Beginner’s Guide to Measuring Ad Spending and Wasting Less Money

Driving traffic to your e-commerce site is one of the biggest challenges that retailers face. You are constantly bombarded with options such as SEO, advertising and other methods. They all cost money, time or both. In today’s guide, I want to cover several general principles that will help you with one of those methods: advertising.

Advertising is a really good and easy way to drive traffic to your store. It can be targeted very precisely at a certain audience through something like Facebook ads and traffic will start coming in within minutes of your ad going live. The downside is that it costs money and some retailers waste a lot of money before ever seeing any conversions. There’s a lot of stories of retailers who have been burned after wasting too much money through services like Google AdWords.

The good thing is that we can learn a few principle and guidelines which will help us avoid these kind of issues. These principles will apply to any kind of advertising service and there are lots of them such as:

• Google Adwords
• Facebook Ads
• Retargeting
• General Media Buys

The list is endless but they all work in roughly the same way. Let’s take a look the general principles that you should keep in mind when using advertising services.

Set Up The Right Tracking Tools

The first step is to make sure that we have the right tracking tools set up. This is not just about adding Google Analytics to your website but actually creating the reports that can give us the information that we need without having to dig through it.

Google Analytics and similar tools support the ability to track goals and conversions. You can see what traffic ends up converting e.g. purchasing something, signing up for a newsletter, etc. You want to make sure that you can track all of the possible conversions in your website including non-monetary conversions.

We have a couple articles on this such as the most useful Google Analytics reports and how to set up ecommerce tracking within Google Analytics. These reports will help us judge any kind of advertising campaign and see how well the ads are really doing.

You might also want to consider other advanced tracking tools like Kissmetrics or Mixpanel. They both offer advanced reports that let you see what individuals are doing when they visit your website. Having a clear understanding of where your actual customers are coming from is the first step before we spend a single dollar on ads.

As a sidenote, you can use the Google URL Builder to create URLs that will also let you track where customers are coming from. Read the guide on Best Practices for Creating Custom Campaigns by Google for more information.

Start With A Very Specific Goal

The next step is to choose a very specific goal that you would like your ad campaign to achieve. “Getting more sales” is not specific enough and will be hard to attribute to a single campaign. “Increase online sales for winter shoes” is more specific and easier to measure. This specificity will also help you develop the right type of messaging around your ad that is relevant to potential customers.

We should be able to go back to our tracking tools and see who has been buying our winter shoes. Is the traffic coming mostly from Google or another source? What is the current conversion rate for this category or type of product? This is our baseline which we will use to compare against any ad spend. If our ads aren’t doing better than our baseline, then we need to change the strategy or abandon it altogether.

Most companies get lost in ad spending because they aren’t seeing results but it can be hard to do that when you expect your ads to do multiple things. The customer who will give you their email address will not be in the same mentality as someone who is looking to purchase something. Become really specific with your goals and a lot of things will become easier when it comes to online marketing.

Choose a Handful of Useful Metrics

Now that we have a very specific goal, we need to have a handful of metrics that will help us quickly track how our ad campaign is doing. The metrics may look something like this:

• Number of page views per visitor
• Average time on site
• Conversion rate

You do want to see use metrics that aren’t related to the actual conversion rate. This is because a campaign will need to be optimized before you reach conversions and you need to have a way to know if a campaign has potential to improve. Look at the kind of metrics that will take place before the conversion event (buying the shoes) and compare them against our baseline.

Landing Pages, Landing Pages, Landing Pages

The next step before you start buying ads is to create landing pages that focus only on our specific goal. This come backs to the idea of being very specific with what you hope the campaign will achieve. Driving your advertising traffic to your homepage can be a sure way to waste money.

You need to create a landing page that focuses exclusively on one topic and will be clear to any visitor coming to your website. If we go back to the winter shoe example, we could create a page that only shows winter shoes and the benefits behind each shoe. Any traffic coming to this page should be from ads about winter shoes.

By controlling the messaging of your ads, you can focus on seeing where you need to optimize things. A general page like the homepage is hard to to optimize because of all the variables that can affect your conversion rate.

Run Small Experiments

It’s now time to actually buy some ads. Since every advertising option is different, we need to run small experiments to get a sense of what works for each one. Budget $100 – $500 to truly understand if this advertising option will work for your business.

During the small experiments, you want to play around to see how each ad responds to different inputs. Tweaking the inputs will affect two broad outputs:

1. Impressions
2. Clicks

You can then tweak everything and see how it affect the above categories. If you add more keywords, does it generate more impressions? If you change the picture of the ad, does it generate more clicks? You can start to formulate some general rules around what kind of inputs create the best outputs.

Once traffic hits your site, you then start to look at what kind of traffic performs better against your core metrics and your baseline. The great thing about advertising is that you can quickly test assumptions and reach valid conclusions.

By applying these general principles, you will be able to make the most out of any advertising budget. Do you have any other tips to improve ad spending? Let me know in the comments.

Tagged ads, advertising, Display Advertising, google adwords