Brad Geddes / PPC Geek
Official Google Ads Seminar Leader.
Author of Advanced Google AdWords.
Co-Founder, Adalysis.
(312) 884-9017
Brad Geddes's Theories on Marketing The Best Ads Testing Metrics for Lead Generation Campaigns

The Best Ads Testing Metrics for Lead Generation Campaigns

This post originally appeared on the adAlysis ad testing blog.

There are many metrics you can test by; however, the best testing metrics for determining success vary by industry.

Often the lead generation industry is lumped together as a type of advertising campaign: just get me leads. It should not be classified this way. Within lead generation marketing campaigns, there are four main subsets of lead generation goals.

For the purposes of this article we will use CPA (Cost per acquisition) as the acronym. If you use CPL (cost per lead) internally, this would be the exact same metric.

The Types of Lead Generation Campaigns

I want the most leads regardless of incremental costs

These campaigns are commonly seen in long sales cycle, very high costs items, in the business to business world. There’s often little search volume; so all the competitors are fighting over the few leads that do exist.

There are exceptions where someone is just trying to lock-up the market or make a land grab where someone might overpay for leads for a while; but in reality, these campaigns are usually in high priced industries.

I want the most leads under a specific average CPA

In these campaigns, the blended CPA is what matters. It is OK if some leads are over the average and others are below it. However, the blended CPA needs to be within a specific target.

This is common in variable priced industries. You might have some leads that are worth $1,000 and others that are worth $10. It is usually difficult to determine any one keyword or ads value as the high value leads are often random and not predictable.

You might see this type of advertising goal in the ecommerce industry. For instance, I work with one ecommerce company that has some sales at $5,000 and others at $100. There’s no predictable way of knowing what ad or keyword will bring in the high priced sale – it’s completely random. Therefore, they work from an average CPA basis per sale instead of an ROAS basis.

I want the most leads possible, but no lead should be over $Y

For this marketing type, you work from a max CPA instead of a blended average. This is common when you are doing lead generation for other companies and then selling the leads. For instance, if you get a lead and then sell it to 4 others for $15 each, your breakeven CPA is $60. As you’d like to maintain margins, you don’t want any lead to ever cost more than $45, so you keep $15 per lead.

In this industry, if you get a lead that costs you $75 and you can only sell them for $60; you lose money on that lead. Since these are fixed costs, you have a max amount you want to pay for any one lead.

I want Y leads a month at the cheapest CPA

It is common for small businesses to not be able to scale properly. They don’t want the most leads if they can’t call them all back; therefore, they usually have a cap on how many leads they want a month.

The goal might be 150 leads a month at the cheapest CPA possible. In addition, these might have a cap such as get me up to 150 leads but don’t break $40 as an average CPA.

The Lead Generation Testing Metrics

There are several metrics that you can use for lead generation. Let’s first examine the metrics and then see which metrics best fit each lead gen effort.

CTR: Click through rate: Just because an ad has a great CTR does not mean it’s converting. This metric is not a good one to use for lead generation as it does not take conversions and cost into account. What this metric is good for is getting the most traffic regardless of how it converts.

CR: Conversion Rate: The conversion rate is a ratio between conversions and clicks. This metric does not take cost or volume (CTR) into account. What this metric is good for is ensuring that of the clicks you do get, you can tell what ad is most likely to get a conversion from those clicks.

CPA: Cost per action: This is your actual cost per action. CPA does not take into account volume (CPA) or the ratio of clicks to leads (Conversion Rate). This metric is good for ensuring that your leads do not break a certain cost.

CPI: Conversion per Impression: Conversion per Impression takes into account volume (CTR) and conversion rate. This is a great metric for determining which ad will result in the most conversions possible. However, this metric does not take into account cost.

Testing by More Than One Metric

You do not have to use only one metric to choose winners. You might want to only choose winning ads based upon an ad winning multiple metrics. Now, what you might find in some cases is that one ad will win by one metric and another by another metric. In these cases, you can pick an ad by your top metric, and then create a new ad looking to find one that will be a winner in multiple metrics.

For example, in this ad test one ad has the lowest CPA and another ad has the highest conversion per impression:

image

 

Therefore, if you wanted the most leads regardless of cost, the second ad with the highest Conv. Impression (CPI) would be your winner.

If you had an absolute lead cost; such as £7; then the first ad would be your winner since the second ad is above your lead cost; however, your target lead cost was £15; then the second ad would be your winner as it will provide the most leads and it is below your lead cost.

In some marketing campaigns, you will only use one metric to determine winners. In others you will use more than one metric. Therefore, let’s examine which are the best lead generation testing metric for each type of lead gen campaign.

The Best Metrics by Lead Generation Type

I want the most leads regardless of incremental costs

In this lead generation type; the goal is absolute leads regardless of cost. Therefore, you can use a single metric Conversion per Impression to determine your ad winners. As this metric takes into account volume (CTR) and conversion rate (CR) it will be your testing metric of choice.

In this case, ad 2 in the winner as it has the best CPI even though it is not the CPA (Cost/Converted click) winner.

image

I want the most leads under a specific average CPA

These campaigns care about volume and average CPA. Therefore, we will want to use two metrics to determine winners: CPI (volume) and CPA (cost). When you find an ad that is a winner in both metrics, then you have found a great winning ad. However, you have possible combinations. Because CPI speaks to volume and the goal is the most leads (within a cost); we’re going to pick ads based upon the winning CPI ad (and the other ad/s will be the CPI losers).

  • CPI winner. CPA winner. Fantastic, this is your best ad. Feel free to test against it; but you have a top notch ad.
  • CPI winner. CPA loser; but the CPA is below your average. In this case, your top CPI ad is your winner as it has the most leads below your lead cost.
  • CPI winner. CPA loser and CPA is above your average. The other ad has a CPA below your target.
    • In this case, the ad below your target CPA will be your winner as ultimately you will be judged on how much a lead costs.
  • CPI winner. CPA loser. All ads are above your target CPA.
    • In this case, you have a choice: what matters more – cost or volume?
      • If its cost, you will pick the lowest CPA ad, examine why the other ad did better on a CPI basis, and then create a new ad to test
      • If its volume, you will pick the highest CPI ad, examine why the other ad prequalified people better (common for lower CPA), and create a new ad to test

In this case, there is a winner by CPI (conv. / impr) and CPA (Cost/Converted click) and thus that is a clear winning ad for this lead gen type.

image

I want the most leads possible, but no lead should be over $Y

The management of this type of account (as most should be) should start at the keyword and search query level to make sure you are only using keywords that are under your target CPA. From an ad testing standpoint, we should use cost (CPA) as a primary metric since the main goal is not to break a certain CPA and then use volume (CPI) as the secondary indicator. Since CPA is the prime metric, we will examine the ads based upon the CPA winner (and the other ad/s will be the CPA Losers).

  • CPA winner (and CPA below your target). CPI winner. This is your winning ad. Feel free to test new variations; but this is a clean win.
  • CPA winner (and CPA is above target). CPI winner. This is your winning ad since it’s the lowest CPA with the best CPI; but since the CPA target is above your goal, you will need to be aggressive about testing new ads.
  • CPA winner. CPI loser. In this case, we need to establish what you care more about: the most leads or the lowest lead cost
    • Lowest lead cost: In this case, you will take the CPA winner/CPI loser ad as that will be the lowest lead cost. Examine the CPI winner, pause it, and create a new ad to see if you can find a combination CPI/CPA winner.
    • Most Leads: CPI winner has a CPA below your max CPA.
      • In this case, your CPI winner will be the winning ad and not your lowest CPA ad as you want the most leads and both ads are below the target CPA. Again, examine the losing ad, pause it, and write a new ad that can become a CPA & CPI winner.
    • Most leads: CPI winner has a CPA above your max CPA.
      • In this case, your CPA winner will be your winning ad since your top CPI ad breaks the primary marketing goal of an absolute max CPA. As usual, examine loser, pause winner, create new ad.

If our target CPA was £10 and our goal was the most leads; then the 2nd ad would be our winner as it has the higher CPI (conv. impr) and is still below the target cost.

If our target CPA was £9; then the first ad would be the winner as the 2nd is is below our lead cost.

If our target was £10 but we cared more about cost than total leads; then again the first ad would be our winner as it has the lowest CPA.

 

image

I want Y leads a month at the cheapest CPA

For this campaign, your primary goal is a set number of leads each month. While the account states you want them at the cheapest CPA; there is usually a max CPA cap as well; however, the main goal is cheap CPAs hitting a specific conversion target. Therefore, your top metrics will be CPA (you want the cheapest leads) and conversion rate (making sure the clicks you do get actually convert).

While CPI could be substituted for conversion rate to find the most volume (up to the point where you can pause the account as you hit your goal) at the cheapest CPA, these accounts are usually small businesses with few clicks, so it usually takes a long time to get CPI confidence; and therefore, it’s usually easier to use conversion rate as the secondary metric. If you have a high number of target leads, then you can substitute CPI for CR (conversion rate) in this evaluation.

In addition, your traffic is split between two or more ads. So when you examine the timeframe (say previous month) you would multiply the number of conversions by the number of ads in an ad group and then take into account the percentage of the month being used to examine the data to get extrapolated conversions. This would show you what would have happened if only the winning ad were running.

For example, if your goal is 100 leads a month and you have three ads in the ad group and you examine a week of data. Then you would take the number of leads that ad received (let’s just say 10 for example purposes) x 3 (number of ads in the ad group since the ad was sharing impressions) x 4 (4 weeks in a month, you only ran the ad 1/4 of the time, you could also divide this by the percentage of time; such as 25%). That means that our extrapolated conversions for the ad would be: 10 (conversion) * 3 (ads) * 4 (weeks) = 120. That means if our winning ad was the only one in the ad group; the ad group would have hit the max conversions.

Now as there is usually more than one ad group in a campaign, odds are that you can’t do this across all ad groups easily. Hence by just using CPA and conversion rate we can usually arrive at the same results for the small amount of data the ad groups usually have.

  • CPA winner. Conversion rate winner. Fantastic, this is your winning ad. Feel free to test, but you have an absolute winner.
  • CPA winner. Conversion rate loser.
    • In these cases, you need to look at the overall account. Are you close to your target leads?
      • If yes, your CPA winner is likely to be your winner since a few more leads per month, even at a low CPA might push you over the edge for your account lead goals
      • If no, if your conversion rate winner’s CPA is somewhat close to the losing CPA (so you aren’t going to suddenly spike your CPA)?
        • If the CPAs aren’t too far apart then your highest converting ad will be your winner since you need more leads
        • If the CPAs are dramatically different, then in most cases you will pick the lowest CPA ad as picking the highest converting ad could dramatically increase your overall CPAs.

As usual, when you find losers, pause them, learn from them, and create new ads that will help you reach your goals.

In this case, ad 1 is going to be our winner as it has the highest conversion rate and the lowest CPA.

image

 

The Quality Score Wrinkle

The one issue we should cover is how quality score affects lead costs.

Google does not show any quality score information at the ad level, it is all at the keyword level. However, when examining ads, usually the higher the CTR, the higher the Quality Score for that ad and keyword combination. This can mean that if you have an ad with a much higher CTR than the other ads in the ad group; it could have a higher quality score and thus you pay less per click (or it has a higher position).

This is why you can have one ad that has a higher conversion rate than another ad, but also a higher CPA. If both ads had the exact same CPC and exact same conversion rate; their CPAs would be the same. However, if one ad has a higher quality score, and thus a lower CPC, it can have a worse conversion rate and yet a better CPA than another ad.

Ad Quality Score CPC Conversion Rate CPA
1 high $0.75 5% $15
2 low $1 6% $16.67

 

Therefore, even if you are not picking winning ads by CTR: it is useful to examine CTR information when creating new ads.

Easily Automate Your Ad Tests

The next time you create a lead gen account; don’t just think its yet another lead generation account – determine what type of lead gen account it is. By understanding the type of lead gen account; you can then determine how to create and manage your ad tests.

Now, determining statistical significance by all of these metrics can be a tremendous amount of work. If you are looking for a solution to automate the analysis of your metrics as well as only seeing alerts when you have winners, take a look at AdAlysis: Powerful Ad Testing made Simple.

No Comments

  1. jelle
    February 12, 2015 at 9:57 am · Reply

    Hi Brad,

    Very informative article!

    With my display image ad campaigns I notice that when I split test them some image ads have lower conversion but much higher view-through conversions. If I would make the sum of all conversion (including view-through) then the image ad with the lower conversions would win,

    How do you choose a winner with image ads with regard to view-through conversions?
    btw, I’m also an adalysis user and it seems that view-through conversions are not visible/usable. I’m I correct?

    Thanks!

    Jelle

  2. Michael Karp
    February 28, 2015 at 8:03 pm · Reply

    Awesome article Brad. I love the level of detail you go into.

    I haven’t experimented much with ads much, but when I do, I’ll refer to this article.

    You might actually find my 12,000-word article on lead gen tactics interesting. Could pair nicely with a well-oiled ad compaign.

    Here it is:

    see: http://copytactics.com/lead-generation-tactics-for-content-marketers

    Either way, nicely written article. Thank you for the info.

  3. Reese Garcia
    April 18, 2015 at 10:34 pm · Reply

    Brad,

    Thanks for providing such a thorough examination of the different types of lead gen campaigns and the crucial ad metrics to test in each one.

    After having read a few other articles of yours today, I decided to order your AdWords book. Looking forward to reading it and having it on my desk at work as a reference.

Leave a Reply