times a day not advertising,
- certain advertisers advertising more aggressively during certain hours of the day
That will affect:
- your ad rank,
- how much you’re gonna have to pay for a click,
- your average position in the auction
The last element, max CPC bid equals the most you’re willing to pay for a click.
Note: You might have a higher cost than the max CPC you set if you have applied any bid adjustments to your campaign like age, location, device bid adjustment.
Bids auction example:
|Max CPC Bid||Relevancy||Ad Rank||Position|
5. The Forms of Remarketing
Remarketing is crucial for the success of your google ads campaigns. It allows you to appear in searches specifically to people who have viewed your website before.
One of the biggest struggles an advertiser has to overcome is brand recognition. It’s especially important nowadays with the amount of digital advertising and google ads competition. Remarketing is a way to create that recognition.
Initially, the advertiser brings the user to the website through a search ad. He then can continue to appeal through remarketing by showing ads again as the user browses the internet or types in Google searches.
There are different types of remarketing campaigns available on Google ads.
The standard remarketing campaign is connected to the display network apps or web apps. It’s when somebody comes to your site to look for a product, browses around and leaves the site without making a purchase. There are over 2 million websites included in the Google display network, and the advertisers bid for clicks and their ads to get shown to the same user again.
The second type, dynamic remarketing is very useful for eCommerce. The concept of dynamic remarketing is customization based on what products or services user viewed on your website. It allows you to show specific product ads as the user who searched for it continues to browse the web. For example, if they search for a wool blanket on an online store and don’t buy one and go on to read an article, your ad could pop up and bring the user back to that exact product page.
The third type, increasingly gaining popularity, is remarketing in search. For example, the user searches Google for a wool throw and sees a search ad for your company. The user clicks on the ad, spends some time on the website and then leaves. The next day, they do another Google search, this time using a more specific keyword. You could predict that and set separate bids for the previous website visitors in search.
If a user has already seen the website, they have brand recognition, and the ad for them can contain a different, more aggressive message. It’s recommended to pick broader keywords and bid extra dollar per click on a second-time visit.
The benefits and importance of remarketing
Remarketing is not just about your previous website visitors. It’s specific visitors who have taken specific actions. By setting up tailored lists and creating remarketing rules you can show ads to people who visited certain pages or abandoned their cart.
Reach people when they are most likely to buy.
One example is a rule-based list. It contains only those users who have added a product to the cart but haven’t completed the check-out. Creating this list requires distinguishing these users. Let’s say this is the cart URL: mywebsitecom/cart. To get in that list, the user had to have viewed this URL, without getting to mywebsitecom/order-complete which signifies somebody who paid.
Maybe the users who abandoned the cart on the last stage of the shopping funnel were busy, or the pricing wasn’t right, they want to do some comparison shopping, whatever reason it may be. This is an audience you can bid a little bit higher per click, show ads on a broader range of websites, run ads 24/7, focusing on the message—offer them a coupon if they come back, etc. At the same time, the first-time website visitors won’t get pulled into remarketing at all—that’s the beauty of tailored lists.
Remarketing could also be a very powerful tool for market research because you get a lot of detailed reporting. You can see what type of consumers these users are, at which websites your remarketing ads being placed on, etc.
Last but not least, you should note that 99% of page visitors won’t make a purchase on their first time on your website. The higher the product price, the lower the probability of conversion for the first visit. This shows you how important it is to set up remarketing and make sure you continue advertising on an ongoing basis.
6. Calculating Profits
6.1 ROI vs. ROAS
Once you start running ad campaigns and generating conversions, you want to get a sense of—is this profitable? Are you making money? How can you improve your account to make more money? These questions usually are intertwined with—how much should I pay per click?
At the beginning of the setup when you don’t have any data, you need to make an educated guess of your default max CPC bids. It’s unclear at that point what your conversion rate will be, how much a conversion is going to be worth, and what percentage of those clicks will lead to a sale.
Eventually, once you get the sense of your value per conversion, and actual cost per click, you should be able to see what would be a profitable max CPC bid by going through several calculations.
The first step in developing your profitable betting strategy is understanding the difference between ROI and ROAS.
ROAS (return on ad spend) refers to a very simple calculation that doesn’t take your company’s profit margins into account. It’s simply the returns from what you’ve spent on ads to what you made in conversions. For example, if you sold 10 items that cost the consumer $10 each, your value is $100 for those sales. That’s not necessarily the profit your company got, but ROAS doesn’t take that into account. It looks at the total revenue you made (total value of conversions) divided by the cost of advertising.
ROI (return on investment) is a more thoughtful calculation that takes into account your company’s profit margins. To calculate ROI, you need to know the cost of all goods, shipping, and other associated costs.
The calculation of the ROI formula is revenue (the conversion value) minus cost divided by the cost of advertising.
Here’s a couple of things you need to know in regards to ROI vs. ROAS calculation:
- You must have your conversion tracking in place. If you aren’t tracking conversions, you’ll have no idea what your conversion value number is.
- Conversions have to have attributed values. In eCommerce, you can use dynamic value conversion tracking to know exactly how much is the revenue of products you’ve sold. If you’re tracking form submissions, you need to figure out how much a form or a lead is worth to your business. For example, if you close 1 of the 10 clients and every client brings an X amount of money you’ll be able to attach value to each conversion by calculating exactly how much each form submission from ads is worth.
- You must know your margins.
So, you have 3 primary prerequisites to tracking conversions and 2 formulas: ROAS, which is total revenue divided by the cost of advertising and ROI which is revenue from the advertising minus the cost of advertising divided by the cost of advertising.
What does 2.28 mean? With every dollar you spend on an ad, you make 2 dollars 28 cents back. You could assume it’s 1.28 cents profit but you don’t know your margins, yet.
Let’s say you have a 60% profit margin which means 40% of the dollar is made up of cost.
So, you have ROAS = 2.28 but when you consider all the costs you only make 36 cents on the dollar. That is why understanding ROI and ROAS is crucial to calculate your profits.
When that’s taken care of, you can start thinking about how to improve your account. You’ll find certain keywords with a very low ROI and some with a very good one. Better keywords generate more sales, but they’re also the keywords your competitors aggressively advertise, so the cost per click tends to be higher.
Keep in mind, the more costly keywords usually are the ones that drive your business!
6.2 Break-even point
Next, you’ll want to figure out your break-even point (BEP). Profit margins are a great piece of information to calculate how much you can/ need to spend to break even. Hence, that’s called a break-even point.
Google ads won’t show your profit margins, it’s something you need to figure out exactly. After that, the calculations are fairly easy.
Let’s take a look at a case where profit margins are 40%—determined before you run google ads account. How is that calculated? Divide your profit margin into one:
In this case, 2.5 is the minimum ROI to break even. In other words, you need to make $2.50 for every dollar spent on advertising to be profitable. That’s your profit margin. You’re only making 40% of that—a dollar. Subtract the dollar to pay Google for the ads and 0 is left. The break-even point.
6.3 Determining max CPC
This chapter will explain how to determine probable max CPC bids based on conversion information you have in your account.
At this moment you understand the concept of tracking conversion values and the importance of knowing profit margins, you also know how to determine ROI from ads and ROAS from ads, ad groups, campaigns, keywords, any data point. What is the formula to extract information and use it to determine the cost-per-click for any given keyword?
Let’s assume we’re setting our bids based on ROAS, so we’re 100% up at 100% margin.
One of the most important and helpful metrics to look at when determining max CPC bid is your revenue per click. You’re essentially paying per click and when you decide to add new keywords and bid more aggressively you decide to buy more clicks. Revenue per click tells what is your average revenue for every single click that you get based on your conversion value.
In Google ads, there is a really simple way to see that data. You go to your customized columns and add the value under the conversions tab. There’s gonna be a column called conversion value divided by click and that’s exactly what your revenue per click is. If your current average cost-per-click is higher than the number you see, you’re probably losing money. BTW, this column only works if you’re tracking values with your conversions.
Next, follow this strategy of determining max CPC based on your conversion value and conversion rate.
Let’s say the average conversion value for a keyword “pure wool blanket” is $225.
You’ll also need to have the desired ROAS—how much more than your conversion value do you want to profit? For example, with 50% margins, you might want ROAS to break even and have a 200% ROI. Decide this number freely. How much money would you like to receive back for every dollar you spend? How much are you willing to bid to get that percentage back? In this scenario, the goal is doubling the money, i.e. every dollar spent is $2 back in revenue. Let’s assume the conversion rate to be 4% (found on your Google ads account).
Take your average conversion value, divide that by your desired ROAS. Then multiply that number by your conversion rate.
Based on calculations and historical data from your account, $4.50 is the most that you should be paying for a click. If any of these numbers change at any point, your max CPC bid will too.
Have some additional questions or comments? Need someone to help you with your business’ PPC? If you are interested in improving your PPC performance, contact us at firstname.lastname@example.org or check out our Growth Marketing services.