Click-Through-Rate: What is it and why does it matter?

Success in AdWords most often comes down to how well your account manager plays the algebra game. Yes, that nasty word “algebra”. Success with many of Google’s products, like paid search and organic search, depends on analyzing and balancing the MANY variables that Google calculates, and consistently managing those variables to optimize performance.

What is Click Through Rate (CTR)?

If you’re already an AdWords Formula client, you’ve heard us talk a lot about click-through-rate (CTR) as we communicate with you about your account and explain the performance you’re getting from the service. This article’s aim is to further explore what CTR is and why we focus on this metric.

Quite simply, CTR is clicks divided by impressions.

calculating-click-through-rate

Impressions are how many times Google displays your ad because it matches what the searcher is looking for. The higher your CTR the better, because Google views a high CTR account as being a quality advertiser. Google assumes that if someone finds exactly what they are searching for, then the user experience improves and searchers will continue coming back to Google for internet searches.

In the early days of the internet, search engines rarely served up what you were looking for. In fact, it was awful.

That’s when Google came onto the scene and the majority of us switched to Google as our search engine of choice because with Google we could be confident that we’d find what we were looking for.

So at its core – the secret sauce to its business model – Google wants to reward advertisers who are serving ads that are highly relevant to what people are searching for. In other words, advertisers with high CTR. It’s why Google has been so successful and why the vast majority of us rely on Google to find things on the internet.

So, if CTR is important to Google, and we want relevant traffic to our site, CTR needs to be important to us. This is why we focus on CTR as our first priority for new AdWords accounts. We want to signal to Google that this advertiser (you) is high quality and is contributing to a positive user experience for Google’s users.

Our ability to do this has earned us the Google Partner credential, which is Google’s stamp of approval that we understand and implement best practices for AdWords advertising.

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And being as competitive as I am, I just love seeing our rank in using best practices compared to other Google Partners.

Google Best Practices score

One of the significant advantages of the AdWords Formula service is that we’re not only highly skilled with AdWords, but we ONLY provide AdWords service to inflatable and party rental businesses. We live and breathe this industry and are able to drive high performance with AdWords better than any other agency out there.

On top of that, we already have a highly effective campaign structure that we can pretty much plug right in for new clients and get a huge head start on stellar CTR. Google then rewards high CTR accounts with lower costs per click and higher average position.

What is a good CTR?

It’s generally accepted that “average” CTR across numerous industries is between 2-4%. But no one wants to be average, right?

With the AdWords Formula service, it’s our aim to provide exceptional value to our clients, and that is done by producing great CTR, which then results in lower cost per click, meaning more relevant traffic for the same investment.

For most of our clients, we aim to maintain CTR of at least 8% range. That’s 2-4 times what’s accepted as “average”. Our average client gets closer to 10% CTR, and our best performing accounts are in the 15% range.

But again, 8% is our benchmark and represents what we think is a good balance between budget and performance for the typical inflatable and party rental business in a moderately competitive market.

What do you mean “perfect balance”?

Sure, if we all had unlimited marketing funds, we could brute force our way to CTRs above 15% and achieve 1.0 average position. Many AdWords managers do this so they can claim high CTR. But what good is high CTR if it means your cost per click is 2-3x what it could be if you focused on balance?

In most cases our objective is to maximize performance with a realistic budget. So that’s why we aim for a CTR in the 8% range: because it’s achievable with most budgets AND it is well above the range that Google views as high quality.

CTR largely depends on ad position (figure 1).

Figure 1 – #1 and #2 positions on Google search results

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And studies show us that searches tend to click in the highlighted areas (figure 2) and are more likely to ignore the rest of the page.

Figure 2 – Heatmap of where most people click/look on search results page

google serp heatmap

Source: http://corporateseo.net/wp-content/uploads/2012/10/holiday-serp-sponsored.jpg

Most of our clients’ ads appear in either the #1 or #2 spot each time their ads appear, and we are balancing budget with performance. As the average position moves closer to 1.0, the cost per click increases greatly, which is why balance is so important.

Again, the most fundamental objective of AdWords is NOT to maximize CTR. It’s to balance CTR with keyword bids so that you can achieve the lowest cost per click, which results in the highest number of relevant people clicking your ad for your finite budget.

The Outliers

Competition is usually the #1 factor at play for accounts with outlier performance – whether that performance be well above or well below the norm.

Our best performing accounts boast CTR of 14%+ with average cost per click of less than $1.25!

But this type of performance would be unheard of in the suburbs of a huge city like Los Angeles, where competition is fierce year-round. To achieve a CTR over 14% in the LA market you would likely see an average cost per click that’s significantly higher, likely $3 or more.

However, in certain suburban markets where there is limited advertising competition, Google auctions off the clicks at lower prices and a lucky business owner with a good foothold in the market can achieve 13%+ CTR at insanely low prices!

Is CTR Everything?

NO

NO

NO

CTR is only the beginning of the journey of optimizing an AdWords account.

In our next article, we’ll discuss what to focus on after you’ve achieved a strong CTR.

Adwords Success with Inflatable Academy

Inflatable Academy offers a one-of-a-kind AdWords service.

Unlike other agencies, we’re 100% focused on the inflatable and party rental business.

In addition, our account structure and strategies are modeled after a very successful account from the Denver area, which over 8+ years of experimenting and adjustments has spent hundreds of thousands of dollars in producing positive ROI. In fact, that business owner, Lance Miller of Big Air Jumpers, sees an ROI on his AdWords investment of 13-15 TIMES!

But that’s not all…

We take that model account and use our own “secret sauce” recipe of optimization routines and tailored campaign structure to adapt Lance’s proven account to fit exactly with your market, product offerings, and website.

Our formula for success starts with optimizing your Click Through Rate to signal to Google that you are a quality advertiser. Next we achieve maximum ROI for you by earning you the cheapest clicks possible for the exact keywords and phrases that drive the most relevant and valuable traffic to your site by managing Quality Score, among other metrics.

Of course, we are certified as a Google Partner:

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In fact, we’re even recognized in Google’s Partners program for exceptional use of best practices to optimize ROI for our clients. As you can see, we’re recognized to be around the 90%+ percentile of all Google Partners.

Partners - Best Practices Rank

Check out how Inflatable Academy’s AdWords Formula service stacks up to other approaches with AdWords (DIY and typical agency approach).

If you’re looking for a huge advantage in growing your inflatable or party rental business, we would love to help you. Contact us today to see if your market is available. If it is, reserve it today and watch your bookings take off this season.

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