Setting a cost per result goal can be an effective strategy for optimizing your paid search campaigns, but it requires careful consideration. In the opening paragraphs, we’ll provide a high-level overview of what cost per result goals are and when they may be appropriate to implement.
What is a cost per result goal?
A cost per result goal refers to establishing a target maximum cost that you are willing to pay to acquire each desired result or conversion from your paid search campaigns. The “result” could be a sale, lead, sign-up, or any other desired outcome. Your cost per result goal helps guide your bids and budgets to aim to keep your actual average cost per result at or below your target level.
When are cost per result goals useful?
Cost per result goals are most useful when:
- You have a clear idea of your desired results/conversions and their value to your business
- You have sufficient conversion tracking set up to accurately measure cost per result
- You are able to segment your campaigns and ad groups to align with different types of conversions or results
- You want to maintain profitability on a granular level in your paid search campaigns
Setting cost per result goals helps you directly translate the value of a conversion into your maximum bids. This level of control can optimize profitability.
When should you avoid cost per result goals?
There are also situations where cost per result goals may not be optimal:
- You are still exploring what conversions or results are viable from paid search for a new product or service
- You have high variances in conversion value, so an average cost per result isn’t as meaningful
- You prioritize volume, scale, or market share over profitability for a campaign
- Your priorities are brand-building or awareness rather than direct-response
In these cases, metrics like click-through rate, impressions, or top-of-funnel conversions may be more meaningful to track than cost per result.
How do you set an optimal cost per result goal?
If a cost per result goal aligns with your campaign objectives, here are some tips for setting an optimal target:
- Research your typical customer lifetime value or your profit margin per sale/conversion to set a maximum.
- Study your current cost per result and factor in additional volume at lower costs.
- Set tiered goals for different campaign types and segments.
- Consider your minimum needed conversion volume or market share.
- Test increasing bids to generate more conversions, then adjust goals.
Often a blend of data-driven estimates and real-world testing is needed to optimize your cost per result goal over time.
How do you actually implement and track cost per result goals?
Once you set your cost per result goals, here are some key ways to implement them:
- Set your max CPC bids based on the goal. For example, with a $20 cost per lead goal, don’t bid over $20 for a lead conversion.
- Use automated bid strategies like target CPA to maintain your goal.
- Create campaign structure based on conversion types and goals.
- Regularly monitor your cost per result metrics for each segment.
- Adjust bids down or pause low performing keywords to maintain profitability.
Ongoing optimization is important to account for changes in click costs, competition, and conversion rates over time.
What are the advantages of cost per result goals?
Some key advantages of properly utilizing cost per result goals include:
- Greater transparency into paid search ROI and profitability
- Ability to directly connect bids to conversion value
- Optimization of campaigns around profitability rather than just volume
- Targeting spend on the most profitable keywords and campaigns
- Flexibility to tailor different goals based on conversion types
With the right approach, cost per result goals can significantly improve your paid search efficiency and return on ad spend.
What are the risks or downsides to cost per result goals?
There are also some potential downsides to consider:
- Goals that are too aggressive can constrain volume, market share, and scale.
- An incomplete view of conversion value and customer lifetime value can skew goals.
- Changes in conversion value over time require adjusting goals frequently.
- Focusing solely on direct response can neglect brand and awareness goals.
- Narrow targeting and bids might reduce reach and visibility.
The keys to mitigating these risks include thorough conversion tracking, regular optimization, and incorporating both direct response and brand goals into your overall strategy.
What steps should you take before implementing cost per result goals?
The keys to success before rolling out cost per result goals include:
- Ensure you have sufficient conversion volume data for each ad group and campaign.
- Check that your analytics and attribution modeling accurately track conversions.
- Review typical customer lifetime value data and profit margins for your products.
- Build out campaign structure and ad groups oriented around key conversion types.
- Calculate historical cost per result metrics for each segment to inform goals.
- Consider a pilot to test cost per result optimization on a limited scale.
With the right prep work and infrastructure in place, you’ll be positioned for effective optimization based on your cost per result goals.
What are some examples of effective cost per result goals?
Some examples of well-structured cost per result goals include:
- Ecommerce site with $100 average order value (AOV): $20 cost per purchase goal
- SaaS company with $2,000 average customer value (ACV): $200 cost per sign-up goal
- Lead generation service with $40 average lead value: $20 cost per lead goal
- Non-profit with $50 average one-time donation: $25 cost per donation goal
Tailoring your goals to your typical conversion value is key. Goals may also vary for acquisition vs retargeting campaigns.
Conclusion
Cost per result goals can drive paid search optimization by connecting your conversion value directly to bid levels and spend targets. However, they require thoughtful setup, monitoring, and ongoing adjustment to work effectively.
Be sure you have the necessary data, campaign structure, and understanding of typical conversion value before prioritizing cost per result goals. Maintain flexibility to adapt to changes and balance both direct response and brand-building initiatives.
With the right approach, cost per result goals can be a powerful lever for maximizing paid search ROI. But they should be viewed as one piece of an overall optimization strategy rather than the sole focus.