AdWords Tips

How to Reduce Your Cost Per Conversion by 16-80% (Sorry, Haters, Quality Score Still Matters)

By Larry Kim July 16, 2013 Posted In: AdWords Tips Comments: 24

Quality Score: Is it the be-all-end-all of AdWords metrics, or no big deal? You’ll get a different answer depending on who you ask. Proponents believe Quality Score is a good measure of the health of your account – high scores tend to correlate with lower costs and better results across the board. Detractors will say QS is a distraction and all that really matters is your cost per conversion, because that’s how you determine your ROI.

Quality Score & CPC

So who’s right? What should you focus on in your PPC reporting?

What Is Quality Score?

As a quick refresher, Quality Score is a metric Google uses to determine where advertisers rank on the SERP and how much they pay. Although AdWords functions as a kind of auction, if the system was purely determined by bids, spammy companies with lousy, irrelevant ads could always bid their way to the top. Quality Score serves as a check against rule by budget alone, by requiring advertisers to prove their relevance.

Better, more relevant ads generally get higher click-through rates (CTR), so CTR is one of the major components of Quality Score. Other factors that influence your QS include:

Every time one of your ads qualifies to be displayed on a SERP, based on what keywords you’re bidding on and what match types you’re using, Google calculates a score between 1 and 10 for your ad on the fly. The higher your score, the better your ad rank will be – in fact a high Quality Score can qualify you to rank above people who are bidding more than you.

Quality Score & Ad Rank

But Quality Score doesn’t just affect your ad position – it also has an enormous effect on how much you pay when someone clicks your ad.

How Quality Score Affects Cost Per Click

Your cost per click (CPC) is determined by the following formula: the ad rank of the advertiser below you, divided by your Quality Score, plus 1 cent. The chart below illustrates how this formula makes it possible to rank higher than advertisers who are actually paying more.

This is all well-known. What’s not so well-known is that Quality Score is even more valuable today than it used to be. I’ll explain how in the next section.

Click Here to Get Your Quality Score Report Card

The Changing Relationship Between CPC & Quality Score

In 2009, Craig Danuloff at Click Equations published some charts that showed how much you save by raising your Quality Score. They looked like this:

Quality Score & CPC

At the high end, a QS of 10 provided a 30% discount on CPC compared to someone whose Quality Score was 7. At the low end, having a Quality Score of 1 forced you to pay 600% more. (Suckers.)

Back in March, I decided to revisit these numbers. Craig originally used 7 as the neutral value because it was the mean Quality Score across most accounts at the time. The thing is, average Quality Scores have fallen over time. In 2013, impression-weighted average Quality Score in 2013 is closer to 5.

If you’re thinking, “So what?,” let me make it clear: That drop in the average Quality Score means that having a QS of 10 now saves you 50% over the average advertiser – 66% more than it saved you four years ago. Even a meh QS of 6 saves you about 17% – in 2009, a 6 would have cost you. Here’s what the savings look like given the new landscape:

Quality Score & CPC 2013

Of course, some people will still tell you that Quality Score is overrated, because CPC savings are meaningless compared to cost per conversion.

Why Optimizing for Quality Score and Optimizing for CPA Are the Same Thing

What those Quality Score detractors don’t seem to realize is that QS is every bit as important in determining your cost per conversion, as well. Here’s how I know:

To quantify the relationship between cost per conversion and Quality Score, I manually compiled CPA data from thousands of campaigns across several hundred WordStream client accounts, representing about $100 million in annualized spend.

I then plotted the average cost-per-conversion versus the impression-weighted Quality Score for each campaign. Here’s what it looked like:

Quality Score & Cost Per Conversion

The data reveals that there is a very strong relationship between average cost per conversion and average Quality Score. Just as above, the higher your Quality Score is, the lower your CPA will be on average. So optimizing for Quality Score and optimizing for CPA are essentially the same thing.

The below table show how much you’ll save on CPA (not CPC) if your Quality Score is higher than 5:

Quality Score CPA

Note that if your QS is below the average, you’ll essentially pay a penalty – up to 64% more per action than your average competitor. In a nutshell, for every Quality Score point above the average 5/10 score, your CPA will drop by 16% on average. Conversely, for every Quality Score point below the average of 5/10, your CPA will rise by 16%.

Michael Wiegand at Portent found similar results a few months back – that for each point that your QS goes up, there was an average CPA reduction of 22%. The main difference between his study and mine is that my data size is about 100x bigger.

It’s worth pointing out that I didn’t see a big difference in average conversion rates vs. Quality Scores. I found that keywords with high Quality Scores converted only slightly better than low Quality Score keywords, meaning that lower CPAs are primarily driven by lower costs per click — which are a direct result of your Quality Score.

(Note: I wrote about my findings over at Search Engine Land last week – there’s some interesting discussion in the comments over there, so check it out if you want to dig into the data in more detail.)

4 Ways to Improve Your Quality Score

At the risk of repeating myself, I think these numbers show that optimizing for Quality Score and optimizing for cost are essentially the same thing. High Quality Scores give you lower costs per click, and lower CPCs almost always translate into lower costs per conversion.

So how do you get your Quality Scores up above the average? Here are four quick tips:

  • Use ad extensions. Google AdWords ad extensions and Google sitelinks make your ads bigger with more places to click, so they increase CTR (at no extra cost).
  • Write better ad text. We co-wrote a guide with PPC Hero that has ten tricks for increasing CTR, including no-brainer stuff like using symbols and exclamation points.
  • Bid on brand terms. Branded keywords tend to have really high click-through and conversion rates and they can bring up your whole account average.
  • Be more methodical about account organization. Don’t just add new keywords to the same ad group until it’s 200 large. Make sure each ad group is organized around a clear theme. If an ad group has 50+ keywords, try to break it down into smaller, tighter groups.

I also recommend getting our free Quality Score toolkit. In addition to a white paper, cheatsheet, and video, it includes a Quality Score worksheet you can use to find your account’s average Quality Score, both raw and weighted by impressions, plus impressions, clicks, conversions, average position, CPC, CTR, conversion rate and other metrics for your keywords at each Quality Score level, for each match type and for different query lengths (1 to 10 words). Download it here.

So what do you think about these results? Let me know in the comments. Got problems with my data? Bring it on.

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Comments

Tuesday July 16, 2013

Idan Cohen (not verified) Said:

Hi Larry,

I think this is one of the best articles I've read about the effect of QS on CPA.

The way I treat it is very simple:

First I make sure there's a corelation between my KW > Ad > LP

Then I start optimizing for CTR systematically.

When I teach beginners about QS I tell them that if we simplify it, QS is Google's way of telling you how good (or bad) your CTR is compared to what Google expects from you for that kw in that position.
Do you agree with this type of explanation?

Cheers,
Idan

Tuesday July 16, 2013

Matt (not verified) Said:

This is a pretty good way to explain QS to a beginner Idan.  When I need a quick and easy way to illustrate the importance of QS to someone who has a basic understanding of the concept I generally state the following:

-QS multiplies Ad Rank

(Ad Rank = CPC Bid x Quality Score) 

-QS divides your costs

(Your Price = Ad Rank of Person Below You / Quality Score + $0.01)

Tuesday July 16, 2013

Larry Kim Said:

yes exactly. we illustrated that on the post and also here: http://www.wordstream.com/articles/what-is-google-adwords

Tuesday July 23, 2013

Idan Cohen (not verified) Said:

This is indeed a great infographic

Tuesday July 16, 2013

Larry Kim (not verified) Said:

hi idan, thanks for stopping by. yes i think you explained it very well! i happen to think QS is pretty important as it tracks very closely to CPA and CPC.

Tuesday July 16, 2013

Graham Hunter (not verified) Said:

I am totally not a hater but...This really doesn't address decreasing marginal returns when trying to scale search as a channel. Let's say you've got a great quality score and your account is chugging along at an awesome CPA. The next steep would be to take advantage of some of the slightly less profitable keywords, usually meaning lower quality score.

I like to use SKAGs (single keyword adgroups) to deal with this decreasing quality when going for scale...thoughts?

Tuesday July 16, 2013

Larry Kim Said:

I think adwords by design makes it ridiculously hard to chase after lower profitable keywords (eg: informational keywords) with low CTRs. You're generally better off just being picky. if you have to scale the budget, then i'd go after other high CTR keywords, or if that was completely exhausted (hard to believe but just say you exhausted all of them - but say you did) then i'd even be contemplating remarketing / search companion, etc. rather than going after low CTR informational keywords.

 

 

 

 

Tuesday July 16, 2013

Jonathan Murrell (not verified) Said:

Loved this article. I just signed up with wordstream a  few months ago and quality score has always been somthing that I have had trouble understanding. 

Thanks! 

Tuesday July 16, 2013

Larry Kim Said:

thanks jonathan! glad you found it helpful.

Wednesday July 17, 2013

Steven Ruesch (not verified) Said:

Hey Larry, 

Thanks for taking the time to write this blog. 

I always see two things when improving CTR and QS: 

1. CPC drops

2. Avg. Pos improves

And an improve of 5 cents per click is a lot for a midsized account.
Resulting hunderds of dollars of saves cost every month. In many cases that covers the costs of PPC services. 

Wednesday July 17, 2013

Larry Kim Said:

congrats on your success steven! I have seen similar results!

Wednesday July 17, 2013

Randall Magwood (not verified) Said:

This is an excellent post Larry. I could have never imagined coming up with advanced Adwords techniques in this post. My quality score with Bing Ads is pretty good, but i find myself paying more on Adwords - even though i get less clicks. But i will implement your quality score tips in this post. Thanks.

Wednesday July 17, 2013

Larry Kim Said:

thanks for reading randall. good luck with your adwords campaigns! get those CTR's up. :)

Wednesday July 17, 2013

Jignesh Gohel (not verified) Said:

What a detailed article, i will definitely share this information with my clients. Sometime clients are not in favour to improve the website as they are much familier and happy with what they have.

A small improvement can really help a lot to save big ammount on advertisement. 

Wednesday July 17, 2013

David Rothwell (not verified) Said:

Good post Larry.

Don't forget the correlation between ad copy and landing page (the conversion engine).

You can over-optimise for CTR by writing provocative ads, but if the landing page doesn't deliver on your ad promise,

your conversions will obviously drop, raising CPA all over again.

Use Search Queries to guide the ad copy (as long as it's in line with your offer), then most clicked on (most attractive)

ad copy to further refine landing page content.

Also use ad copy to deliberately disqualify clicks (I know, lower CTR) from window shoppers with no actual

money to spend.

Wednesday July 17, 2013

Sydney Hadden (not verified) Said:

some on page SEO work for the landing page is also essential.

Wednesday July 17, 2013

Larry Kim Said:

All great tips! Thanks David!

Wednesday July 17, 2013

Sydney Hadden (not verified) Said:

Great article Larry,

I have a hard time making clients understand just how important QS is. I think if you bring some on page SEO tips into your ways to improve QS this is a great comprehensive resource. I think that organizing your campaigns is probably the most under utilized strategy. 

 

-Sydney

Wednesday July 17, 2013

Ignacio Gutierrez (not verified) Said:

Hi Larry!

Great post! The images are really explanatory.

Two quick questions...

In our Ad Groups should we mantain the quality score of our keywords similar?

If we can't improve the quality score of some keywords with QS < 5 What should we do? Should we delete them?

Cheers, 

Ignacio

Wednesday July 17, 2013

Larry Kim Said:

are the CPA's on the below average QS keywords at or below the target CPA? if so, i wouldn't delete them. But if they were doing terribly from both a CPA and QS perspective (which is usually the case) then yes, i'd consider deleting them and trying out different keywords / ads. there are plenty of keywords in the keyword tool.

Friday July 19, 2013

Dean Marsden (not verified) Said:

Great post Larry. Love the visuals and data.
 
Sometimes I've found it hard to make sense of the factors that make up Quality Score and I've had a few keywords running before where it's taken a lot of work to improve it's Quality Score. I've always believed however that there is a reward, but I'd not really looked into the data before. Your statistics are very interesting!

Friday July 26, 2013

Karan Sharma (not verified) Said:

Hi Larry,

That is really a great article explaining about what is quality score, how it effects your account and how can you impove it. I would like to share my experience, i have tried these techniques but still struggling with the QS issue. I think the landing page relevance is something that plays a great role in improving your QS. If you have images all over the page and very little text, QS is below 5. Please correct me if i am wrong.

N congrats for being the number 1 in Most Influential PPC Experts 2013 :)

Thank you

Wednesday August 07, 2013

Web Development Company (not verified) Said:

reaaly very useful tips for QS but still some cofusion about QS after updating enahnce. 

I have some PPC account and most of quality score betwwen 5 to 10 but still i am paying high cost.

 

Saturday March 08, 2014

PPC for Tech Support (not verified) Said:

Hey Larry,

Many Thanks for this great article about PPC - Quality Score.

The Images helped to understand the concept. I emphasis on the adcopy, landing page and ad extantions including social links.. and that really helps. 

How effectively, we can put third party brand name(s) and keywords in the adcopy.. I think It would refelect better result. if allowed by Google?

 

Thank You  

max

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