[MUSIC PLAYING] We've build smart shopping ads directly inside Shopify to help you set up the integration between Shopify and Google and so that you can get your Google Ads up and running quickly. With smart shopping ads, Google is analyzing your data for you, selecting the most effective ads and allocating your budget to it. If in the future you feel like you want more control of your Google ads and want to start running ads on top of your smart shopping ads, you'll need to know a few key metrics.
And that's what I want to discuss with you now. These are core not just to Google Ads but to all marketing spend for your business. I'm going to share with you two business metrics you always need to think about. And then I'm going to share three ads metrics you should check out every day to improve your ads. Number one, you need to know how much it costs for you to get a customer.
Based on all the ads you run and all the traffic you earn, how much ad budget do you need to spend before you see a new customer? For me, I'm paying just under $7 per customer. And while that might sound like a lot to you to just get one person to buy, you need to think about in the context of your business. If I'm paying $7 for a customer who spends $50 on my store, that's a pretty good deal.
I just have to consider the cost of the product and fulfillment, and I can understand my profitability per purchase. If I go one step further and think about my customer lifetime value, $7 is a really good deal. This cost is unique to my business because I sell food-- has a relatively low purchase price, low barrier to entry. But for you, this cost per purchase could change, and it could be different basing your industry and your product.
The most important part is that you know this number, you track this number, and you get to understand it. The question is no longer, how much should I spend on my ads? Instead, the question is, how much do I want to spend on my ads? So do I want to spend $7 on ads today and get one customer, or do I want to spend $14 and maybe get two customers?
Or to ramp that up a bit, do I want to spend $700 on ads today if I know it can get me $5,000 in sales? At that point, it really comes down to balancing your expenses and finding that upper limit. You always want to spend within your means and responsibly reinvest your earnings into the right parts of your business.
Down the road, as you increase spend, you may see your ads become less efficient. Sometimes it's ad fatigue, where the same ad is shown to the same searcher and that searcher glosses over it. Other times, it can mean your ad is being shown to every relevant searcher, and there's just no one else to target. For both reasons, it's important to constantly test your audiences and creative to ensure you're capturing all that attention.
The second important metric you need to know about your business is how much traffic you need before getting a sale. This is going to be very different for different brands and products, so it's a bit harder to benchmark. Ultimately, you want to know, of 100 people who visit your store, how many of them would buy? Maybe two. Maybe three.
That's actually average. This way, you can start to make budget decisions, where you run ads to certain audiences of certain sizes, so that you can hit those goals. Let's take a simplified example. If you're trying to earn $100 on a $20 product, you need to get 5 customers. If you have a 2% conversion rate, meaning 2 buyers for every 100 visitors, you need to get 250 visitors.
And to get those 250 visitors, you need to get your ad with a 5% conversion rate in front of 5,000 people. I say this is simplified because it's not that easy to get to. It makes sense once you've invested the money, seen the results, and made sales, but it takes work to get there. You can't simply find 5,000 people to get in front of.
They have to be what's called a qualified audience, meaning they actually have interest in what you're selling. And for me, my qualified audience was people who love eating biltong and are searching for it. I'm not going to go out and start running ads to people searching for chocolate cupcakes. That's not a qualified audience for my business. Sure, I might get 5,000 people to see my ad, but I bet none of them are going to click on that ad.
As you run your ads, you're trying to learn two key business metrics that are going to inform your marketing decisions long-term. You're going to learn how much it costs for you to get a customer, and you're going to learn how much qualified traffic you need to get before one of those visitors becomes a customer. Next, I want to zoom in a bit and look specifically at our ads.
Again, if you're running smart shopping campaigns through Shopify, Google is doing this number crunching for you. That said, I still think these are valuable concepts to know. First, you want to keep an eye on your impressions. This is the number of times your ad is actually being seen. For search and shopping ads, the more impressions, the more clicks, the more sales.
Remember, you're focused on qualified audiences, so definitely try and maximize your impressions with clever keyword targeting. But don't go too far and start attracting attention from people who will never buy from you. Second, keep an eye on your click-through rate. This is the number of people who click on your ad per 100 impressions.
1% to 3% is good. Anything more than that and you're doing very well. A good click-through rate means that your ad is matching what people are expecting when they search. Keep improving and trying to increase that rate. If your click-through rate is low, consider changing your messaging. Keep everything else the same, but just try that different messaging.
Then compare the two. Which message did better? Take the winner and try another variation of it. See if you can win. See if you can beat your last best one. Keep making it better. You can also try testing the audience too by targeting different keywords. Did the original audience perform better, or did the new one?
Constantly test your ads to see which audience and which creative is more effective. But one important thing is test one variable at a time. If you're using smart shopping ads through Shopify, Google's artificial intelligence is doing this testing for you automatically. The last ad metric I want you to follow up with is your demographic data.
In Google Ads Manager, you can break down your audience by gender, age, location, which can really help you narrow in on your audience. I've noticed after testing my ads there's a very specific profile for biltong buyers in North America. Not only did my ad spending help me get sales, it helped me understand my business and my customers more, which helped with all of my marketing across the business.
So when it comes to looking at your ad metrics, keep an eye on impressions, click-through rates, and demographic data. These will all inform and help you work towards your golden metric of cost per conversion, how much it costs you to get that customer. After you've learned that number, you have the ability to grow your sales and your business by responsibly spending on Google Advertising.
Thank you so much for taking the time to learn Google search, display, and shopping ads with me today. Again, if you're looking to get started with advertising, I highly recommend installing the free Google Shopping app which will let you run those smart shopping ads we talked about. Also, don't forget, when you start running smart shopping ads, Google has included a coupon for $100 for your first campaign.
Thank you so much for joining me today, and good luck growing your business with Google Ads. [MUSIC PLAYING]