Lin Rodnitzky

8/13/2019 Lin Rodnitzky

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David Rodnitzky

[email protected]

By David Rodnitzky, Founder & CEO, PPC AssociatesBy David Rodnitzky, Founder & CEO, PPC Associates

T h e L i n - R o d n i t z k y R

a t i o :

PPC Associates Simple

Way to MeasureAdWords Account Performance

PPCAssociatesh o l i s t i c o n l i n e m a r k e t i n g

Contact us at:


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Contents


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PPC Associates Simple Way to Measure AdWords Account Performance 3

An Introduction toThe Lin-Rodnitzky RatioHow are we doing? This is the first question marketers ask us about their Google AdWords account. For a long time,

we struggled with this question. We would go into lengthy explanations of PPC best practices and discuss conversion

rates, account structure, and competitive benchmarking. Often this detailed analysis didnt give the marketers any

more comfort; it just created frustration. OK, theyd say, I know I have to improve a lot of things in my account, but

does that mean Im absolutely terrible or close to perfection?

The truth, of course, is that there is no easy answer to this question (if there was, people wouldnt need SEM experts like

us). We have, however, come up with a metric that at the very least is directionally useful. We call it the Lin-Rodnitzky

Ratio, named after our company founders, Will Lin and David Rodnitzky. In its simplest sense, the Lin-Rodnitzky Ratio isdefined as follows:

Divide the overall account cost per conversion by the cost per conversion of all queries with at least one conversion

to achieve the Lin-Rodnitzky Ratio.

Well now walk you through how to determine your own accounts ratio, and some suggestions for how to improve your

ratio going forward.


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The Basic Building Blocks of the Lin-Rodnitzky RatioThe first thing that you absolutely must have in your account for the Lin-Rodnitzky Ratio to work is conversion tracking.

Conversion tracking in AdWords can be achieved in one of two ways: by installing the AdWords Conversion Tracking

code, or by setting up goals in Google Analytics and then linking your Google Analytics account to your AdWords

account. Rather than trying to explain this ourselves, we recommend that you read Googles helpful guide to

conversion tracking here: http://adwords.google.com/support/aw/bin/topic.py?hl=en&topic=16344.

Depending on the amount of traffic and conversions your account receives, you generally want to evaluate

conversion data with at least two weeks of data, and preferably with a few months of data. The more data you have

to analyze, the higher your confidence in the results.

Once you have enough data and youve verified that your conversion tracking is properly set up, you can start to

collect the data used to calculate the Ratio. The two pieces of data you need are your overall account cost per

conversion and your converting queries cost per conversion.

To see both of these stats in one place, you need to follow these steps:

Make sure you have set a date range for data in your AdWords account of at least two weeks and

preferably several months;Go to the Keyword tab in the AdWords interface;

1.

2.


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3. Scroll down to the See Search Terms tab and select All


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This will take you to a report that shows you data for all of your search queries. Its important to understand the

difference between a keyword and a search query. A keyword is a word or phrase that you add to your account.

A search query is the actual search term that a user typed into Google that was matched to your keyword. Thus, youmight buy the keyword New York Hotels but end up getting matched by Google on search queries like:

NYC motel

New York vacation

Uptown Hilton in NY

To learn more about keywords and queries, and to learn how to organize your AdWords account to eliminate

non-converting queries, read our white paper on Alpha Beta campaign structure (available at

www.ppcassociates.com).

The search query report should look something like this:


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The next step is to set up a filter against this list of search queries. To do this, just follow these steps:

1. Click the fil ter tab above your search query results. The select create filter. A yellow box should appear.

2. From the drop-down, choose conversions and then choose conversions (1-per-click).

3. Use the >= greater than or equal to option and enter 1 in the box. Press apply.


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You should now see your list of queries reduced to just the queries that have received at least one conversion. If you

scroll down to the bottom of the page, youll see the results of your filter, and below thatyoull see the results for the

overall account.


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You are now ready to calculate your Lin-Rodnitzky Ratio. In the example above, the cost per acquisition from queries

with at least one conversion is $79.90, and the overall cost of all queries is $471.84. Thus, the math looks like this:

471.84/79.90 = 5.91

Thats your Lin-Rodnitzky Ratio.

Weve reviewed hundreds of AdWords accounts over the last four years using the Lin-Rodnitzky Ratio, and weve

concluded that healthy accounts typically have a Lin-Rodnitzky Ratio between 1.5-2.0. On a continuum of scores, this

is what each score range generally means:

1.0-1.5:The account is too conservative. Most likely this means that the only queries getting any traffic are brand terms

or the absolutely most targeted queries. This means that the account is likely missing out on a lot of incremental

conversions, most of which are likely to still be highly profitable for the business.

1.5-2.0: The account is well-managed. There is a combination of consistent winners that always bring in sales and

experimental queries that are being tested to identify growth opportunities.

2.0-2.5:The account is too aggressive. There are too many queries getting clicks that are not driving conversions. This

is either due to excessive use of broad match, a lack of attention to the account, or a lack of rigorous analysis of

metrics.

2.5+:The account is being mismanaged. Money is being wasted daily, and simple changes can save the business a

lot of money.

What Does It All Mean?


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In the example above, the Lin-Rodnitzky ratio was almost 6 (note: this is not an account we are managing; this was

taken from the account of a potential client prior to our management). This account is wasting thousands of dollars

on queries that will never make the company a penny of revenue, much less profit.

The Lin-Rodnitzky Ratio is a great way to assess the performance of your current agency or SEM team, as well as an

effective way to set expectations for account improvement. It is also a great way to measure the impact of global

changes to your account. In other words, if you measure the Lin-Rodnitzky ratio before and after any test you apply to

your AdWords campaign, you can create a benchmark of the relative value of that test; the test that most

dramatically pushes your account closer to the 1.5 to 2.0 Ratio is the test that provided the most benefit to yourbusiness.

In general, weve found that there are a few core techniques that drive significant improvements to the Lin-Rodnitzky

Ratio:

1. Eliminating poorly performing queries.

At the root of Lin-Rodnitzky Ratio problems are queries that cost a lot of money but dont drive conversions. An easy

way to improve your Ratio is to run the See Search Terms analysis, but instead of filtering against queries with at leastone conversion, filter for queries with a lot of spend and no conversions, or filter for queries with conversions but with

unacceptable cost per conversion.

Heres an example where over $1000 could have been saved simply by eliminating five keywords (the total amount

that could have been saved based on the query in this report was $11,000!):

Using the Lin-Rodnitzky Ratio to Improve Your Performance


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2. Bid adjustment based on cost per conversion.

Some queries could be profitable for your business, if they were bid at the right price. Identifying queries with a lot of

conversion volume but unacceptable cost per conversion and then bidding down these queries is an easy way to

increase your Ratio. Of equal importance, queries that are getting great conversion volume but are bid too low (and

thus missing out on opportunities) will also drive positive Ratio effects. Again, you can create simple filters to identify

these bidding opportunities.


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3. Alpha Beta Account Structure implementation.

The best approach is to implement the Alpha Beta Account Structure. Alpha Beta eliminates bad queries, improves

great queries, and helps you identify queries that need additional testing. The overall impact to your Ratio isenormously beneficial.

The Lin-Rodnitzky Ratio is not intended as a cure-all. Rather, it is a simple way to benchmark the health of your AdWords

campaigns. It should help you determine whether you have the right people managing your accounts, and to what

degree you need to make immediate changes to your strategy or account structure.

A successful paid search campaign is based on many factors. As weve noted in our white paper The Seven Habits

of Highly Effective Search Engine Marketing (available at www.ppcassociates.com), profitable SEM campaigns are

driven by a holistic approach that includes:

Search engine selection

Keyword creation and optimization

Ad text testing

Landing page optimization Proper tracking

Account structure

Precise targeting

Get all of these techniques right, and youre guaranteed to have a great Lin-Rodnitzky Ratioand an ROI-positive

account!

Parting Words


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PPC Associates is a growing search engine marketing agency located in the San Francisco Bay Area.

Our approach to SEM is what we call holistic search engine marketing. Weve identified seven core elements that

go into effective SEM, and we make sure to apply these principles to each of our clients. To be successful at SEM, we

consider everything from your Web site usability to the time of day and geographic location of your sales.

We begin every engagement by getting a thorough understanding of: your business objectives; your Companys

core strengths; and the interaction between your marketing campaigns and your Web site, your sales team, and your

customer service department. Search engine marketing is but one part of an overall conversion funnel for your

business - without knowledge of the rest of the funnel, we cannot effectively manage your SEM. As a client, you canexpect us to constantly ask for greater understanding of your business and to use that information to further improve

your SEM campaigns.

Finally, weve learned from experience that a marketing department that is considered a companys cost center is

the first team to go when times are tough. We take the approach that all SEM should and must be a profit center

for your business. This means that we work with every client to understand your business goals - either in terms of

revenue, profit, or margin dollars - and then run your SEM campaigns to meet or exceed these goals.

PPC Associates was founded in early 2008 and now has more than 50 clients, including ExactTarget, Knewton, Shopify,

Beau-Coup, EchoSign, and OneKingsLane.

About PPC Associates


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Our most recent Net Promoter Score survey (August 2011) resulted in 19 of 22 respondents as net promoters (9 or 10

out of 10) with only one detractor. Detailed client responses from the survey are shown below:


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About the Author

David Rodnitzky is founder and CEO of PPC Associates, a position he has held since the Company's inception in 2008.

Prior to PPC Associates, he held senior marketing roles at several Internet companies, including Rentals.com

(2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on

advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel

start-up.

David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his

spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not

necessarily in that order.

Contact Us

To learn more about how PPC Associates can help improve your SEM, Facebook, or display campaigns, please

contact us at 650-539-4124 or visit our website at www.PPCAssociates.com.

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Lin Rodnitzky