How do I test a new product using AdWords?

A reader asks:

How do I test the conversion rate with a new product using Google AdWords?

My answer:

It depends on what the definition of "the" is. As in, what conversion rate are you talking about? In which market?

Here’s the deal: there’s no such thing as "a" conversion rate – just different people saying yes or no to your offer. When you test your offer in front of enough of those people, you get an average conversion rate: 2 out of 100 buy, or 5 out of 100, or 0.7 out of a 100, etc. What you really care about is, "To which groups of people can I profitably market?"

If you’re selling hot dog cookers, you’re not really interested in the conversion rate among vegetarians. If you sell cars, you’re not aiming for the tween market. Don’t place a Hummer ad in the Sierra Club magazine. Etc.

In mass media, you have to look at big markets: readers of the New York Times arts and leisure section;

In nich media, you can target tightly focused groups: bowlers, fly fishers, artists using Adobe Illustrator, etc.

In direct mail, you can dig deeper with lists and selects: bald sudoku enthusiasts with an annual income greater than $110,000 who live within ten miles of La Jolla and drive a convertible.

With AdWords, you can dig into the mind of your prospect by targeting specific keywords. You’ll learn, for example, that people who search for "steel girders" will buy your "Bridge Engineering For Dummies" at three times the rate of people searching for "steel cables." Each keyword represents a slice of the market with slightly (or significantly) different concerns, desires, fears, and triggers than other slices.

With AdWords, and a willingness to customize your sales process for different market segments, you can test multiple segments and stick with only the profitable ones. If any.

The process itself is simple:

  1. Choose keywords (or websites in the content network)
  2. Write ads that match those keywords or websites
  3. Send the traffic to landing pages that continue the conversation begun with the keywords/websites and ads
  4. Take your best shot at a sales funnel and count the sales

If you are close to breakeven, then you can almost certain become profitable quickly by testing and improving the whole process. If you get no interest (either in your ad or your offer), you can either completely retool the campaign, or cut your losses and find something else to promote.

One warning: don’t try this until you have conversion tracking set up (see Chapter 14 of AdWords For Dummies for a really clear description of how to set up and interpret and act on the conversion data).

One clarification: you’re not actually testing a new product, but a new sales process/product combination. Thinking about any element in isolation will lead to narrow thinking and mistakes.

 


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2 Comments. Leave a comment or send a Trackback.
  1. #1 • Will said on December 4 2007:
     

    Hi Howie,

    Thanks for answering my questions on your blog. Based on my previous experience, Just few people take time to answer the questions from their readers. You are the people who care of your readers and provide help to them. I really do appreciate for it.

    I totally agree with you, as a marketer, we need to know the market and target audience. We need to segment them to test and figure out what’s the really thought in the their mind behind the keywords they are searching for on search engines.

    In your post, you mentioned that ” If you are close to breakeven, then you can almost certain become profitable quickly by testing and improving the whole process.” which level do you talk about, campaign level, adgroup level or keywords level. Pls help to verify it. Thanks

    I also have following questions regarding conversion rate. Hope you can help to answer.

    1. When testing conversion rate of sales letter by using adwords. there are two types of keywords converting keywords and non converting keywords. somebody say you need to get 100 clicks to make conclusion. somebody say you need to get 200 clicks to make conclusion. somebody say, you need to keep on running your ads until you lose money after break even point at keywords level. Which one is correct and what’s your recommendation.

    2. Different converting keywords bring in different conversion rate. How to calculate a over all conversion rate? And there are 80% of keywords or even more than 90% keywords don’t convert to sales. Do I need to count non converting keywords when calculate over all conversion rate?

    2. How many conversions do I need to get an accurate conversion rate?

    3. What’s the general industry stand of conversion rate of different price level of info product like $47, $97,$197,$497 and $997? Somebody say there is no any stand. Somebody say, the industry stand of conversion rate with a $97 price tag is only 0.5%. Which one is correct?

    Once again, thank you for your time, knowledge and great help.

  2. #2 • Howie Jacobson said on April 23 2008:
     

    Hi Will,

    Testing: at the granular level. Is this keyword ROI positive or negative? Which ad makes me more money, A or B?

    How to determine when a test is conclusive: get http://winneralert.com, which runs each test through a statistical package to determine true significance. Or use http://askhowie.com/split to run each one manually. It’s a complicated science, but the basic question is, “How confident am I that this result is real, and not based on chance?”

    Overall conversion rate: it’s an average. Why do you need to know it? Only when testing a new medium to find out how much to pay. Once you know the conversion rate per medium (which in AdWords means per keyword), that’s all you care about. Each profitable keyword may eventually gets its own sales funnel. Again, the more granular you get, the more you learn. It’s the difference between a mediocre mutual fund and the 3-4 stocks within it that are making giant profits.

    How many conversions: See question about clicks, above.

    Industry standard conversion rates: I have no idea. What matters is not how your rates compare to everyone else’s, but whether you are profitable.

    Cheers,
    Howie

 

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