Grow my business

Consider profit-based marketing

Overview

Marketers’ ultimate goal should be to maximise bottom-line profits, as opposed to just media efficiency or cost savings. Where possible, use KPIs that reflect business outcomes such as gross profit or lifetime value (LTV).

The bulk of advertisers see performance campaigns as a cost centre and work exclusively towards maximising media efficiency. This mindset results in practices focused solely on cost savings and limits profit growth over time. However, an increasing number of advertisers are adopting a different approach. They want to win, grow and dominate. They see performance campaigns as a profit centre and work towards maximising profits.

This difference in mentality creates a real competitive advantage because profit-based marketers are willing to relax efficiency requirements to bid more competitively. They unlock access to higher ad positions and larger conversion volumes, which in turn provides them with valuable data to reduce inefficiencies afterwards.

There are four key practices to execute a profit-based approach:

  1. Choose to grow: make profit the primary metric for evaluating campaign performance.
  2. Measure total profits and customers’ economic value as accurately as possible, then improve the model over time.
  3. Match demand: remove budget caps to test if campaigns are profitable.
  4. Test bids to find the point of highest profits, or import your profit data into Google Ads and use Smart Bidding to optimise towards your most relevant metrics.

Adopting a profit-based approach can give you a competitive advantage in the auction. The addition of deeper profit-based data will allow you to be more tactical and fight harder for the most profitable customers.

Don’t limit the profitability of Search by focusing solely on efficiency gains. To maximise profits, make profit your primary metric.

Key takeaways

Marketers’ ultimate goal should be to maximise bottom-line profits, as opposed to just media efficiency or cost savings. Return on investment or cost per acquisition are incomplete metrics, as they don’t account for sale volume or allow you to optimise business profits. Where possible, use KPIs that reflect business outcomes such as gross profit or lifetime value (LTV).

Maximise profits in Search and focus on growth rather than solely on efficiency to win in the auctions that matter.

Adopting a profit-based approach can give you a competitive advantage in the auction.

Next steps

  • Assess business context

    Assess your business context and what you’re trying to achieve. What are your profit margins per product? What are your most profitable segments?

  • Model profit growth opportunity

    Model your profit growth opportunity. You can use an LTV calculator and gain insight by simulating profits for gradual increases in cost per acquisition.

  • Profit-based approach

    When you’re using a profit-based data set, consider importing data for use with Smart Bidding.

  • One

    Assess business context

    Assess your business context and what you’re trying to achieve. What are your profit margins per product? What are your most profitable segments?

  • Two

    Model profit growth opportunity

    Model your profit growth opportunity. You can use an LTV calculator and gain insight by simulating profits for gradual increases in cost per acquisition.

  • Three

    Profit-based approach

    When you’re using a profit-based data set, consider importing data for use with Smart Bidding.

Resources

Sources

1Source: Google/MIT, Global, Technology Review Insights, ML Leaders and Laggards,
Leaders (n=186) defined as >15% increase in revenue or 15+ point market share increase,
Laggards (n=176) defined as <0% growth in revenue or <0 point market share, 2018