POAS before ROAS: How you could be maximising your returns by optimizing to profit
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My deck from the Search Advertising Show at Brighton SEO- September 2021. Bidding to profit metrics
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POAS before ROAS: How you could be maximising your returns by optimizing to profit
- 1. POAS before ROAS: Maximising your profit Rich Ingilby @rjfingilby
- 2. Rich Ingilby Client Growth Manager Experience across a range of budgets/ industries #searchadvertisingshow #poasbeforeroas @rjfingilby
- 4. What is POAS? 1 How to set it up 2 Questions 3 Today #searchadvertisingshow #poasbeforeroas @rjfingilby
- 5. What is POAS? (and why is it better?) #searchadvertisingshow #poasbeforeroas @rjfingilby
- 6. For all products: Revenue - Cost of Goods Sold Cost of Advertising What is POAS?
- 8. POAS encodes more information Optimises to: Number of conversions Total value of sales Real value of sales CPA ROAS POAS #searchadvertisingshow #poasbeforeroas @rjfingilby
- 9. ROAS: 3.1 POAS: -2.4 ROAS: 4.3 POAS: 3.2 Benefits of POAS 1. Optimises to specific product performance
- 11. Product feed integration Product splits But you need to solve some dependencies first
- 12. 3. More information in reporting Benefits of POAS
- 13. 4. Levelling barriers between finance and marketing Important PPC metrics for us Important PPC metrics for your CFO ● Profit ● CVR ● Revenue ● ROAS ● CPA ● Brand recall Benefits of POAS #searchadvertisingshow #poasbeforeroas @rjfingilby
- 14. ...ultimately, more profit Measuring a metric means that algorithms can maximise it #searchadvertisingshow #poasbeforeroas @rjfingilby
- 15. BUT... POAS is not suitable for all businesses and all campaigns
- 16. And POAS is not the golden goose
- 17. How to set up POAS #searchadvertisingshow #poasbeforeroas @rjfingilby
- 18. We’ll run through the big two
- 19. Match these up with basket data Attach value to products 1 2 Apply it to bidding* (*If possible) 3 #searchadvertisingshow #poasbeforeroas @rjfingilby
- 20. 1. Import values into your product feed #searchadvertisingshow #poasbeforeroas @rjfingilby
- 21. 2. Apply the value to basket data aw_merchant_id aw_feed_country aw_feed_language {event_name = “purchase”, } Plus: - value - currency - shipping
- 22. 2. Apply the value to basket data id price items: { } quantity aw_merchant_id aw_feed_country {event_name = “purchase”, } aw_feed_languag e Plus: - value - currency - shipping
- 23. country (‘event’, ‘purchase’,{ } language (+ usual values) id price items: { } quantity 2. Apply the value to basket data
- 24. Merchant Center Cost to make it How many? Tag Reporting Profit Item ID 2. Apply the value to basket data #searchadvertisingshow #poasbeforeroas @rjfingilby
- 25. 2. Apply the value to basket data #searchadvertisingshow #poasbeforeroas @rjfingilby
- 26. 3. Apply it in your bidding
- 27. 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy 0. Wait a little bit 3. Apply it in your bidding
- 28. 3. Apply it in your bidding 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy (Revenue - CoGS) Cost #searchadvertisingshow #poasbeforeroas @rjfingilby
- 29. 3. Apply it in your bidding 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy #searchadvertisingshow #poasbeforeroas @rjfingilby
- 30. 3. Apply it in your bidding 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy #searchadvertisingshow #poasbeforeroas @rjfingilby
- 31. 3. Apply it in your bidding 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy #searchadvertisingshow #poasbeforeroas @rjfingilby
- 32. 3. Apply it in your bidding 1. Create your Conversion Goal 2. Create a new bid strategy 3. Select ROI target 4. Select your Conversion Goal 5. Apply your strategy #searchadvertisingshow #poasbeforeroas @rjfingilby
- 33. 4. Last but not least: Test Test Test #searchadvertisingshow #poasbeforeroas @rjfingilby
- 34. Why POAS? Measuring a metric means that algorithms can maximise it #searchadvertisingshow #poasbeforeroas @rjfingilby
- 35. Thank you for listening richard@ayima.com #searchadvertisingshow #poasbeforeroas @rjfingilby
Editor's Notes
- START WITH THE WHY - WHY THIS TOPIC Chose POAS because the heart of PPC for me is getting the right data, and getting the data right - inexorable movement towards automation
- CoGs = the cost of manufacturing those particular products The topline is essentially profit
- Progression of getting more and more information encoded
- Different products cost different amounts to make Massively different profit margins for bikes and tents (unless the bike is stolen and being sold on gumtree) What you want to do is obviously sell more of the tent, because it’s worth more
- I.e. wherever a product has a changing value, and a profit that changes - and this isn’t just about the product - Hotel rooms/ Flights per customer might become more profitable to run in certain seasons which isn’t reflected in the price
- Product feed integration - regularly synced with latest prices- If your products change value constantly Product splits, e.g. hotel chain with optional extras, flights with additional baggage. inflight meals, car hire- this needs to be present in tracking The extras need to be specific products This is where some issues come in that we’ll talk about later
- Break even is always 1 - simple to understand POAS encodes huge level of detail that you can hone in on to figure out what is going on Profit for products/ over time Cart data- what is the average number of items in the cart (cart level tracking) Actual products that sold- rather than what ad the user clicked through
- Mainly an issue when agency/client relationship and CoGS isn’t taken into consideration- profit typically is spoken about less regularly
- Minimisation / Maximisation algorithms are the basis of bidding optimization Typically you see ad spend fall, conversions remain roughly level, and revenue rise - Figures change per industry and spread Depends how suitable it is for the business itself
- If it adds nothing extra E.g. same CoGs for every product make POAS meaningless Or if every conversion has the same value (e.g. you’re optimizing to PDF downloads) OR, if you’re bidding for brand awareness… Ability to allocate a CoGS High fashion similarly - most of the cost is branding and brand spend is split across the whole range (e.g. flights the COGs depends on number of passengers - Have you ever been on a flight where you’ve looked around and thought “there’s no way this is profitable” - ( though you could take route averages) TELECOMS - Majority of the cost is building the network in the first place (campaigns targeting phone contract sales yes - because cost of a handset) Who thinks it is relevant? Show of hands
- It’s not the golden goose, POAS, like other metrics (ROAS etc), is still not taking into account Customer lifetime value - it’s profit at the point of sale Offline purchases- how much are people spending post-booking - e.g. Hotel booking and restaurant, in-flight purchases, ticket sales (where most of the value is behind the bar) Not impossible, I’d say you can identify a reasonable average, if possible split by each product. Just make sure it isn’t being double counted.
- The principle is mainly the same
- The principle is mainly the same
- This will differ based on where your product feed is managed - here is the raw value that needs to be populated Note that this takes on the same currency as your price- if running in multiple currencies then calculate different Cost for each You could also submit this via the content API
- Within your global site site tag, (looks very similar for floodlight tag if using SA360, we’ll run through in a bit) This is the code that fires when a purchase is triggered, so event_name = purchase First you have to match the order as a whole to the right merchant center account, country and language then…..
- Within this you also have the items Basket level data lets it match up what items have been purchased Items submitted within an array within the values This is what lets it match up to what items have been purchased - item 123 ID = must match up with the merchant center
- Within floodlight event snippet, it looks more like this Again massively depends on your set up.
- This is the ultimate marrying up of data Item ID is key to connecting the two, much like setting up the dynamic remarketing, Google has no way of connecting merchant center to your tag unless the item ID exists in both.
- These columns should return values
- So we have to get a little creative This is not possible in Google Ads, unless you add profit metrics into the tags. But, you probably don’t want to give this information away… Add profit into your data layer to fire at the check out Set up a profit conversion action masquerading as revenue (- numbers are going to be tough) Bid to it Very happy to talk to people afterwards about this, get in touch
- Wait a little while for the conversion data to build up. Historic data is key to all bid strategies
- This is important- create the conversion column I’ll run through this process in SA360 as it’s the most straightforward, Google Ads it *is* possible but you have to get more creative, happy to talk about this afterwards Create this using only your floodlight tag OR google ads tag, and the Merchant center value - this means that you can still use auction time bidding (which is worthwhile) Should be as simple as Revenue minus Profit (this is ultimately all that Google needs to know to optimise the bidding) Do not do any complicated formulas around (Price * Quantity )- (COGS * Quantity), as this will rule out auction time bidding if you’re using ads conversion data) Won’t go into too many details here as this really depends on the way you’ve set it up, rather than bore everyone to death with 5 different ways of implementing
- Baby steps - though everyone here I’m sure is a pro Also SA360 keep on changing their bid strategy creation process, so even though I made this deck a couple of weeks ago, this might already be outdated
- Select revenue Auction time bidding, this is where it pays off
- This is where our earlier step of only using floodlight really helps
- I don’t need a screenshot of this. Click Go. This leads to a bonus step
- Always test it against your current set-up. Prove the business case and make it clear whether it works well for your specific business
- Ultimately it comes down to this