Many AdWords advertisers have asked themselves, why is my cost per conversion so high?
I’ve developed a 4 step checklist to help AdWords advertisers figure why their cost per conversion is higher than they want it to be. It’s a sequential checklist that will be useful if you’re ever trying to figure out why your cost per conversion is too high. Start with checklist item 1 and work your way down the list.
The Rothman PPC Too-High Cost Per Conversion Checklist
1. Am I being unrealistic?
If you’re cost per conversion is too high, the first question you must ask yourself is if you are being unrealistic?
Take a web design firm, for example. Say their cost per lead is $120 and 1 out of every 8 leads turned in a new client. The cost of a new client is $960.
Seems high at first glance, but what if the average revenue per new website sold is $5,000, and what if 80% of new website clients also get sold ongoing services like social media management, content development, or web hosting? And what if the web design firm knows that for every 5 clients they get, they’re going to get an additional word of mouth client in the following three months?
Now the cost per lead of $120 doesn’t seem so high.
You have to be realistic. A moving company isn’t going to be able to spend $300/month and get 40 leads. It just doesn’t work that way.
Many business owners have their head in the clouds about cost per conversion goals (among other things), and too many business owners give up on AdWords too early because they have unrealistic expectations.
If you’re not happy with your cost per conversion, check yourself, think about if your expectations are realistic, and think about just how valuable one new, solid AdWords lead is.
Are your cost per conversion expectations realistic?
2. Am I tracking all conversion types?
If you are indeed being realistic with your expectations, then the next item on the checklist is to make sure that you are tracking all conversions types.
With lead generation campaigns there are three types of way to track conversions: calls from ads, calls from the website, and lead form completions.
Say a moving company owner isn’t happy with their $120 cost per conversion. But say they’re only tracking calls from mobile ads and lead form completions, and they’re not tracking website calls. At least half of their leads are likely coming from website calls, so if they included those unreported conversions in their conversion count, they’d probably have double the conversions and their cost per conversion would be $60 and not the inaccurate $120.
You have to make sure you’re correctly tracking all conversion types if you’re unhappy with you cost per conversion, because if you’re not tracking all conversion types, then your cost per conversion is going to be artificially high and you’ll be worrying about a problem that might not exist.
3. Am I bidding too high?
Assuming you are indeed tracking all conversion types and your cost per conversion is accurate, your next step is to look at your bids and see if you’re bidding too high.
Bidding too high can lead to a higher than desired cost per conversion.
For example, let’s say you’re a divorce lawyer with a 20% conversion rate and your average cost per click has been $60 over the last month. That means you’ll get one lead for every five clicks, and your cost per conversion has been $300.
If you lowered your bids and got an average cost per click of $30 and still got a 20% conversion rate, your cost per lead would drop to $150.
When you lower bids you want to be careful about going too low and not being able to spend your full desired budget, but in a lot of cases, especially with large markets and smaller monthly budgets, you can lower your bids by quite a bit, get a lower cost per click and cost per conversion, and still spend your full desired budget.
If you’re not happy with your cost per conversion, your cost per click coming from bids that are too high might be the issue. Lower your bids, see if your conversion rates holds steady and if you can still spend your full budget, and if you can, then you’ll get a lower cost per click, a lower cost per conversion, and more leads for the same overall budget.
4. Do I have problem keywords?
But what if your bids are reasonable and fine?
What if you’re being realistic with your expectations, you’re tracking all leads, you’ve got an acceptable cost per click, and you’re still getting a cost per conversion that’s too high?
Then you’ve got problems… keyword problems.
If you can check off the above three items, then it’s time to go to your search terms report and check out your search term quality.
What are people actually searching in Google when they click on your ads?
Are the searches you get clicks from quality searches done by prospective clients? Or are you showing up on a bunch of junk?
Most likely in this spot, you’re showing up on a lot of low quality searches and that’s why you’re not getting conversions and your cost per conversion is too high.
If you’re a Detroit plumbing company advertising on AdWords and you can check off the above three checklist items, then you’re probably getting a lot of junk on your search terms report like:
- plumbing supply companies in Detroit
- pictures of plumbers crack
- how much money do plumbers make
- plumbing license board michigan
- how to tell if your toilet is clogged
- i clogged the toilet, again
You’re probably showing up on a lot of bad, low quality searches and that’s why you’re not getting conversions and your cost per conversion is too high.
Once you review your search terms report and confirm that your search term quality is bad, then you’ve got to figure out what keywords are leading to those low quality search terms. What are your problem keywords?
I have a very simple way of doing this.
a) Set your date range to a large date range, like last 30, 60, or 90 days.
b) Go to the keywords tab
c) Sort keywords by cost (keywords that have accounted for the most spend at the top)
At this point, you’re looking at a large date range and you’re looking at the keywords that have been eating up all your spend.
Now look at the cost per conversion column.
Do you see any keywords that you’ve spent a ton of money on that have lots of clicks and spend but zero conversions?
Do you see any keywords that you’ve spent a ton of money on that have lots of clicks and spend but a cost per conversion that’s way higher than your campaign’s overall cost per conversion?
Those two types of keywords are likely to be your problem keywords… the keywords with lots of spend and no conversions and the keywords with lots of spend and a way higher than average cost per conversion.
Now that you’ve isolated the problem keywords, you can then go on to fix them and get your cost per conversion down. And we’ll talk about that on an upcoming article.