What Should My AdWords Conversion Rate Be?

A lot of clients ask me whether I can point them to industry statistics showing what their conversion rate should be when using Google AdWords. Although it’s perfectly understandable that a company would want to know how their conversion rate compares to their competitor’s, this data is virtually impossible to get, and even if you could, it would be almost completely meaningless.

Unless…

That is, unless you’re selling a commodity. But even then, the data is unlikely to be helpful. There are two questions every online advertiser needs to answer:

1. Are we making our money back and then some?
2. Whether we are or not, can we improve the results?

If the answers are no and no, then quit advertising. Otherwise, keep it up. It’s as simple as that. Yes, knowing that your competitor has a better conversion rate might tell you that there is room for improvement, but chances are you already knew that anyway since most advertisers come nowhere close to reaching their online potential.

If you are not selling a commodity then knowing how your competitors are doing doesn’t help you at all. Let’s take Apple and Zune, for example. You might say mp3 players are commodities since they all do the same thing, but they’re a far cry from a true commodity like corn or pork bellies, if only because of brand perceptions.

Let’s take a prospective customer for an mp3 player and examine just a sampling of the factors that would influence a conversion, or a sale.

1. Brand perception
2. Cost
3. Offline marketing (promotions, etc.)

This all happens before the customer to be even gets online. Once they get online there are all the factors and dynamics of the actual ad:

4. Ad quality
5. Ad placement
6. Keyword choice

Then there’s what the user finds at the end of the rainbow:

7. Landing page or homepage?
8. Quality of webpage design
9. Quality of website navigation
10. Every other factor of the website that might have an influence, however slight, on the user’s actions

By the time the user ends up making a purchase, who knows exactly what it was that made them purchase one mp3 player instead of another. Apple’s ads might do better because they’re experts in crafting marketing messages, or they might do poorly because anyone who would consider an iPod would just go straight to Apple’s website instead of searching for “mp3 players” online. Imagine how much more complicated it becomes if we ask what the standard conversion rate is for the electronics industry?

Again, the only questions that really matter are whether you’re making your money back and then some, and whether there is room for improvement. And there is always room for improvement.