So Troy and I had a long, healthy discussion recently about what was better: a higher conversion rate, or a lower cost per conversion. This stemmed off an optimization we did for a client in Google AdWords, and we basically had to pick which direction we wanted to go.
The choice may seem obvious; “well, of course I want more conversions.” But what if those conversions were costing you nearly double? Let me illustrate:
Looking at two different types of PPC campaign strategies, we can see that Option B has 3 times as many clicks as Option A at only a 50% increase in cost per click, but a whopping 4.5 times the campaign cost. Option B will likely scoop up more of the garbage clicks since it experiences a lower conversion rate. So the questions remains:
“Do you want 2.5 times more conversions at 4.5 times the cost, and 2 times cost per conversion?”
I don’t think there is a no-brainer answer for this, but let me go back to our earlier blog post about cost per aquisition. We need to understand what we are willing to spend in order to acquire a new cusotmer. If that answer is $50, then perhaps Option B is fine, but if the answer is $25, then Option B may not be fine (A more complex answer to this exists if we actually look at the lifetime value of the customer, but for now, let’s just talk about cost per acquisition). Option A seems to be more efficient on the surface than Option B, but then let’s also remember a previous post on how we can compare two compaigns side-by-side and evaluate them based on a Value-to-Spend Ratio.
Which option would you recommend for your client?
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So Troy and I had a long, healthy discussion recently about what was better: a higher conversion rate, or a lower cost per conversion. This stemmed off an optimization we did for a client in Google AdWords, and we basically had to pick which direction we wanted to go.
The choice may seem obvious; “well, of course I want more conversions.” But what if those conversions were costing you nearly double? Let me illustrate:
Looking at two different types of PPC campaign strategies, we can see that Option B has 3 times as many clicks as Option A at only a 50% increase in cost per click, but a whopping 4.5 times the campaign cost. Option B will likely scoop up more of the garbage clicks since it experiences a lower conversion rate. So the questions remains:
“Do you want 2.5 times more conversions at 4.5 times the cost, and 2 times cost per conversion?”
I don’t think there is a no-brainer answer for this, but let me go back to our earlier blog post about cost per aquisition. We need to understand what we are willing to spend in order to acquire a new cusotmer. If that answer is $50, then perhaps Option B is fine, but if the answer is $25, then Option B may not be fine (A more complex answer to this exists if we actually look at the lifetime value of the customer, but for now, let’s just talk about cost per acquisition). Option A seems to be more efficient on the surface than Option B, but then let’s also remember a previous post on how we can compare two compaigns side-by-side and evaluate them based on a Value-to-Spend Ratio.
Which option would you recommend for your client?
