Conversion Rate And Cost Per Conversion

Another clever thing you can do with Google AdWords is track a ‘sale’ from a search term. This is helpful because you can track which search terms perform better than others. For example you may have the search term ‘blue widgets’ so not only can Google tell you:

• how many times your advert appeared
• how many times someone has clicked on your advert
• the average cost per click

 

but also the following:

The Conversion Rate

This is the number of times that after someone has clicked from a single search term they have actually bought from your site. In other words the click has converted into a sale. So you may have had 100 click thrus from the term ‘blue widget’ and three sales might have occurred from those 100 visitors. This would equate to a 3% conversion rate.

You also may have had 100 visitors from the search term ‘red widget’ and one sale might have occurred from these 100 visitors. This would equate to a 1% conversion rate. So you could compare the search terms and deduce that the ‘blue widget’ search term converts better than the ‘red widget’ search term as three out of every 100 click throughs from the search term ‘blue widget’ result in a sale compared to only one out 100 click thus for the term ‘red widget’.

This is very powerful information. It means that you can bid higher for the term ‘blue widget’ because you know that it is three times more effective than the term red widget. So take for example that both blue widgets and red widgets give you a profit before advertising of £10 per sale you know that for every 100 clicks on blue widget you make £30 and for every 100 clicks on red widgets you make £10.

So to break even for blue widgets you can spend £30 per 100 clicks or 30p per click and for red widgets you can spend £10 per 100 clicks or 10p per click. So you can see that you can adjust your bidding strategy on the performance of the terms you choose based on how well they convert. In this example the term ‘blue widget’ is worth bidding higher than ‘red widget’ as it makes you £30 per 100 clicks compared to £10 per 100 clicks.

Cost Per Conversion

This means literally as it reads. This is the cost it took you in clicks to get one sale expressed as an average. So if you spent £200 on clicks and got ten sales then the cost per conversion would be:

So the cost per conversion equals £20. On average the spend on clicks to get a sale is £20. You can get this data over any time period by just adjusting the dates within Google AdWords, so you can track whether over a specific period of time has cost you more or less to get a sale.

This figure is very important as it can tell you whether you are spending too much to get a sale. For the same reasons as above if you are spending £20 to get a sale, but the profit on the item is only £10 before advertising, you are paying too much for the clicks because £10 - £20 = £10 loss!

So it is a good idea to monitor the cost per conversion for the last seven days and make sure it falls within your budget. Please note: gather the data for the last seven days because this will give you a decent average based on current sales. If you do it for the time since you began the data becomes less reliable because it averages it out over a longer period of time. Depending on the number of sales you get it may be that you can gather data for less than seven days (if you sell many items) or greater than seven days (if you sell very few items) so that you get a good sample size to make accurate judgements.