One of the most important questions you need to ask yourself when starting your adwords campaign is how much should you need to spend. In a previous article we went through the many different terminologies that are used in google adwords to assess the performance of a particular account. But we need to come up with a clearer understand of these metrics. What are the most important ones in order to assess success and failure of a particular campaign.
In this article I will give you a simple solution provided by John Crestani, one of the leading gurus in ppc in the market. He has a video that addresses this issue that is likely to be one of the most single important simple contributions I’ve seen addressing this topic.
There is a lot of confusion and different opinions on the internet about this core issue of “what metrics to track” and how to track them. Here is Jon Crestani’s answer:
Check the video here:
https://www.youtube.com/watch?v=ZtLzrAX9BHM
Essentially, his recommendation is to take into account two fundamental metrics: ROI and ROAS. In the video he confuses these two metrics I believe and hence he ends up saying something different when he is explaining what he is saying – he refers to 1:2 as 1/3 and not ½. This is why I believe he actually gives us 2 recommendations of what the most important numbers to track in google adwords are.
If one takes into account the 1/3 rule then we need to look at ROI. ROI is basically the profit minus the cost divided by the cost. This is sometimes also confused with profit minus cost. What Jon is basically suggesting is that if a product costs, for example, 500 euros, then our cost per conversion should be around 1/3 of that. So 166 USD.
On the other hand, Jon is also making us aware of ROAS and here he recommends that a the perfect ratio is ½. In other words, if we spend 500 euros in adwords we should make 1000 in sales.
