You're investing in PPC because you want to increase your revenue through search engines, it's that simple! Your investment needs to generate positive cash flow.
To figure out if your spending is paying off, you need to calculate your ROI. This will tell you if there is a positive return. Fortunately, the calculation of ROI is not that difficult:
ROI = (Total Revenue – Total Expenses) / Total Expenses x 100
If your ROI is positive, your investment is profitable because you'll get more of what you originally spent on advertising. However, if it is negative, it means your investment is invalid.
Your conversion rate is the percentage of users who click on your ad and make a purchase. This is important because not everyone who clicks will buy your product or choose your service. CPC is not the same as CPC.
Conversion rate = number of purchases/number of people who click on the ad
AdWords average conversion rate
On average, advertisers can expect a conversion rate of 3.17% on the Latest Mailing Database Search Network and 0.46 on the Display Network. Are these numbers normal for your company? Or are you surprised?
However, you need to benchmark your AdWords conversion rate to see if your efforts are paying off. For example, let’s say you used to convert at 0.3% and now increase your conversion rate to 1.3%. However, you know that the average per search is 3.17%, so if you're still at 1.3%, you have a long way to go to reach the average and improve it further.
If you can't even get to the average, then you need to do a lot of work to make SEM work!
You can set broad goals for your PPC campaigns, such as increasing growth, increasing profits, and getting more conversions from clicks. However, you must ensure that your goals align with your SEM strategy. For example, if you want to increase traffic to your website, your main goal should be to increase your search engine CTR.
If the main goal of your PPC strategy is to attract leads, then the KPIs you need to track are sales and market conversions through paid search traffic, and you need to determine how much each lead should spend. To do this, you need to activate conversion tracking in Google Ads.