The Lin-Rodnitzky Ratio is a good quick way to evaluate your AdWords account.
We do not want to use this as our only means of auditing an account, but it can be very helpful to get us started and provides some good quick insight.
So what is the Lin-Rodnitzky Ratio and how did it come to be?
The formula came about from the two founders of PPC Associates (now 3Q Digital), Will Lin and David Rodnitzky. It is meant to be an easy way to measure the efficiency of your AdWords account. You can visit their site for the full white paper from the folks who came up with the process.
Ensure Google conversion tracking is in place for your site. Google has two ways to do this:
- AdWords conversion tracking is setup.
- Pulling Google Analytics Goals into AdWords
Google has information on how to set up conversion tracking here.
Now onto the details of the formula and how to get the data.
Lin-Rodnitzky ratio = CPA of all search queries / CPA of search queries with at least one conversion
The process is pretty easy. Just select a 2-3 month span of time in your Adwords account:
Now go to your keywords tab for all your campaigns and create a filter that will filter all keywords with at least one conversion over the past 2-3 month window you selected. You will also need to ensure we have “converted clicks” and “Cost / converted click” columns selected for the table.
Once we have this, then we can calculate the score of our account by scrolling down to the bottom where you will see this for your account.
In this case, we will take $161.66 / $102.39, which gives us a ration of 1.57
Now what do the ratios mean?
- 1.0 – 1.5 is too conservative. We may be getting all our revenue from brand keywords and not from other keywords, remarketing and other opportunities.
- 1.5 – 2.0 is a healthy, well managed account. This means we have a good mix of keywords and opportunities.
- 2.0 – 2.5 means we may be too aggressive with our spend. We may have a lot of queries not generating conversions for the account.
- 2.5+ is a very poorly managed account. Money is being wasted if we are not purposely testing a lot of keywords knowingly.
The above are not hard rules, but guidelines. We could have a brand new account where we have launched a lot of new keywords to test or we could be pushing to add more keywords to an account which can mean a higher ratio for a short period of time.
The account I showed you is one I am managing and you can see we do fall in the good zone, but we are always working to add more keywords, testing ad copy, audiences, timing etc… to make sure we are maximizing our revenue and spend.
Hope this was helpful and as always if you have any questions or want help with your campaigns, you can contact me.