National ads, local results: Where should you be putting your money?
Discover which locations are your money-makers and focus on maximizing revenue, not exposure in unprofitable places, says contributor Jacob Baadsgaard. Here's how to dig into the data and figure out where to put your ad money.
When it comes to search engine marketing (SEM), geotargeting is a local advertiser’s best friend. After all, if you only serve customers in Evanston, West Virginia, it doesn’t really make sense to pay for clicks from people in New York City.
Geotargeting is also great for franchises. Even if you have locations around the world, potential customers are a lot more likely to respond to a location-specific ad than one-size-fits-all ad copy.
But what about national or international e-commerce retailers? What if you run a business-to-business (B2B) services or software as a service (SaaS) company that serves clients anytime, anywhere?
Surely, a broad targeting approach is best for businesses with a broad target market.
While nationwide targeting is often recommended for nationwide offers, it isn’t always the most profitable way to market your business. Even if you can technically serve or sell to customers anywhere, when it comes to SEM, not all locations are created equal. In national campaigns, some locations are incredibly profitable, and others are an incredible waste of money.
Pay for what works
In marketing, it’s easy to fall victim to a fear of missing out. Some advertisers add extra keywords or match types “just in case” a potential customer searches in an unusual way. Some of us run ads across the nation (or world) “just in case” a random person in a random place happens to search online for our products or services.
However, the goal of an effective marketing campaign isn’t maximum exposure — it’s maximum profit and revenue.
Even if you miss out on the occasional potential customer, if eliminating certain keywords, locations or other poorly performing elements improves the profitability of your campaigns, it’s the right move.
As an SEM advertiser, your job is to drive profitable new business for your company. You can’t afford to spend money on clicks with a low chance of producing sales. You have to pay for what works.
Targeting the right locations
With all that in mind, let’s take a look at how to use geotargeting to improve the performance of your national or international SEM campaigns.
Depending on whether you are running e-commerce or lead generation campaigns, there are two different ways to identify which locations you should be targeting. In either case, you’ll need to have run a national campaign for a few months to see how your ads perform in different locations.
Let’s take a look at how to use this data for e-commerce and lead generation campaigns.
While it might seem odd to use geotargeting in a Google Shopping campaign, choosing the right location settings for your campaigns can significantly improve the performance of your product listing ads (PLAs).
The reason behind this is fairly simple: Different products sell better in different areas. For example, kayaks don’t sell particularly well in Reno, Nevada, but they’re a hot commodity in Sarasota, Florida.
So, while an e-commerce business can probably ship kayak parts to Reno, running ads for kayak parts in Reno probably isn’t a great investment.
While some product-location mismatches like these are fairly obvious, some can surprise you. This is where the AdWords Report Editor comes into play.
If you’re properly tracking e-commerce sales in AdWords (and if you aren’t, you have bigger problems than location targeting), you can easily create a table report in the Report Editor that will show you the profitability of different locations.
For example, here I’ve broken down an e-commerce client’s results by region and Conv. value/cost. (See upper right corner of the image below).
To provide added perspective, you can also throw in additional metrics like total clicks, impressions, cost and so on.
This particular client sells products across the world, but their best regions are all in Canada. And, as you can probably imagine, focusing their ad spend on driving Canadian clicks produces a much better return on advertising spending (ROAS) than focusing on clicks from America or other countries.
Unfortunately, things aren’t quite so straightforward in lead-gen campaigns. Most lead-gen businesses don’t track actual sales and revenue inside of AdWords, which means you’ll need to do a little data compilation to identify your top-performing locations.
Assuming that you are tracking conversions in AdWords, you can get some interesting insights directly from the Report Editor. However, while the total clicks, cost per conversion or cost per click of a location can be helpful, these metrics don’t really tell you much about the profitability of a location.
For that, you need sales and revenue data.
If you’re really gung-ho, you can record the Google click ID (GCLID) for every lead in your customer relationship management (CRM) system. Then, you can create custom goals in AdWords for sales and revenue and upload a spreadsheet with the GCLID and sales information for your leads that have closed (For more info on how to do this, click here).
This approach will allow you to include sales and revenue data in your table in the Report Editor. However, if you — like most businesses — haven’t gone to the trouble to get this setup, don’t worry, you can still figure things out.
As long as you know which sales came through AdWords and where your customers are from, all you have to do is put together a spreadsheet with sales, revenue and location information for all of your AdWords sales that occurred within a specified time period.
Then, you can use the AdWords editor to parse out your ad spend by location and cost.
Again, you can include other metrics like total clicks and cost-per-conversion to help provide perspective.
By dividing your ad spend in a specific location by the sales you made in that location, you can get a feel for your cost per sale.
Similarly, by dividing your revenue from a specific location by your ad spend, you can get a sense for your cost-to-spend ratio.
For example, the client above had their best ROAS in California, Florida and Texas. While New York and Illinois were eating up a lot of ad spend, the actual profitability of the client’s campaigns in those states was a lot lower.
Using that information, we created campaigns that were specific to California, Florida and Texas and ran those against a general campaign in the United States. The ad copy, keywords and other settings were identical.
At the end of our test, eliminating 94 percent of our target states only dropped lead and sales volume by about one-third, but it improved the performance of our campaigns by 69 percent. As a result, we were driving two-thirds of the national campaign’s results at one-third of the cost.
The moral of the story? Even if your business isn’t limited by location, the profitability of your SEM campaigns is. More often than not, when you dig into the data, most businesses get great advertising results in certain locations and terrible results in others.
The good news is that, with a little bit of effort, you can usually discover which locations are your major money-makers and focus on maximizing revenue — not maximizing exposure in irrelevant or unprofitable places.
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