ROI Oh my!

This week we were discussing ROI (Return On Investment) as well as ad optimization. 

ROI is critical to any business.  If one isn't recouping the money they expended on the product or the ad, then they are losing vital financial stability and the house of cards will quickly crumble and fall.  The way we determine ROI is that we first look at the expenditure, and then we look at the return.  In the case of what we were studying this week it would be the cost of advertising vs. your conversion rate.

If an ad is successful, that means that you have a good conversion rate.  A conversion rate is getting the consumer to do something.  This could be anything from signing up for an email, to purchasing an item, it is really up to the individual business owner to try and decide what a conversion is to them.  Now that we understand what a conversion is, we need to determine how much the conversion cost us in terms of advertising costs.

If the conversion was purchasing a product, and the product sold for $10.00 and our ad cost us $3.00 at the time of conversion, then it can be said that our ROI is $7.00.  In other words we made money after we adjusted for the investment that it took to make the money.  So you can see it's actually pretty simple to calculate.

Now on to ad optimization.  This really boils down to how to make your ad more successful, and get rid of the bad clicks.  We need to focus on good keyword choices, good negative keyword choices, and using google ads to tell us when we have a bad score. 

As with anything we are learning that is new to us, it can be a bit of trial and error.  However, the key is to keep tweaking and doing our best to get it "just right..."