PPC Testing Part 3: A Campaign Optimization Walkthrough

In the first two posts of this series (PPC Testing Part 1: The Ground Rules and PPC Testing Part 2: Optimization Cheat Sheet), the basic rules have been set and you’ve learned some of the optimization points you have to work with in order to gain more efficiencies in your accounts. However, for some, the thought of going into your accounts and making a bunch of changes might still be a bit intimating. I think most of us learn best by doing, so lets go through an AdWords optimization together.

First, let’s review the PPC testing ground rules. You will them see displayed during the walkthrough.

• Don’t disrupt normal account practices
• Don’t test too many variables together
• Give your tests enough time to get real results
• Use the scientific method (hypothesis, test, analyze, report)
• Understand the context
• Leverage the technology

A Basic Campaign Optimization Walkthrough

Getting set up. In this example, one of your advertiser’s campaigns has been spending its $100 daily limit consistently for the last month with a $2.00 average cost-per-click (Avg. CPC), netting one sale per day. Is there an opportunity to get more traffic and sales from this campaign?

Step 1: Benchmark current performance. Pull a keyword performance report for the last 30 days. Learn how to do that here. You should also pull a campaign performance report for the same time frame and make sure to include the impression share metrics. In this example, by using the impression share metrics, we see that we’re missing out on 40% more available impressions because of our low budget. We know that we’ve been capping out daily on our spend so we knew that there were more impressions available to us, but now we know just how much that could be. Our goal now is to try to get more clicks out of the same $100 daily budget—and the only way to do that is to lower our Avg. CPC that is currently $2.00.

Step 2: Discover the average key performance indicators (KPIs). With the keyword performance report, you’ll need to figure out your KPIs (the most important metrics). Right now, not only is this campaign at $2.00 Avg. CPC, but the keywords are also hovering at an average position of 2.5. If we were to lower our keyword bids, chances are that we would pay less per click but also drop in position as other advertisers willing to pay more would jump ahead of us. But we know the advertiser has told us that they don’t mind if their ads dropping to position 3 or 4 so we have some room here.

Also, with one sale per day, we know that their conversion rate is at 2% ($100/$2 CPC = 50 clicks per day; 50 clicks/1 sale = 2%). So how do we increase sales? If we could drive twice the traffic per day and the conversion rate stayed the same, would that would do it? So now we need to find a way to drop our CPCs to $1 so that we get 100 clicks from the $100 daily budget. At a 2% conversion rate that certainly would be 2 sales per day! However, just know, by paying less per click we may drop ad positions and that could adversely affect our conversion rates.

So what to do? Let’s dive first into the keyword performance.

Step 3: See what keywords get clicks. This campaign has 1,000 keywords. As with many accounts, a small subset of terms is spending most of the budget and so by optimizing this group of terms, we’ll have a greater affect on the account without having to manually work on all 1,000 terms. In this example account, twenty keywords are spending eighty-five percent of the budget. Look at those twenty terms carefully. Are they converting? Do they seem to be wasting the budget?

Step 4: Identify the most valuable terms. You also want to see what keywords are actually converting. Regardless if they’re spending a lot, keywords that are proven to work need to be treated a bit more carefully so you don’t accidently lose their converting power. In fact, you may want to actually increase the bids on these converting terms to make sure that they get high ad positions and are shown more often to searchers.

Step 5: Identify the budget wasters. Are there terms that are simply getting clicks without any conversion activity? If they’re important to the account in other ways, you should know that before simply dropping their bids or pausing them (such as terms around new products where search volume is about to grow quickly, for example). However, in this test, we’re going to pause any terms that have spent over $50 in the last month and haven’t registered a conversion. We can always turn them back on again after the test, but let’s give the other terms a chance to convert.

Step 6: Add terms and negatives. Are there any trends on the converting terms? If so, maybe we should try coming up with more words like those. For example, are keyword phrases with the words “buy” or “purchase” in them converting? Maybe using words like these are reaching users who are ready to shop and not just browsing your advertiser’s website. On the flip side, are there any trends with the poor performing terms that we can use to build some negative terms for the campaign? Maybe the keywords surrounding high-end products aren’t doing so well. It might be a good idea to blanket those terms with some negatives to make sure that your keywords don’t trigger those kinds of ads to show.

Step 7: Come up with your hypothesis. Okay, so now we have a good plan. For the middle-of-the-road terms we’re going to drop their bids by just 25% to see if that has any effect. We’ve identified the budget wasters and have either paused them, drastically reduced their bids by 50% and/or loaded up the campaign with negative terms to stop those kinds of keywords from triggering ads. For our valuable terms that seem to be converting, we’re going to raise their bids by 10% to see if that drives any more sales. Overall, we know some of our bid changes are going to affect our average positions but we’re fine with dropping down from position 2.5 to 4 as long as these changes have a positive effect.

Our hypothesis is that by making these changes, we’re going to reduce our cost per click overall and get more clicks from our daily budget. Also, by elevating the bids on our converting terms and dropping (or outright pausing) the budget-wasting terms, we’ll gain higher performance. The combination of more clicks per day as well as a more efficient keyword list should effectively double sales.

Step 8: Save your current work and upload changes. Do it! Be sure to use Google AdWords editor to save your current campaign setup so that you can upload it quickly in case you need to revert back for any reason. Alternately, you can use the recently launched AdWords Campaign Experiments (ACE) a tool that allows you to accurately test and measure changes to your keywords, bids, ad groups and placements.

Step 9: Monitor the account closely for the next few days. Just as with any launch, you need to carefully watch the revised campaign for a few days. Make sure that conversions don’t drop off completely or that you suddenly can’t spend that $100 budget per day anymore. If anything looks like it’s a disaster, just re-upload the original campaign and start over. But, if it’s acceptable, let it run its course for a few weeks. I repeat: only bail on the test if it’s having a drastically negative effect on the entire account. In any case where you can let a test run until it’s complete, please do so.

Step 10: Check success. After the test period is over (at least two to four weeks) then you can decide if your optimizations were a success or not. Honestly, there’s a very good chance that some of it worked and some of it didn’t work. It’s your job to look through the results and see what happened and if which of your optimizations to keep or not.

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