To get the most out of your Google Ads campaigns, it’s important to set targets. As we can track the results of your campaign in great detail, there are a wide range of performance metrics to choose from.
In this article, we’ll explore why goal-setting matters, which metrics to use, and how to calculate performance benchmarks that actually help your business grow.
Why set performance targets for your Google Ads campaign?
There are a few key reasons for setting performance goals for your Google Ads campaign.
1. Goal alignment
Having a clear goal helps us stay on the same page with each client. When we have a clear picture of what success looks like for your business, it is much easier to make decisions that will help you get there.
2. Measure success
By defining performance targets this allows you to analyse the progress of your campaign on an ongoing basis. You can make decisions and identify areas for improvement based on the results. Without performance targets, it’s difficult to assess whether or not the campaign is running successfully.
3. Make data-driven decisions
Tracking performance metrics allows you to make decisions that are based on evidence. This way, you will have a much better understanding of what to expect in the future.
4. Maximise return on investment (ROI)
The end goal of any marketing campaign is to maximise the return on your investment. With clear metrics like ROAS (Return on Ad Spend) or CPA (Cost Per Acquisition), you can optimise your budget, reduce waste, and scale what works.
Which performance metrics should you use for Google Ads?
There is a wide range of metrics to track in Google Ads; however, some are more useful than others.
The best metrics to work towards will depend on your intended outcome.
In general, there are two that are useful in most situations.
1. ROAS (Return on ad spend)
ROAS is calculated by dividing the total revenue generated from advertising by the total cost of the advertising campaign.
This measures the amount of revenue generated from every dollar invested into a Google Ads campaign.
ROAS is useful if you are looking to increase revenue from your campaign, for example, for e-commerce stores or online shops.
How is ROAS calculated?
The formula for ROAS is:
ROAS = Revenue / Ad Spend
For example, if a Google Ads campaign generated $10,000 in revenue and the total cost of the campaign was $2,000, the ROAS would be calculated as shown below:
ROAS = $10,000 / $2,000 = 5
In this case, for every dollar spent on advertising, the campaign generated $5 in revenue. ROAS can be expressed as a ratio (5:1) or a percentage (500%).
2. CPA (Cost Per Acquisition)
CPA measures how much it costs to acquire a conversion.
A conversion could be a lead for your business, a download, a phone call, or other actions that are completed on your website.
CPA is useful when lead generation is the main goal of your campaign.
How is CPA calculated?
CPA is calculated by dividing the investment by the number of conversions generated from your campaign.
The CPA formula is as follows:
CPA = Total Advertising Cost / Number of Conversions
For example, if a Google Ads campaign cost $1,000 and generated 100 conversions, the CPA would be calculated as follows:
CPA = $1,000 / 100 = $10
In this case, the cost per acquisition is $10, meaning that on average, it costs $10 to acquire each conversion.
How to calculate performance targets for Google Ads
1. Define your goals
Firstly start by defining your overall goal. This is your desired outcome from your investment in the campaign.
For example it could be that you want to generate $10,000 in revenue from $2,000 in ad spend.
2. Calculate your profit margin
It is important to know what your profit margin is so that you can allocate your budget.
This involves subtracting the cost of goods sold (COGS) or the cost of providing a service from the revenue generated per conversion.
When allocating your ads budget, take into account the lifetime value (LTV) of your average customer. If you sell a product or service that has a lot of repeat customers, you can allocate more budget to acquiring your first lead or sale.
3. Review past performance
If you have run Google Ads in the past, this provides really useful data.
Take into account any business changes that have happened since you last ran the ads as well as any external factors that could affect the performance of your campaign.
Select the metric that is most relevant to your campaign.
As explained above, ROAS is generally more useful for revenue-based goals (common in eCommerce), whereas CPA will be more useful if you are looking to generate leads (popular for service-based businesses).
4. Set realistic targets
Set realistic targets so that you have a path to success.
Your goals can always be tailored over time, depending on performance and changes within the business.
Get expert help with your Google Ads campaign
Ready to make your Google Ads campaigns more effective with clear, measurable goals? Contact SGD today and let’s grow your business with data-backed strategy.
