Today we are back talking about advertising and your online store. Whatever the size of your shop, it’s inevitable that you will be doing some level of advertising. And one of the most popular ways online is to use Google AdWords. Now this isn’t a topic that you can just jump into and get it over with. But we wanted to give anyone who hasn’t explored this option a chance to learn more about how you can use AdWords and eCommerce effectively.
To help us, I talked Hayk Saakian, an AdWords specialist. Trust me, he knows his stuff. He not only explains what it takes to get started with AdWords but also gives some real-world examples that clarify some of the questions you might have. From initially making the decision to use them to how to get your ads to show up, we covered it all. It includes:
- What AdWords really are
- How to approach the decision to use AdWords for your online store
- How to track your conversion rates for your advertising
- Setting up your eCommerce campaigns using AdWords
- What’s the best way to make sure your shop shows up in the Google Product Listing Ads
What’s your best definition of ad words?
Hayk: The way I like to show people is with a sample search. For example, when you go to Google and you search something like “light-up shoes,” what you’ll see is a lot of different things and some of the information on that screen is going to be ads. Some of the information is going to be organic search results provided by Google’s algorithm, the organic algorithm. The distinction is that anything that’s on this page, which is an ad, is coming through ad words, which is a platform. It generates about two-thirds of Google’s revenue, and it’s the way that businesses and individuals can advertise to people in search engines without having to rank through the algorithm.
Bob: So there are several different levels or ways you can use AdWords.
Hayk: Mm-hmm (affirmative).
Bob: Okay. An online store owner, when first making the decision, maybe a coach or somebody has told them, “You need to start advertising.” So they start looking at AdWords. What would be your advice to them when they’re making that initial decision on whether AdWords will work for them or not? I know there are a lot of variables, but what do you usually talk to them about or advise them about?
What advice do you have for online store owners wondering if AdWords will work for them?
Hayk: The main thing I look at with AdWords is return on investment, on estimating that before you start running any of the campaigns. The cool thing with AdWords is since anybody can see the ads that you see on Google, a lot of that is public information. The ads that you’re thinking about running? There are other people who have already run ads on those keywords and so you can do the research and see what are they spending based on their sales price. If you’re in the same industry as them, you might have the same margins. What could their return on investment be? Based on that, I advise clients to look for a potential for return on investment. Can you rough it out for weeks or months before you have a successful campaign like your competitors do?
I could walk through an example if that would make more sense.
Hayk: Okay, to get more specific, the things that I look at are conversion rate, cost per acquisition, and return on investment. When I say conversion rate, I’m talking about out of 100 people who go to your website from an ad, how many of them will actually buy something? That’s the conversion rate. Conversion rates for other sites might be could be maybe you’re offering a free e-book that you’re collecting emails for or maybe you have a newsletter, but e-commerce conversion rate is what we’re talking about here. What you want to do is take 100 and divide it by your conversion rate.
For example, if your conversion rate is 5% which is pretty good, I would say a poor conversion rate or below average conversion rate is around 1% and anything worse than 1% really needs a lot of attention. A good conversion rate would be around 10 to 20%. I think Amazon is maybe like 30%, some of the highest in the industry.
They know that if you look at a product on Amazon, there’s a one in four chance that you will actually buy that product or buy something else during that same session.
Hayk: Let’s start with that, so if your conversion rate was 5%, 100 divided by 5 is 20. The reason that’s important is because it means that out of every 20 people that go to your website, one of them will actually buy something, so now you know how many clicks it would take to generate a purchase. The next step there is to figure out how much does it actually cost to get somebody to click on your ad. Just for some quick context, the way AdWords works on Google compared to traditional advertising, is there’s are many differences. One is that the inventory is sold in real time with quotes meaning that people are actively competing against each other to show up for a search. The second difference is that it’s based on an auction system where if you go to a radio station or TV station and you want a specific spot, they just have a price for it and you pay them and it shows up.
With Google, if you want to show up higher than someone else or if you want to show up instead of someone else, you have to pay more. Those are the key differences, so the cool thing with that is, there’s a lot of tools out there. One free tool is called Google Keyword Planner. One that I personally use is called Spy Foo that will tell you for a particular keyword, what it will cost for someone to click on your ad and what will you pay Google for that.
Let’s say on this example it was $1.50. Yoou know that it takes 20 people before you get one purchase so you need 20 clicks. Therefore, 20 times $1.50 is $30, so that tells us on average, you will spend $30 to sell a pair of shoes. Now you need to go back and see, okay, well what is your price point, are you profitable? If you sell your shoes for let’s say $50 and it costs you $30 in advertising to sell a pair, maybe your cost out the door is $10, so you’re making a great profit.
On the other hand, if your profit margins are 10 or 11% and that’s all the room you’ve got for marketing, then it doesn’t make sense. The interesting thing I’ve seen with AdWords is that the unit economics of the business are a significant factor in whether you’re going to be successful with it or not. You might have competitors that are selling the same product as you or spending more and making more money even though you have the same product and it’s because of their back-end fulfillment and how much money they can generate per sale.
Another thing that’s hard for a new e-commerce store to think about is what is the lifetime value of a customer? For instance, a common strategy with e-commerce nowadays is to essentially lose money on your first customer, your first sale, in order to sell them more products down the line. Example could be maybe you’re selling baby food and you’ll spend $100 to make a $10 sale because you know that the typical person might spend $200-300 a week on baby food. After you get their email address and you have all their personal information, you can resell them down the road, so this is the kind of math I talk about when looking at whether AdWords is worth it.
Find out your conversion rate. You can estimate if you don’t have a conversion rate yet, based on how good your website is, how good you think it looks. Anywhere between 1 and 5%, that’s kind of a good ballpark, and then cost per click is public data that you can find through a tool called Google Keyword Planner or a paid tool called Spy Fu and you’d multiply those numbers and decide if is this an acceptable margin. The key there is that it will take you probably a month or two to actually achieve that. In the beginning you’ll be losing money on your ads. That’s pretty standard. The main reason for that is just how their ad system works and whether there are built-in discounts on auctions.
For instance, maybe I was advertising on this keyword for a year for a $1.50 and you’re a new person. You decide to advertise to compete with me. Google will give me a discount to show up for the same keyword and will mark you up for premium in their algorithm. Even though we’re both bidding $1.50, I’m going to be paying $1.30 and you’re going to be paying $1.70 and we’re going to be competing for the same spot.
Bob: Now you mentioned conversion rates and you may have already answered this but how does one easily track conversion rates or is there some method or tool that you should use? Some people even say, “Okay, conversion rates, where am I seeing these? Are they inside of AdWords?” Any thoughts on that?
Is there any easy way to track conversion rates?
Hayk: Yeah. There are two layers to this question. One is, how do you get any kind of data to figure out what channel is producing revenue—AdWords, or any other channel? Then the second layer of data, which is much more complicated is, if you’re doing multiple different campaigns on different channels, which one ultimately convinced someone to purchase. I’m going to address the first challenge because that one is the most useful to most people.
Hayk: We have some clients who are doing millions a year and they’re spending a lot on different channels, so it gets really complicated.
You know, if you have an e-commerce website, generally let’s say for WooCommerce, there is a plug-in that will send your transaction data whenever someone makes the transaction on your website into a free tool called Google Analytics. Google Analytics tracks how people get to your website and what they do on your website. By feeding your sales data into that system, you can connect the dots and say, if someone came from AdWords or if they came from Facebook or if they came from somewhere else and they made a purchase, you can make statistics on that. The plug-in I use for WooCommerce, it’s called WooCommerce Google Analytics Pro. It’s the official one made by WooCommerce. It’s a paid plug-in at $29. I know there are free plug-ins that will do what’s called the enhanced e-commerce integration as well, but I haven’t tested them so I can’t personally vouch.
It gives you a lot of useful information. For instance, it will tell you your conversion rates. You don’t have to calculate it. It will look at your per session value. Out of 100 people, how much is each person going to your website worth? It will break it down based on different channels, so for instance you can see that Google paid might be a 5% conversion rate and Google organic might be 10%, so you can see the differences.
I think anybody who’s running an e-commerce store today should set this up. In most cases it’s free or a one-time fee, and the information is incredibly valuable.
Bob: Okay. This is overwhelming for a lot of people and that’s why there are businesses like yours and why you do what you do, but when they’re first starting to set up their eCommerce campaigns with AdWords, any tips you might share with actually setting up those campaigns, the first few steps they might want to take or some words of wisdom on your part?
Any tips or advice for setting up an AdWords campaign?
Hayk: There were two areas that were challenging to me with AdWords for e-commerce. One is just getting it set up and then after you got it set up, actually improving your ads and getting profitable with them. I can speak to just how do you even get it set up first because that was a really big challenge for me and I think it might be useful to know for a lot of people. Should I start with that?
Hayk: Okay, so to actually get your products shown on Google ads, the keywords you’re looking at, if you’re doing research online, they’re called Google product listing ads or Google merchant center ads and they go through Google ad words, so if you’re doing your online research, that’s what you want to type in. The key for those is how do you actually just set it up and how does it work all together. The first key is called Google Merchant Center. Basically this is a database of your products on Google. The purpose of this is for Google to know what are all of the products that you sell. It’s organized in a structured format so that, like your website is html and they have a hard time understanding it sometimes, so they invented this thing called Google Merchant Center where you can just upload a spreadsheet— or some plug-ins will do it for you—of all your products.
It includes things like your prices, your colors, your shipping information. From there, they read all of your product information and they integrate it with AdWords. This was a big stumbling block for me just getting it set up, because, with a normal AdWords campaign for a service business or local business, you don’t have to do any of this stuff because you’re not selling products online. Just getting that set up. There’s a plug-in that will do it, Google Commerce. There’s a $79 plug-in called WooCommerce Product Feed, again, that’s the official plug-in. I’ve seen free plug-ins that can do the same thing, but I know the official one definitely works, so that’s the first step: getting your products into Google’s databases.
Once you’ve gotten all of that taken care of, it’s very similar to running a normal Google AdWords campaign. There’s a few differences but it’s still the same auction system. You’re still bidding on keywords, and once you’re set up with all that, you’re set. If you make updates to your products and you have a plug-in like the WooCommerce one I mentioned, it should automatically update everything in Google It might take a few days but once you’ve got all that set up, you’re done with the technical setup.
From there, it’s more creating and optimizing your actual ads.
Bob: Okay. You brought up Google product listing ads and it sounds like there is a method to the madness of actually getting your shop to show up in this, so for with that all said and done, any other words of wisdom?
Any other words of wisdom?
Hayk: That Merchant Center thing I was just talking about? That’s really the biggest challenge. One thing that tripped me up personally when I set up these campaigns has to do with shipping. A lot of companies have shipping that makes sense for their customers but you’re going to have a really hard time to set up a complicated shipping system n Google. What they’re looking for is a specific price on shipping your product to specific countries. Let’s say you’re selling a pair of shoes. They want to know that to the United States, it’s going to cost $10 or it’s going to be free for a specific number of units ordered.
If you’re doing variable shipping based on their location or it’s different every time, you’re going to have a lot of problems just getting your products in there. That’s the biggest thing that tripped me up.
Bob: Now I said that was the last question and I lied because I just thought of something else. Let’s say you have a business and people come to you to do this or to basically manage it or help it get started or whatever. Is it a matter of how many products you have whether a do-it-yourselfer says, “Okay, I’m going to tackle this myself and give it a try,” and you know maybe there will be frustration or things aren’t working out and they feel like they need somebody, but is there really some point and I don’t know if it’s in inventory, if it’s your product or what the variables are, that a person might say, “Okay, I need Google ads, AdWords, and I’ve realized that, because of this, or that, I shouldn’t tackle this myself.”
How do we decide if we should tackle an AdWords campaign ourselves or get some help?
Hayk: I would look at two main things: how many different products you own and sell and how much advertising you’re looking to do (or are prepared to do). Let’s say if you are doing it yourself, you’re bootstrapping a lot like, we started our agency with bootstrapping, then you want to focus on one or two key products, you want to do it yourself just to get it off the ground. Because there is a lot of low-hanging fruit that you can achieve, you can grasp without having an expert really involved.
The place where we shine with clients is when it sort of gets out of hand. Maybe they have hundreds of products, all with different keywords (because remember, it’s an auction system based on keywords). We know, with thousands of different keywords, when it can get out of hand and you’re thinking about, “Do I want to get an intern or do I need to hire somebody?” That’s when it seems to make the most sense to consider getting help.