Your Google Ads ROAS looks great. But is your business making money?

Google has been pushing advertisers to use Target Return on Ad Spend (ROAS) bidding for lead generation.

You set a target for how much you want to earn for every ad dollar. Google tries to achieve it.

With a 500% target, you spend $10,000, Google tries to get you $50,000 in revenue.

It's money in vs money out. You don't worry about the cost per click or per lead, or how many leads you get. As long as the campaign hits your target ROAS you're getting what you asked for.

I love the simplicity. But should you do it?

I'm on the fence because it doesn't factor in the work between the RO and the AS. (The return and the ad spend).

Imagine two Google Ads campaigns for identical service businesses.

• Both spend $10,000 on advertising in a month.
• Both win 20 customers.
• Both earn $50,000 in revenue
• Both achieve a 500% ROAS.

From Google's point of view both campaigns have hit their target. $10,000 in, $50,000 out.

But there is a real cost to turning leads into customers. Someone has to:

• Answer the phone.
• Call people who filled in a form.
• Figure out if they're a good fit for the business.
• And do all the estimating, quoting or whatever has to happen before a lead becomes a customer.

What happens if:

• Business 1 gets 100 leads, 20 become customers?
• Business 2 gets 500 leads, 20 become customers?

For argument's sake, suppose it takes an average of 15 minutes of staff time to handle a lead that goes nowhere.

• Business 1 spends 20 hours dealing with leads who don't become customers.
• Business 2 spends 120 hours.

Where does the cost of those hours show up?

When your sales team loses confidence in the leads

And then there's another thing I've seen a few times.

When a sales team starts getting a lot more leads they're excited. Especially if they're on commission.

They work every lead hard. They call over and over till they speak to the person. They put effort into the quotes. They follow up.

But after dozens of conversations that go nowhere, they become despondent. They expect that the next lead won't go anywhere either and they put less effort in. Especially if they're on commission.

What's the point of working harder if you're not making more money?

This starts a vicious circle. Less effort means fewer sales, which in turn reinforces their perception that the leads aren't worth chasing.

When a good lead arrives it gets the same low-effort treatment.

Obviously this is bad for the business. But it's also bad for the ad campaign.

Google's bidding system relies on feedback about which clicks eventually produce customers.

If your sales team stops putting in the effort, fewer leads turn into sales. Google sees the results, but it doesn't know that the problem is the way the leads are being handled.

As far as Google is concerned, the advertising isn't producing as much revenue as it used to.

Google sees fewer sales coming from the ads and might start reducing how much it's willing to pay for clicks.

That can mean your ads appear less often, bringing in fewer potential customers.

A lead handling problem becomes a lead volume problem.

Now, I'm not saying that this bid strategy is going to produce a flood of leads that don't become customers, but it could.

And it might do exactly the opposite. Google could find better customers than we would have found by trying to control every keyword and click.

That's why I think it's worth considering.

But ROAS alone doesn't tell us if it's working for the business. You need to look at more than just money in vs money out.

What to measure alongside ROAS

I'd add four more metrics:

• How many leads does it take to win a customer? If that number starts climbing, why?
• How much staff time is spent on unsuccessful enquiries? A 30-second conversation is very different from three hours spent preparing a quote.
• Is lead volume affecting sales performance? Are good prospects still getting prompt responses and proper follow-up? And what do the salespeople think?
• Is the extra revenue producing extra profit? Once you've accounted for the cost of handling all those enquiries, is the business actually better off?

If the way I think resonates with you I'd like to give you a free copy of my book Profitable Google Ads. You can download it at https://pete-bowen.com/book.

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