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Brad Geddes's Theories on Marketing The Complete AdWords Audit Part 11: The Lin-Rodnitzky Ratio

The Complete AdWords Audit Part 11: The Lin-Rodnitzky Ratio

This is a continuation of the AdWords Audit Series. You can see previous parts here: Introduction, Goal setting, Measurement, Campaign Settings & Bid Adjustments, Ad Extensions, Impression Share & Auction Insights, Quality Score, Account Structure, Keywords & Match Types, Ad Copy and Testing.

 

If I had just 1 minute to audit a PPC account, calculating the Lin-Rodnitzky ratio would be the way to go. If I had 5 minutes, I would do the quick account diagnosis as described by Brad Geddes.

And after that, I’d say I really need a couple of more hours for the rest of the audit.

For those unfamiliar with this exotic sounding ratio, it is named after the founders of 3Q Digital (formerly PPC Associates) Will Lin and David Rodnitzky and is a quick way to assess the efficiency of your account.

So all credits go to its inventors and I’d highly recommend to download and read the official white paper at 3Q Digital. Most of the content of this post is based on that white paper.

And although the ratio sounds complex, it really is quite simple (or ‘elegant’ as mathematicians would like to say).

The Lin-Rodnitzky (or L/R) ratio is calculated as following:

lin-rodnitzky-ratio

 

How to calculate your L/R Ratio in AdWords

First of all, you need conversion tracking to be working in your account to be able to calculate this ratio. See the measurement part of this series for all about tracking conversions.

Secondly, you need enough click and conversion data in your account for significant results. The official L/R white paper suggests to evaluate at least 2 weeks of conversion data, but preferably a few months. I usually find that the last 2 to 3 months is a good time range.

Once you’re sure conversion tracking is working properly for the time range you’re evaluating, follow these steps:

1. Set a date range of your choosing (somewhere between 2 weeks and 3 months) in AdWords.

2. Go to the “Keywords” tab, click on the “Details” button and select “Search Terms: All”.

3. Make sure the following columns are visible in your search terms report: “Converted Clicks” and “Cost / converted click”. If they aren’t, add them first by clicking on “Columns” -> “Customize columns”.

4. Click on the “Filter” button, then select “Create filter”.

5. From the drop-down choose “Conversions”, then select “Converted clicks”.

6. Use the greater than or equal to sign >= and enter 1 in the box. Click “Apply”.

7. Now scroll to the bottom of the page, where you’ll see something like this:

8. Now you divide the total (grey) “Cost / converted click” by the filtered (yellow) one. In the example above that would be: 4.99 / 2.91 = 1.71

What does the ratio mean?

So now you’ve calculated the L/R ratio for your account, let’s see what it actually means. In the official white paper we can find the following interpretation: “we’ve concluded that healthy accounts typically have a Lin-Rodnitzky Ratio between 1.5-2.0.

On a continuum of scores, this is what each score range generally means:

1.0-1.5: The account is too conservative. Most likely this means that the only queries getting any traffic are brand terms or the absolutely most targeted queries. This means that the account is likely missing out on a lot of incremental conversions, most of which are likely to still be highly profitable for the business.

1.5-2.0: The account is well-managed. There is a combination of consistent winners that always bring in sales and experimental queries that are being tested to identify growth opportunities.

2.0-2.5: The account is too aggressive. There are too many queries getting clicks that are not driving conversions. This is either due to excessive use of broad match, a lack of attention to the account, or a lack of rigorous analysis of metrics.

2.5+: The account is being mismanaged. Money is being wasted daily, and simple changes can save the business a lot of money.”

Note that not every account has to be in the 1.5 to 2.0 range all of the time. I’ve seen well-managed accounts with temporary L/R ratios between 2.0 and 2.5, for example right after adding many new keywords. That’s why it’s best to evaluate your ratio over a rather stable period (or only for mature campaigns).

So ratios below 1.5 or above 2.5 really mean there’s serious work to be done, but what exactly?

What to do when your Lin-Rodnitzky Ratio is too low

This means you’re hardly taking any risks. You’re probably mostly advertising on exact match keywords that are known to convert well.
While this may seem like a great idea, as stated above, you’re probably missing out on a lot of additional interesting search queries.
Besides, you’re not following the ‘always be testing’ principle in your account by trying out new keywords.

To increase your L/R ratio, you could thoughtfully:

  • Add keywords in phrase and/or modified broad match (that you currently only have in exact match).
  • Try new keywords by doing research with the Keyword Planner or other tools, as can be found at the bottom of the Keywords & Match Types post.
  • Try out the suggestions from the Opportunities tab (just the ones that make sense to you).
  • Add a Dynamic Search Ads campaign.

What to do when your Lin-Rodnitzky Ratio is too high

This happens more often than a too low ratio. This means you need to (seriously) cut the waste in your account.

The higher your ratio is, the higher there’s a need to:

  • Add poor performing queries or words as negatives.
  • Pause the worst performing keywords.
  • Lower bids for keywords with a too high CPA or a too low ROAS.
  • Increase bids for keywords that deserve a higher bid based on their value per click and your targets.

In short: you should spend less money on queries that aren’t working and more on the ones that are. By the way, make sure you have enough data (clicks) before deciding a query isn’t working.

And obviously, you should also investigate why those queries aren’t converting. Are they simply not relevant to your business? In that case you can freely exclude them.

But if the queries are relevant but still don’t convert (enough) after a significant amount of clicks, there may be other reasons for this like your website, offering, landing pages, ads, competition, prices, etc.
In that case excluding the queries will save you money, but the real problems still need to be addressed.

 

The Lin-Rodnitzky Ratio: Your Audit Checklist

checkbox

Is your Lin-Rodnitzky Ratio between 1.5 and 2.0?

 

This is a guest post by Wijnand Meijer, Quality & Learning Manager at iProspect Netherlands, an online media agency based in Amsterdam. He created his first AdWords campaigns in 2006 and is currently helping advertisers and coworkers alike to get their Paid Search to the next level.

Opinions expressed in the article are those of the guest author and not necessarily bgTheory. If you would like to write for Certified Knowledge, please let us know.

No Comments

  1. Filip
    December 11, 2014 at 7:02 pm · Reply

    HeyWijnand.

    How about DSA and Shopping campaign, should I include them or not?

    Anyway, real example: I´m managing a campaign with L/N ratio 13.5 (last 3 months). What a waste right? Well not exactly. Average weighted QS is 7.7 and ROAS 15.8 (even 10 would make me satisfied) so the campaign seems to be in pretty good shape.

    So let’s find out which search queries are wasteful – the most expensive search query without a single conversion costs only $9 per 3 months and brought me 80 clicks. I know that it’s highly relevant and I if it delivered one conversion per year, I would be still happy. The tenths search query $2.5 and I have another 1946 search queries without any conversion. Should I exclude them? Hardly, it would kill the campaign. The campaign is targeting quite small niche, spending only $800/m so not a typical campaign (but which campaign is typical really?) and the majority of search queries brings me just couple of dozens of clicks.

    My point is, the L/N ratio just by itself can easily misguide you unless the campaign is very typical (again, what is it?) and shouldn’t be followed blindly. Maybe it could be adjusted by excluding sear queries under certain threshold (with very low search volume or spend) from the calculation or maybe even better to somehow include the ratio of total spend of search queries with 1+ conversion and search queries with 0 conversions.

    Anyway Wijnand thank you so much for this series, I was always waiting for another article like if it were game of thrones or something.

  2. Colleen
    December 12, 2014 at 9:26 am · Reply

    +1 for the Game of Thrones comparison, this is the best PPC series ever!

  3. Wijnand Meijer
    December 14, 2014 at 4:40 am · Reply

    Hi Filip and Colleen,

    first of all: I’m humbled by your comparison and will do my very best to make the next posts worth the wait!

    When it comes to your case Filip, as usual, profit is the best measure of how a campaign is performing. And those numbers sound like a great performing campaign.
    And indeed, if you don’t see any significant waste in your search queries, you should be fine. Sometimes many low volume keywords with 0 conversions can increase your L/R ratio. Maybe your ratio is lower when you look back a full year? The more niche and low volume your account is, the longer you need to look back before you can draw any conclusions on most keywords.

    Just watch out for low volume keywords and queries that never convert, many of those hurt profit as well and usually stay under the radar if you don’t evaluate them on a long timeframe.

    Good luck and stay tuned for the next post about Shopping Campaigns!

  4. Ad Republic
    January 16, 2015 at 8:58 am · Reply

    What an insightful way to measure account efficiency. Definitely going to use this in my next audit!

  5. Toni
    January 29, 2015 at 8:24 am · Reply

    As usual, what a great post.

    I love the idea of the Lin-Rodnitzky Ratio but I’m having a hard time understanding why such intelligent guys would resort to such an overly simplified model. It could be that I have misunderstood something. But as far as I understand, it’s last-click based and doesn’t in any way take into consideration the real return of your marketing investment, just the avg. cost of a conversion – no consideration of whether it’s an established brand or not, or if your average order value is in the hundreds or in the thousands, let alone revenue numbers, just CPA. 😐

    I don’t mean to sound negative, I’m just seeing so many reasons why it would give skewed, perhaps even misleading, results. I’d love to hear what verticals you have found the ratio to represent reality most accurately or have found it valuable in other ways?

    • Wijnand Meijer
      January 31, 2015 at 7:52 am · Reply

      Hi Toni,

      thanks for your comment! I agree that the L/R ratio may seem a bit simplified, and that’s why I mentioned “that not every account has to be in the 1.5 to 2.0 range all of the time.”

      But if you agree on the principle that there are healthy and unhealthy ratios when it comes to money you spend on converting terms and money you spend on non-converting terms, this ratio is a way to get a quick feel for such a balance.
      The fact that it’s last-click and CPA based – which is absolutely too simplified to analyze most online marketing metrics – isn’t a real problem when it comes to calculating such a ratio within your paid search account.
      As long as all conversions you want to take credit for are tracked within AdWords, it doesn’t really matter which keyword or search term got credit for the conversion, as this ratio is about a balance on the account level, not a metric on an individual keyword level.
      Having huge differences in the average order value could give a misleading L/R ratio, that’s right.

      The way this ratio works best is to quickly calculate it, when it’s too low, using your own judgment and account knowledge, look for opportunities to expand and test more new things. If it’s too high, is there any waste you could get rid of? If you don’t find any significant waste, then that ‘overrules’ a high L/R ratio.

      It works best in established accounts and campaigns that have been running (and been optimized) for a couple of months at least. So there may be good reasons why you temporarily have very high or very low L/R ratios.
      But in the long run, a ratio below 1.5 or above 3 usually isn’t a good sign.

  6. dan perach
    September 13, 2015 at 2:37 pm · Reply

    would you perhaps recommend running this tool and excluding brand kws? If so, what would healthy ratios be then?

    • wijnandmeijer
      September 14, 2015 at 8:29 am · Reply

      I think analyzing the ratio per campaign is actually most insightful. Although an account average L/R gives you a quick feel, as always, averages lie, especially when it comes to brand vs non-brand keywords.

      So for brand keywords, ratios are probably going to be low (1.0 – 1.5), but that’s nothing to worry about. For your non-branded keywords I would still aim for 1.5 to 2.5 L/R ratio.
      Especially for mature campaigns where you have enough data to spot waste & opportunities.

  7. Samuli
    November 11, 2015 at 4:32 am · Reply

    Great post as always. Lin-Rodnizkyn ratio was new to me and i got many other valuable ideas for future audits as well.

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