Extremely high Cost per Conversion
I'm reaching out today in hopes of some kind soul may help enlighten me with a solution to my biggest AdWords problem: cost per conversion. One of our online retail sites has one particular campaign that everything centers around. It has been running for a few years, and has five ad groups in it.
Each ad group has had different levels of success. For 2013-to-date, our best converting group has a cost/conv. of $6.76. It also converts the best of the five groups at around 7.5%. The worst has a cost/conv. of $19.13. The other three are not far off from that, and these have conversion rates of 2.3 to 4%.
Our best converting group has a CTR of 2.15%, which is actually fourth worst. The other groups, which do not convert as well, have higher CTR's ranging from 2.67 to 3.68%.
By all accounts, these stats are not bad! Overall this campaign has an average CTR of of 2.48% and a conversion rate of 3.92%. The problem in tow is the actual cost/conversion: $12.58.
If we were selling dump trucks with those stats I surely would be elsewhere this early on a Saturday morning. But alas, we are not - the item we are selling averages just $30, and so you can immediately see how the current state of things is untenable.
The average CPC is $0.49 and the impressions number ~485,000 since January 1st, 2013 (and these are well-targeted impressions, I believe. We have been very careful about cutting the fat of unrelated searches.)
So why is this happening? I'm tempted to blame the competition. This particular store is in a bit of a niche market, but there are a certainly a handful of competitors to deal with. Am I overbidding? Not out of inexperience, I don't think so. For this campaign our average position is 2.5 (and I should mention, we are and have been using Conversion Optimizer for a long time now.) I would also add that our quality score is 10/10 for about 85% of keywords within the scope of the campaign, and the balance made up of 7/10's.
That's a pretty good snapshot of this campaign. What I'm crossing my fingers for is that someone out there with more experience might be able to see a hole in my data, or something I'm overlooking - anything that can get our costs down without bringing down revenue at the same time.
If you'd like to assist but need more info don't hesitate to ask. I will tell you as much as I can.
Re: Extremely high Cost per Conversion
The numbers look good - I'd be happy with those kind of numbers in most cases - but you clearly do have an issue with the profit margins.
Here's one place I would start - take a look at the ad positions that generate conversions in Analytics (hopefully you have Analytics tracking the conversions as well as in AdWords - if not, I'd recommend you set that up) See which ad positions give you the conversions - it might be that all your conversions come from positions 1 and 2 . which means that the competition is such that an average position of 2.5 means that more than half your traffic isn't converting.
The rationale for saying this is that with low cost items people tend not to shop around that much - after all, on a £30 item, how much can you save if you shop around? Also it might be something that people have a good idea of how much your product should cost. People tend to shop around a lot on big ticket items - but for smaller purchases they might look at one or two places.
if this highlights ad position as significant then the next step for me would be to set up a couple of experiments in Adwords to text the bid levels. Run 50% of your traffic at a higher bid.
I know what you're thinking... if I bid higher my clicks are likely to cost more so what's the point of that.... right?
Well - yes the clicks will cost more. But if the ad position improves then so might your CTR - and often the conversions improve too since, as we might have seen previously, the higher ad positions convert better.
It is good to focus on the CTR and the CPC - but your bottom line is based on the cost per conversion...
At a cost per conversion of £10 you can make 100 conversions - you sell for £30 so you sell £3000 for a cost of £1000 - profit £2000
But by increasing your bids, and getting a better ad position whilst it costs you £15 per conversion you get 200 conversions.
You sell £6000 for a cost of £3000 - profit now £3000
Probably exaggerated numbers - or maybe not - but you get the idea. The key is testing to find the sweet spot.
I'm sure others are going to weigh in with more (and probably better) ideas ;-) But this is where I would start my analysis.