SEM profit isn't everything . . . it's the only thing
Apologies to the legacy of the great Green Bay Packers coach Vince Lombardi, who said: Winning isn’t everything, it’s the only thing. Professional football is about winning and Google search marketing is about making a profit.
So this section is devoted to helping you to make that happen. We will cover the steps and process you can use to engineer profitable campaigns. We use the word engineer because NOBODY can create a campaign that is profitable the first time it runs. (We looked it up – it has never happened).
You may not be actually using "profit" as your stated goal. For example: you may be trying to get people to sign up for your charity or trying to get people to volunteer for some cause you represent. Your “conversion”, however, will still have a value and your goal will be to lower the cost of those conversions relative to that value. That's close enough to the concept of profit.
Find profit as cheaply as possible - then scale that profit
There's really no magic here. Just a lot of work and some real science. You've got to create profitable conversions - and do it for for the lowest cost possible. That means finding profitable conversions for just a few hundred, or even just a few dozen, of those expensive clicks.
Scale your losses to a minimum. Scale your profit to a maximum. Simple. Sort of.
Your job is to find where the profitable conversions are hiding in your marketplace. What are the specific combinations of: settings, locations, keywords, ads/landing pages that produce conversions. At a profit! Once you have figured out how to create a few profitable conversions, your job will shift to scaling that profit as aggressively as you can.
This is going to take some trial and error. And some science in determining which campaigns need which kinds of "fixes". To do this job right, you're going to have to
- Create a LOT of very focused campaigns,
- Try many variations on those campaigns,
- Throw out the campaigns that won't produce,
- Help the ones that produce to flourish, and
- Scale the profitable ones quickly and aggressively
Learn how to compute your SEM profit
If you haven't personally witnessed SEM campaigns that generate real profit, it can become difficult to imagine it happening. Especially when you find out how hard it is to even get clicks - and they cost a LOT of money. But with the right engineering, your campaign/s can indeed generate profit So how do you go about computing that profit?
Your campaign will generate a crop of impressions (people who see your ad)...and those impressions will generate a bunch of clicks (people who click on your ad or call)...and those clicks will generate a gaggle of conversions (people who do something you value)...and those conversions will have a value to you in terms of marginal income.
Profit is the difference between the marginal income from the conversions and the cost of the clicks you paid to Google to create them. Let's look at an example of how this is calculated:
SEM profit: easy to compute - but difficult to engineer
Just look at the example in the diagram above. Those numbers would be considered quite good for most campaigns. 7% click through. 8% conversion rate. $120/conversion value. And that would yield you $5,880 profit after you paid Google $4,200 for those 1,050 clicks at $4 each.
The point is, those clicks are expensive. And you can only make a profit if a large percentage of them (8% in this case) yield a very valuable conversion ($120 each). If this was a way to sell a product that yielded only $40 each conversion, it would be IMPOSSIBLE to make any profit. Unless you could change the numbers. A lot.
Think about this profit calculation (above) as the starting point for designing any new campaign. This will become a very natural way to think.