Analysing the ROI of Google Adwords
The cool thing about this process is that a well-designed website provides you with very detailed information about the sources of those visitors, what search terms they used to find you, what they did on the site, and what pages they visited before converting.
In turn, this detail allows you to easily figure out your conversion rates which you can then use to justify further investment in your website marketing.
Making Google Adwords work for you
For example, let's say that you run a Google Adwords campaign to drive traffic to your website. Google Adwords is an example of pay per click advertising, where ads are displayed on search results and other web pages; as the advertiser you can choose when your ads display by selecting relevant keywords alongside which the ads should run. You don't pay for anything unless someone clicks your ad.
Over the course of a month you generate, say, 500 visitors to your website. Of those 500 visitors, 80 of them convert. That's a conversion of 16%. Let's also say that your Adwords campaign cost you $800 for the month, or $10 per conversion (which is, by the way, a much more interesting number than the cost per click).
That suggests that if you were to double your Adwords spend, you should expect to see 160 conversions the following month, assuming these metrics hold true. And if they do, then it isn't difficult to justify increasing what you spend on Adwords provided the value of a new customer is greater than $10 and the alternative cost of customer acquisition is lower than $10.
Note that every business is different, and these numbers are used purely for example. You may pay considerably more - or considerably less - per conversion. Also, the examples ignore the potential for you to increase your ROI even further by fine-tuning your Adwords campaigns and your website.
However, once you have a baseline, you can start to focus even more closely on how changing even small elements can improve your results - and increase the ROI of your Adwords campaigns even further.