Many successful paid marketing campaigns focus on return on ad spend (ROAS) as the primary metric. While many other metrics are important and affect the bottom line in various ways, ROAS is king when it comes to assessing campaign performance. ROAS is a percentage-based metric that represents how much return you received from your investment. If you spent $10 and made $20 in revenue, your ROAS would be 200%. After over a decade of managing PPC campaigns, one strategy has reigned supreme when it comes to producing the best ROAS. This strategy is what I refer to as a tiered marketing strategy.
A tiered marketing strategy works so well because it is efficient and scales campaigns in the most cost-effective way. The strategy includes 3 main tactics – segmenting, identifying, and scaling. This strategy can be applied to every trackable marketing medium your business uses, whether that’s offline or online. I’ll use Google Ads as an example initially, but will expand on other applications later on.
Segmenting
Segmenting involves grouping keywords into common groups or themes. With display advertising this can be done with targeting options like audiences, topics, etc. This is typically done within most Google Ads accounts anyway, as it’s a best practice. The key to this step is to be as specific as possible. At our agency we work with a lot of behavioral healthcare and addiction treatment facilities, so I’ll use these campaigns and keywords as an example. First, each ad group includes very specific keywords:
This example shows how to divide up terms in a very specific way. Different variations of the same term get their own ad group. For example – addiction treatment center, addiction treatment program, and addiction treatment facility will all get their own ad group. Though the variations are very similar, you’d be surprised how differently these variations perform from a ROAS standpoint.
Identifying
The next stage of the tiered marketing strategy is the identification stage. This involves assessing the ROAS from each individual group. Adding a ROAS column to your Google Ads view helps identify the ROAS from each group quicker. If all sales or conversion are the same value to your business, you can also use cost per conversion to identify how efficient each group was. It’s important to gather enough data to be able to make sound decisions. I can start this step after the campaigns have run for 30 days, but typically prefer a 90 day window to get accurate data.
Scale
The final step of the tiered marketing strategy is scaling. This step is what sets the strategy apart from others. Now that you’ve divided your campaigns into very specific groups and identified the ROAS from each group, it’s time to use that data to take action. The 3 main metrics I use to accomplish this are the desired number of leads or sales, the ROAS of each group, and the corresponding search impression share of each group. Search impression share refers to the percentage of times your ad showed for a particular search term. If your search impression share is 50%, your ads show 50% of the time that term was searched. The key is to identify the best performing group and maximize the volume of that group before moving on to the second-best preforming group. If my best performing group has a budget of $100 per day and a 50% search impression share, I would increase the budget to $200 per day to capture as many of those leads as I can since they’re the most profitable. This tactic is used in many aspects of life outside of marketing. I like to use the following example to illustrate the logic behind this tactic:
As the video illustrates, buying all the $1 apples first is the only route that makes sense. This same logic is used with scaling your campaigns. Using one of my client’s accounts as an example:
For this client, each lead or intake has the same value to the business, so we can look at cost per intake as our return metric. In this case, the “Rehab Programs” group has the lowest cost per intake. It also has only a 15% impression share. This means I can increase what I’m spending on these terms by 6x its current rate and expect a similar return. I keep working my way up until I hit the desired volume of leads.
This is where the 3rd metric, desired number of leads, comes into play. In the video example the desired number of leads was 24. If we didn’t employ a tiered strategy, buying all 24 apples would cost $48:
When implementing the tiered strategy, those same 24 apples cost $42:
Though this is a simple example, the logic is the same. You want to work your way up until you reach the desired number or leads. Since most groups will typically have limited volume, you’ll need to work your way up using multiple groups to achieve your desired number. This assures you capture the best return overall from your campaigns.
Tiered Marketing Applications
While the examples above focus on Google Ads, this strategy can be applied to any trackable marketing medium. To apply it to all marketing mediums, you would follow the same steps within each medium – then in the scaling stage cherry pick the best performing groups regardless of medium. For example, let’s say you’re a wireless keyboard company currently running Google Ads and Facebook Ads, and need to sell 500 keyboards per month. You break your campaigns into groups, identify the cost per sale from each group, then work your way up until you hit 500 keyboards. As an example, this would be a typical scenario:
I’m running Google & Facebook Ads, and the groups have cost per sale numbers ranging from $15 to $30. These groups also have “sales volume available” numbers ranging from 100 to 200. If I want to sell 500 keyboards, the most cost effective way to do that is to maximize the Google Display campaign volume (100) first, then move on to the Facebook Remarketing campaign, Google Device-Specific campaign, then the Google Device-Specific campaign, and lastly getting the remaining 50 leads from the Google wireless keyword campaign. This is the most cost effective way to reach 500 sales.
This strategy has consistently proven to be the best overall strategy for my clients, regardless of industry. The strategy is efficient and flexible. If the desired volume changes, you just continue the scaling step and work your way up to that volume again. Every advertiser wants to get the most return for their money, and this strategy can help you achieve that.