How To Calculate And Increase ROI On Google Ads?

If you’re running ads on Google, you probably heard about ROI.

ROI, which stands for Return on Investment is, basically, a metric that indicates how much profit your business has earned from your ads compared to how much money your business has spent on those ads. Every business wants to reduce its spending and increase conversions.

So, ROI is an important metric, that will determine how your ads have performed.

We will discuss how to calculate ROI and determine what tips you need to take into account to increase ROI on Google Ads.

Formula to Calculate Return on Investment (ROI)

If you want to know how to calculate ROI, there are 2 metrics that you will need to have beforehand.”

Revenue: the total amount that you earned during the campaign period
Cost of goods sold: the total price you paid for the goods

After you have all the essential numbers, you’re ready to determine your ROI.

ROI = (Revenue – Cost of goods sold) / Cost of goods sold.

With this formula, you can easily find out what your profits from running ads.

Why ROI matters

Why does every business need to know their ROI? It is a good question to ask. The answer is pretty simple: by calculating your business’ ROI, you can understand, how much profit has been made by running ads and also, give more insights on how you should spend the budget. If you see that campaign A performs better than campaign B; you can invest more money in campaign A.

Essential tips to increase ROI on Google Ads

Maximizing ROI on Google Ads can be a challenging task, but we will introduce 5 techniques to help your business increase ROI in this article.

Targeting the market by their interests

The first tip that we highly recommend is to target the audience by their interests by delivering the different content types that align with what people are actually searching for.

To do so, you need to divide your customer database into groups by interests. And for each group, the content will be different, as the interest between groups varies.

With this technique, you will increase conversions, as you are showing the content that the group is interested in.

Set up Google Ads Extensions

Another technique that we think could help your business is to use Google Ads Extensions.

Previously in our blog, we have discussed how your business can set up the ad extensions. Using ad extensions is a good way to boost ROI. Here are some options for ad extensions that you can apply:

  • Location: This extension will display the address to viewers.
    Callouts: They will display pop-notifications when there are new offers from your company
  • Calls: Add a live call button to the ad.
  • Sitelinks: Put the link that will transfer to the landing page or other site pages that are related to the ad on Google
  • Reviews: Will display the reviews from customers

Dynamic Keyword Insertion (DKI)

Dynamic Keyword Insertions is a technique that automatically updates their ads to match the users’ search query. It’s a powerful feature. However, it would help if you were careful when you’re enabling it.

There are 2 situations when you should not use DKI:

If the ad group does not perform well, avoid using DKI. If the ad group converts poorly, DKI will make it even worse.
Analyze all Ads ad groups individually, to see whether DKI can be applied or not

If you see that the ad group has a high conversion rate and you would like to boost it, DKI would greatly help. Consider optimizing the landing page by inserting more relevant keywords to match users’ search queries. As a result, your CTR (Click-Through-Rate) increases because of DKI.

Remarketing lists for search ads (RSLA)

Remarketing lists for search ads or RSLA is one of the efficient ways to bring back the visitors of your website, who had previously gone to the site and left without making any purchases.

RSLA is a powerful Google Ads feature that allows your business to customize the search ads campaign for users who have visited your website before.

By analysing customers’ on-site behaviours, your business can retarget those people more effectively and urge them to come back, leading to a conversion increase.

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