Measuring SKU Performance in Google Ads

John [00:00:11] Hey everyone, John, around here with solutions eight and today we're gonna be

John [00:00:13] discussing what is the skew performance?

John [00:00:16] Sometimes we get asked this question by, leads existing clients,

John [00:00:19] even just, during our speaking engagements or we're teaching courses

John [00:00:21] And it is a, long answer

John [00:00:23] So I thought it was gonna be a good idea to make a video about this because

John [00:00:26] This is going to be something that you're going to have to dig, to

John [00:00:29] find out the information for now

John [00:00:31] We normally use a tool called NPE, but if you're not on nor beam, I'm gonna

John [00:00:34] share with you a way that you can actually combine your Google ads and

John [00:00:37] your analytics to account, to find out if you're driving traffic to a specific

John [00:00:41] Product

John [00:00:42] What is actually the full effort of what comes back from driving

John [00:00:46] that trip to the product?

John [00:00:47] Now, today is not the day that it was 10 years ago, which means

John [00:00:52] that you, you run an ad, you got a good keyword, you got a good ad

John [00:00:54] You get a landing page or, a dedicate page on your website dedicate to

John [00:00:57] that one product and you turn it on

John [00:00:58] And what is your clicks and your conversion cruise rate, your

John [00:01:01] row ads, et cetera, from one

John [00:01:03] That's all gone

John [00:01:04] Now we have to understand that on average, it takes 10, 15, 20 days

John [00:01:09] sometimes for people to convert, they're engaging on your social, your organic,

John [00:01:13] your email, your paid traffic on SCM

John [00:01:16] Those channels, they are taking a long time to buy

John [00:01:20] And it's unfair to take a look at one channel with one campaign and

John [00:01:25] say, what is actually happening from the efforts in that campaign

John [00:01:28] And I'm kind of dip my toe into ways that you can measure both the skew performance,

John [00:01:33] but also what is the actual revenue and how do you measure against that?

John [00:01:37] And I'm gonna share with you why Roaz is not something that you may

John [00:01:41] want to focus on holistically, or even solely it is a good K KPI,

John [00:01:46] good key performance indicator, but it's not the be all end all

John [00:01:49] You can have a horrible ROAS, but a great C and a great LTV, and you can be

John [00:01:53] very profitable and you can be stopping three feet from gold as Casa always says

John [00:01:57] So I wanna share this with you today

John [00:01:59] And a good example of that from a higher spend client that I can share with

John [00:02:03] you, what you may see on one channel, but looking at it a different way

John [00:02:07] And then also thinking about it even a different way after that

John [00:02:10] Could be the key benefits for your company to either a scale or B even just be in

John [00:02:16] the short term, much more successful by thinking about it differently

John [00:02:19] and reacting to this differently

John [00:02:20] So let's get started on the screen

John [00:02:22] You are gonna see a campaign that's blurred out

John [00:02:25] So what this campaign is, a performance max campaign with one skew, with one page

John [00:02:31] And what

John [00:02:32] This campaign and this performance Maxus one skew is doing is

John [00:02:35] driving a very specific product

John [00:02:37] We're driving as to a very specific product page

John [00:02:39] Everything's very singular

John [00:02:41] So we can treat this as an individual skew

John [00:02:43] Now I do have 56 other campaigns in this account running

John [00:02:48] One of them is a brand campaign and the other ones are some

John [00:02:51] dynamic remarketing campaigns

John [00:02:53] And what you're gonna see here

John [00:02:56] Is on May 1st through May 31st

John [00:02:59] So this last month in 2022, I spent 67,000

John [00:03:03] I have 1200 conversions and I have $248,000 in conversion value by

John [00:03:08] click and $292,000 in conversion

John [00:03:11] Value by time

John [00:03:13] And the difference between these two is in the last 30 days, the people that

John [00:03:16] clicked, I made 248,000 on the people that have clicked before May 31st, but

John [00:03:22] converted within May 31st is 209, 2000

John [00:03:26] That's the difference between them and the reason why I'll see this is, is,

John [00:03:28] Hey, you have 95% of your conversions

John [00:03:31] We're most likely gonna receive 84 more conversions and

John [00:03:34] $13,000 more conversion value

John [00:03:36] And this is an estimate you're gonna see why there's that Delta there is because if

John [00:03:40] we waited one more month, this number here will look more like this number there

John [00:03:44] So again, 67,200 $92,000

John [00:03:49] cash in the bank, I guess I would say with 1,207 conversions

John [00:03:53] Now, if we look at the Roaz of this let me do this

John [00:03:57] I try not to share any let me do Roaz by time

John [00:04:01] Try not to share any specific, client privilege information, but I do

John [00:04:05] wanna share what this looks like

John [00:04:07] The Roaz here is 436% good

John [00:04:10] It looks really

John [00:04:11] now in this same time period though, in analytics, remember

John [00:04:15] this number 292,000 in analytics

John [00:04:17] What I've done here is I have gone into and move that up

John [00:04:20] here over to, to the right

John [00:04:22] What I've done is looked at the same time

John [00:04:24] Period, May 1st, May 31st

John [00:04:26] Then I've also segmented by a filter of the channel, which is just the Google CPC

John [00:04:30] So I'm not taking into consideration anything from

John [00:04:34] Or from which is called Microsoft advertising

John [00:04:36] Now I will never get over saying Bing

John [00:04:38] Bing is just gonna be stuck in my vocabulary for like the next 10 years

John [00:04:41] but Bing Facebook, Instagram Snapchat TikTok, Hulu, any

John [00:04:46] sort of CTB S data, nothing

John [00:04:48] So it's only

John [00:04:49] From the Google channel

John [00:04:50] However, there's gonna be a caveat to this, which is what

John [00:04:53] I'll share with you soon

John [00:04:54] But from the inbound sales that have come from the Google ads channel,

John [00:04:58] there's $680,000 in product revenue

John [00:05:02] Now what's interesting about this is two things are happening here

John [00:05:05] Google said, Hey, they clicked on my ad in this campaign and spent 209,

John [00:05:10] $2,000 with us, but they clicked on any other campaign in my in

John [00:05:15] Account and spent 680,000

John [00:05:18] Well, how could that be?

John [00:05:19] Well, in this specific account, my brand name made about a

John [00:05:22] million dollars this last month

John [00:05:24] Yeah, about a million dollars this last month

John [00:05:25] Just I think 1.1 inside of that million dollars, what do you

John [00:05:28] think is in there where they buy?

John [00:05:30] Well, Was it, this product here that I know you're is blurred out, but the same

John [00:05:34] product that I'm I'm sharing on the screen is the same product in that campaign

John [00:05:37] Do they come back through the brand campaign and end up buying

John [00:05:39] the product that I was pushing traffic to from one campaign?

John [00:05:42] Yes

John [00:05:43] We have seen that times and times, again, that even utilizing nor

John [00:05:47] beam is where I can prove it

John [00:05:48] But I wanted to kind of give you food for thought into how do you measure the

John [00:05:51] overall effectiveness of your marketing?

John [00:05:53] It's not always campaign specific, not everyone is gonna click on that

John [00:05:55] ad and then go into the website and then just click and buy

John [00:05:59] Sometimes they click, they leave and they might change devices, change IP

John [00:06:01] addresses, change locations, and they simply just Google the brand name because

John [00:06:04] they wanna come back and buy from you

John [00:06:05] But what are they gonna come back and buy from you?

John [00:06:07] What are they actually going to buy?

John [00:06:09] Well, was it the campaign that drove the first one, two or three clicks to the

John [00:06:12] site looking at that specific product?

John [00:06:14] Most of the time

John [00:06:15] Yes

John [00:06:16] So when you look at a different way, have to think about, well, did they

John [00:06:18] come back through my marketing campaign?

John [00:06:20] Yes

John [00:06:21] Did they come back through the brand campaign?

John [00:06:22] Yes

John [00:06:22] Did they come back through the campaign that was trying to drive

John [00:06:25] the click in the first place?

John [00:06:26] Yes

John [00:06:26] How much APEN are you dedicating to that product?

John [00:06:29] And what is your net sales from that specific channel?

John [00:06:31] Well, we see that we spent . 66,000, we got 292 channel direct clicks

John [00:06:37] and conversions, but in the channel of Google sorry, not a campaign,

John [00:06:42] direct clicks and conversion, but the channel that is Google is 680,000

John [00:06:45] So that's a double, I'd a doubling of your revenue

John [00:06:48] Now, if you're looking at your Google ads campaign and measuring it just

John [00:06:50] by row, as you're like, uhoh, I need to be at 700, let's say, well,

John [00:06:54] not to say that the 436 is bad

John [00:06:55] That's amazing

John [00:06:56] But it's actually in my account, total has a 400 rows of a 1.5 million spend

John [00:07:01] So I do think that it is slightly above average, but it even is twice as good

John [00:07:05] as what we're seeing here, because we're simply taking the, unknowns about, well,

John [00:07:10] what exactly happened after they clicked?

John [00:07:11] What happened now?

John [00:07:13] Here's from the part that gets a little bit crazy and I pulled up on the screen,

John [00:07:15] a few things to think about one Roaz

John [00:07:18] Is it good?

John [00:07:18] Well, on my Google ads channel, it's a four on my analytics

John [00:07:21] from that same channel

John [00:07:22] It's

John [00:07:23] Awesome

John [00:07:23] So we're looking between a, four X and an eight X return

John [00:07:27] Now I think, well, what is the cost of acquired new?

John [00:07:29] that's different

John [00:07:30] That's different than what you see here

John [00:07:32] That's different than what you see in analytics

John [00:07:33] Why well is this the first, second, 12th time that they purchase from you?

John [00:07:37] And you can say, yes, I'm only tracking a 90 day click, but what happens if they

John [00:07:41] come back and buy from you every year, they look like they had to have clicked

John [00:07:44] on an ad and purchase from you again

John [00:07:46] So when you're taking into consideration, what is new versus repeat?

John [00:07:49] This is a whole different scenario

John [00:07:51] This is a big, big, big change

John [00:07:53] And what I mean by cost of acquired new customer is you can have a row as

John [00:07:56] a four to eight, but the first time the cost of new customer is $100, let's

John [00:08:01] say, but the second, third and fourth, fifth purchase, second, third, fourth,

John [00:08:06] whatever purchase is a CPA of three bucks

John [00:08:10] Now what happened?

John [00:08:11] Well, you paid dearly for the first time that that customer came in

John [00:08:15] and they kept purchasing from you through your brand campaign, let's say,

John [00:08:19] and your brand campaign has a good CPA

John [00:08:21] So maybe it's, $3

John [00:08:23] Now, what is the average of that?

John [00:08:24] Well, if you're looking at Roaz and you're looking at revenue,

John [00:08:26] your C might be somewhere around

John [00:08:28] a hundred dollars cost required to customer, but your CPA could be 25 bucks

John [00:08:32] She like, wow, I'm getting a $25 CPA

John [00:08:34] Well, that's not true is four purchases on average

John [00:08:36] And if you look at your actual customer list, you're really

John [00:08:37] paying a hundred dollars

John [00:08:38] Then you're paying $5 every single time to come back

John [00:08:40] That's a different way to think about this now

John [00:08:42] So now Roaz becomes a little bit less important and the cost of acquiring

John [00:08:46] the new customer becomes important

John [00:08:48] This is a model that we use very often the CAC versus LTV

John [00:08:52] And what does this mean?

John [00:08:53] What LTV means that what is the lifetime value of that from a

John [00:08:57] three, six and even 12 month out?

John [00:08:59] So if you have a three month lifetime value, which means they,

John [00:09:02] may purchase again, most likely not let's use round numbers here

John [00:09:05] So the lifetime value of the first purchase is first three

John [00:09:09] months is a hundred dollars

John [00:09:09] Okay

John [00:09:10] Well, what do they spend in six months?

John [00:09:11] Well, a lot of times they do come back

John [00:09:13] Well, a 1.5 repeat rate annually means that about half of those, a

John [00:09:16] quarter of those people are gonna come by and, and buy a second time

John [00:09:18] So now actually the LTV is one

John [00:09:20] now we're at 150

John [00:09:21] Well, what is the LTV of 12 months?

John [00:09:24] We usually get two purchases a year

John [00:09:25] Now that is $200

John [00:09:28] So a row as a Ford, eight, doesn't matter, a CPA of 25

John [00:09:32] Doesn't matter

John [00:09:33] The cost of acquiring that new customer costs you a hundred dollars, but

John [00:09:36] the lifetime value of it is $200

John [00:09:39] So now you're actually spending a hundred dollars to make $200

John [00:09:42] And if you look at what is the cost of acquiring a new customer,

John [00:09:44] as long as this does not go up

John [00:09:46] And a lot of times it does go down to scale

John [00:09:48] As long as this does not go up, you have a very scalable campaign, regardless

John [00:09:51] of what your role as, or your CPA says

John [00:09:53] If you get more new customers, your CPA

John [00:09:56] Could potentially go up because you have a lot less repeat customers, which means

John [00:10:00] you're not getting the $3 conversions

John [00:10:02] You're getting more $100 conversions

John [00:10:03] So your cost pro acquisition doubles and you're like uhoh,

John [00:10:06] but your C stayed the same

John [00:10:07] Why you had twice as many new customers, CAC stayed the same, regardless of

John [00:10:10] CPA, your Roaz went from four to eight

John [00:10:12] Oh no

John [00:10:13] Now it went down to 200%

John [00:10:15] Roaz this is looks bad

John [00:10:17] Yes

John [00:10:17] But what is the cost of acquiring that?

John [00:10:19] Well, it's the same

John [00:10:20] It's just, I'm getting less repeat

John [00:10:21] I'm getting more news

John [00:10:22] So my Roaz looks terrible because I didn't get the fast $3

John [00:10:25] Easy Roaz conversion my $3 CPA

John [00:10:28] Then if spending a hundred that boosted my CPA really, or that

John [00:10:32] boosted my Roaz really high

John [00:10:33] So who buys is actually going to affect your Roaz, who buys is actually

John [00:10:37] gonna affect your CPA, but your cost of acquiring that new customers

John [00:10:41] more important than anything else

John [00:10:42] Cuz you can scale that as long as that metric stays the same

John [00:10:44] And as long as your LTB stays, the same other things you have to

John [00:10:47] think about across pollination

John [00:10:48] What other efforts on other channels are driving in my brain convers

John [00:10:51] Now we have to look at how many new branded conversions, sorry, how

John [00:10:54] many branded conversions are new customers, because if you could find

John [00:10:57] a cost of acquired new customer brand, you could spend that to the moon

John [00:11:00] And if you find the cost of acquired new customer on non-brand,

John [00:11:02] you can spend that to the moon

John [00:11:03] And if you look at what you're manipulating, your other social channels

John [00:11:06] on, for example are actually driving up or down that cost acquired new customer

John [00:11:09] You'll see those two Correlly

John [00:11:10] So your Facebook campaign might have a better CPA or a better row as, and

John [00:11:13] you're seeing your brand actually have more sales and less CPA, more row

John [00:11:17] Good

John [00:11:17] Keep spending on that because if you add those two together, what is the cost

John [00:11:20] of acquiring new customer, regardless of channel it's X good keep scaling

John [00:11:23] So the other one is the cross explanation between Google ads, campaigns

John [00:11:27] Like did they click on product a, did they buy product B?

John [00:11:29] That happens about 10% of the time

John [00:11:30] So just take that in consideration

John [00:11:31] That's . You might get a sale of an item that he actually never spent a dollar

John [00:11:34] on marketing because they were marketing a different item and they just bought

John [00:11:37] another item after they came to the site

John [00:11:39] So a few things that think about ancillary things that are not really

John [00:11:41] affecting the, the big, picture, but things you must think about is

John [00:11:45] Why am I receiving sales on that?

John [00:11:46] You can look through the top convergent path and even Google analytics and

John [00:11:49] identify that that product was actually sold from a first click, from a different

John [00:11:52] product that you're marketing for

John [00:11:53] And is your other channels driving that inbound brand conversion

John [00:11:56] So two things you wanna be very, very considerative, but at the end

John [00:11:59] of the day, what you wanna look at is it's not necessarily row as by SKU

John [00:12:02] Doesn't matter, RO as by

John [00:12:04] Is good

John [00:12:05] But if I said, if I'm only gonna go after all of your customers that step by from

John [00:12:08] you every month, I can do a 2000% ROAS on all of your existing new customers,

John [00:12:12] you're gonna lose money, cuz I'm just spending more to make you the same amount

John [00:12:15] of money, but ROAS looks fantastic

John [00:12:17] But the cost of acquiring at new customers, what you have to think about,

John [00:12:20] I don't really care what the RO is

John [00:12:21] Honestly, the RO is, is, is a good key performance indicator that I'm

John [00:12:25] heading in the right direction

John [00:12:25] When the RO as goes down

John [00:12:26] If I know my new customer is coming up and my cost acquiring new customer is

John [00:12:30] going down, I'm just using my budget more

John [00:12:33] If you're on Shopify, hop into your Shopify account and look

John [00:12:35] at your analytics tab and look at the return of customer rate

John [00:12:37] And if it's 30%, you can imagine that's possibly 30% of your sales, maybe even

John [00:12:41] 40% of your sales that are coming in from even your pay channel are coming in from

John [00:12:44] customers that already know about you

John [00:12:46] And you just keep paying for more and over again, can take that money and actually

John [00:12:48] go more towards new customer acquisition

John [00:12:50] Your Roaz goes down, your CPA goes up, but your CAC may go down

John [00:12:53] And if your LTV stays the same, you now have made more money

John [00:12:56] So that's kind of my, little rant here for the day, but a thing to think

John [00:13:00] about where it's not skew specific, it's not campaign specifically

John [00:13:03] You have to think about this holistically

John [00:13:05] Was it cost to acquire a customer?

John [00:13:06] What do they spend over long enough time period, but obviously after all

John [00:13:10] of your cost and your net profit, do you equate to being profitable?

John [00:13:14] And if your LTB stays the same and your cost of acquiring your customer

John [00:13:17] stays the same, keep adding an admin

John [00:13:19] One last thing to think

John [00:13:21] When you're looking at the C versus LTV is how far do you wanna spend

John [00:13:25] into your future profitability?

John [00:13:27] Remember that time period?

John [00:13:28] I said it is three months, six months a year

John [00:13:30] If I make an LTV over a year period of $200, but my first month cost is

John [00:13:36] a hundred dollars and it costs me a hundred dollars to make that, that first

John [00:13:39] time revenue of that a hundred dollars

John [00:13:41] I don't see profitability until year

John [00:13:44] , that's fine

John [00:13:45] If I'm probably DC funded and I have a 10 year ramp up, but if you're like, I can't

John [00:13:49] just eat off nothing for the next year

John [00:13:51] You'll need a row

John [00:13:51] As of, let's say 200% on your first time, sale

John [00:13:55] So your cost acquired a customer would be one fourth of the one year LTV

John [00:13:59] And that scenario you'll say I cost me $50 to make 100 in the first purchase

John [00:14:03] Then by year two, I made 200

John [00:14:05] Now my year is $50 in $200 out or average over 12

John [00:14:10] So don't get too aggressive by saying like, oh my gosh, I'm gonna make

John [00:14:12] six grand by year seven, I'm gonna spend $7,000 cost for required

John [00:14:15] New customer

John [00:14:16] You just broke even for the next seven years

John [00:14:18] That's how that scenario works

John [00:14:19] So please lemme know if you like this video, think about

John [00:14:21] this in a different way

John [00:14:22] It's a lot of fun to fun to kind of measure

John [00:14:24] Performance in a, in not necessarily pigeonhole yourself into one campaign's

John [00:14:29] performance for what's you there's much more stuff going on here

John [00:14:32] So just things to think about when you're measuring success,

John [00:14:34] your Google ADSD campaign

John [00:14:35] I'm John Ram solutions eight

John [00:14:36] Thank you so much