Search Engine Marketing: SEM - Are You Winning?
"Average" CPA for your account isn't what you're concerned with, though. Sometimes failure is hidden in a successful average. Certain ad groups are bound to be über-profitable — branded terms usually fall into this category. People who have the wherewithal to search for your brand name are much further down the buying cycle and tend to convert at a much higher rate.
Review a report detailing the CPA for each of your paid search campaigns and ad groups on at least a monthly basis. If your campaigns are structured correctly, the ad groups should each be attracting a distinct slice of your target market. Each of these ad group slices convert differently and cost differing amounts per click given the competition.
As such, your ad groups' level CPA's will reveal how efficiently your campaigns are being run. Wasted spend and undertapped opportunities will rise to the surface. Those managing your campaigns will need to take action to preserve the profitability of them.
Value/Cost per Ad Group
If your order value (and margin) can swing greatly between transactions, you need more than the CPA metric. In these cases, CPA doesn't tell you how profitable you are because the actions on your site have differing values. CPA won't cut it, and neither will standard conversion tracking.
You'll need to take advantage of value-based conversion tracking to record the unique revenue or profit associated with each conversion. Assuming your shopping cart software has access to this information, AdWords' and Yahoo's conversion tracking scripts can be modified easily for this purpose.
Armed with this value-based data, you'll use value/cost or return on ad spend (ROAS) as your key metric instead of CPA. This ratio gives you laser insight into profitability. Of course, you'll need to establish your target value/cost or ROAS ahead of time. All ad groups will be judged and optimized accordingly.
Timothy P. Seward is the author of the “Ultimate Guide to Amazon Advertising" (Entrepreneur Press®, 2019) and the founder of ROI Revolution, which drives growth for brands, retailers, and ecommerce merchants with its results-driven digital marketing technology and services. With his extensive marketing and retail background, he is a thought leader who has spoken at 70+ industry ecommerce and Amazon events including IRCE & Prosper, is a frequent guest lecturer at North Carolina State University’s College of Management and has contributed to key industry publications including Internet Retailer.