Explanation

People already have one goal in mind when they launch Google Ads: to get new customers. Setting ambitious but achievable goals is essential to turning a profit. Your goals give you clarity in a complex task, and will guide every action whether growing budgets or pausing. In this course we’ll teach you to set key performance indicators and make adjustments to reach your goals for ROI and scale.

Before you launch you need to set 5 goals:
1) Budget— how much you want to spend a day
2) Target market— interests, product market, demographics, location, etc. 
3) Conversion action— usually a signup, phone call, or purchase
4) Infrastructure— the webpages, phone numbers, emails, salespeople, etc. you’ll use to capture conversions
5) Goal cost per action— how much you want to spend on advertising to get a signup, call, purchase conversion, or click

Starting with budget, choose whatever you think is a meaningful test, but you have to also choose an amount you’re willing to lose to the experiment. You need to find a balance, but if you’re unable to spend $100 a month Google Ads isn’t for you. Who you want to reach is defined by what products you sell, to which demographic, in what location. An ecommerce store may want to sell running shoes to people in the United States who are in the higher 50% of income earners, are female, and within the ages of 25 – 55. On the other hand, a HVAC company may want to sell home heating repair services to middle-income, single-family homeowning men in Poughkeepsie, NY over the age of 55. Start by defining your average customer today rather than some untapped market, and redefine this target over time.

Next, your Google Ads conversion action should also mirror how you do business today whether by phone, contact form submission, or online purchase. You may want to adjust your infrastructure— webpages, phone scripts, emails, and sales processes need to guide new customers into a purchase because this audience is just meeting you. Landing pages should be used that follow the best-practices of offering a single call-to-action to visitors and keeping it  above-the-fold. Phones should be answered promptly by salespeople who persuade the lead into the sale. Emails should regularly arrive to nurture leads into their first purchase. Salespeople should adjust their pitches to close a new audience.

Finding your goal cost-per-conversion, also referred to as cost-per-action (CPA), can be harder. Broadly, it can be defined with this formula:

(Customer lifetime value x the percentage of conversions that purchase) / your goal return = goal cpa

Some may not know their customer lifetime value, what percentage of conversions purchase, or their goal return. To find your customer lifetime value consider a payback period for your advertising spend, whether directly after the first purchase or months later. Next, find the average profit from all customers within that period of time. Then find out what percentage of leads or phone calls purchase (not needed when driving web purchases). Finish by deciding on a goal return— often a 2 – 3x ($200 – 300 for every $100 spent). This could result in the following equation:

($100 x 10%) / 2 = $5 per lead

From there calculate your goal cost per click. Knowing your goal cost per click aids ROI estimation and will give you guidelines for campaign creation and bid management decisions. Start with:

Goal cost per conversion x  conversion rate = goal cpc

If current cost per click is more than goal cost per click, your campaign will probably not meet your ROI goals. If current cost per click is under goal, you’re likely to exceed them. You may see results like this:

$5 goal cost per lead x 10% lead conversion rate = $.50 goal cost per click

Over time watch the Avg. CPC column in Google Ads to compare your real CPC to your goal and estimate ROI (very useful before your first conversion). The average purchase rate for website traffic is between 1 – 2%, and the average lead capture rate on web traffic is about 10%, so you can always use those as placeholders. Make sure to update these numbers over time as you see results.

Goal setting is easy; the hard part is creating successful campaigns. Still, don’t ignore the importance of this. You need to commit them to memory, use them to evaluate results every time you login (in our planning course), and revise them over time (first 2 – 3 conversions and then increments of 10). Specific goals form the roadmap to your success.