(Dedicated to Max K, Manhattan)
As a PPC agency staff member, from time to time, you may find yourself in situations where you have to adapt to your audience. KYC – “Know Your Customer” as the saying goes. And communicate accordingly – we should add right away. In this particular article we would like to illustrate the above said by analyzing 2 possible presentations of a rather complex issue, i.e. the importance of setting your conversion values in your interface. Namely, we are going to compare 2 different categories: a professional essay and a piece of marketing communication – relative to the same subject matter.
1./ Category: Professional Essay – Level: Advanced
Goal: Illustrate what might happen depending on whether or not you set the right conversion value
You can find the first presentation
here. In this case the author has to present the concept in an exact and exhaustive way. Within this given framework, we may state that the discussion is kept simple in a special sense: it does not expand to cover cases which are more complex (i.e. storefronts) than what is absolutely unavoidable. Still if you manage to fully understand its message you’ll be equipped to deal with more complex situations. The discussion is advanced also since basic terms and simple calculations are not explained in it.
It’s worth asking for which audiences and under what circumstances is this exact and exhaustive discussion appropriate. E.g. if you have to educate future advertising professionals or if you need to demonstrate your own professional values for some reason, it may be absolutely suitable for your purposes. However, the presentation linked-to above might prove too sophisticated and complex in situations where a different kind of approach seems to be advisable.
2./ Category: Marketing Communication – Level: Basic
You have an audience of some hairdressers in your metro. Either clients or prospects. You need them as clients and simultaneously want to convince them about the importance of setting their conversion values in their interface. However, you don’t have to display your professional qualities since they have gathered (or come to the forum) to listen to you, they trust you and need your advice. What you mean to achieve is that most of the audience gains some correct understanding of your concept provided they listen carefully. Goal: remind them what CPA and ROAS mean and first of all explain why setting your conversion value may be vital. Use a simple, fully explained numerical example.
Important rules are: terms and calculations should be kept simple and explained. Tables, mathematical formulas, external references etc. should be avoided. The level of interest of your audience can be described as follows: they don’t wish to take detailed notes, nor do they want to learn the technique of PPC advertising. What they need is some really easy, still authentic explanation.
Find here a possible alternate discussion as it could be posted e.g. in a forum for the shop owners mentioned above.
What Is Your conversion Value?
We would like to illustrate the importance of setting your conversion values by using a simple numerical example.
In our example, a hairdresser’s shop has two ad groups within its campaign, both aimed at acquiring customers. The first ad group’s theme is hair cut, while the second ad group’s theme is unisex hairdressers. Theme means a subject matter your keywords are grouped around.
In a particular week, the first ad group brings in 200 clicks at $0.50 each. Hair cut being a rather simple theme, only 1 in 20 clicks delivers a customer. The total spend of the ad was $100 and it resulted in 10 customers; in other words, one costumer costs $10. This is called cost-per-conversion. In the same period of time, the second ad group brings in 50 clicks at $2.00 each. Since unisex hairdressers is a bit more specific theme, 1 in 5 clicks brings a customer. In this case, like in the first ad group, the total spend is $100, and it also resulted in 10 customers. The cost-per-conversion, which we sometimes also term as cost-per-acquisition, is $10 in this ad group as well.
Let us compare the two situations with special regard to profitability.
Since the amount spent on acquiring a customer is $10 in both cases, the shop owner may conclude that the two ad groups are equally profitable, even though a click costs four times more in the second ad group ($2.00) than in the first one ($0.50). This may seem reasonable as long as the conversion value is not factored in, as this important metric can completely change the scenario. If the shop owner finds that a customer from the hair cut ad group results in $30 of profit, while a client from the unisex hairdressers ad group results in $40, he may want to set these amounts as the respective conversion values in the ad groups. In this case, 10 customers would generate $300 in profit in the first ad group and $400 in the second. Since the total spent on each ad group was $100, it may be concluded that the return-on-ad-spend (ROAS) is $300/$100=3 in the first ad group and $400/$100=4 in the second group. Based on this, the shop owner may correctly conclude that assigning more of the budget to the second ad group and less to the first one is advisable.
The above example illustrates that while cost-per-conversion is a highly important metric, profitability can best be measured by ROAS. When your advertising is driven by cost-per-conversion, you minimize the amount spent per customer on advertising, but this does not always tell you much about profits. On the other hand, when your attention is focused on ROAS and you designate it to be the driving force behind your efforts, you will optimize the profits derived from advertising—which is closely related to your bottom line. In plain English, it’s well worth watching how much a customer costs you, but what really matters relative to your bottom line is how much can be gained in profits by one dollar spent on advertising. This is why it is so vital to set conversion values in your advertising interface.
In case your agency handles the above questions in any special way you may want to mention it in a brief, well-written closing paragraph.
Conclusions: If you manage to identify the level of interest of your audience and to present your concepts in a corresponding way your clients and prospects will appreciate it a great deal. They will conclude you pay special attention to their needs by addressing their problems in a language they speak and understand. However, finding the right form of communication is often a rather difficult task. It’s much more an art than science and can only be learnt via years of consistent work. Evidently, active participation in public forums is one way to gain experience in this special field.
