A properly managed Google Adwords campaign starts off with a little bit of Elizabethan English: “Know Thy Numbers.” The problem is that most people didn’t take Shakespeare in college so they missed that part. Seriously, though, a very small percentage of Google Adwords users know the numbers (or metrics) that are most important for running their campaign.

So what ARE the metrics that you need to know? For starters, you need to know the value of a click. How much is a click worth to you in Google Adwords or any other search networks? But wait a minute…to determine the value of a click, you ALSO need the conversion rate of your website. Then how do you define a “conversion”?

“Conversion” can mean different things to different people. For instance, let’s say you are selling toothpicks online. Maybe you are selling cinnamon and other flavored toothpicks. (Believe it or not, there are MULTIPLE sites that do exactly that!) For your business, you would most probably define “conversion” as a sale. After all, I doubt you would be trying to collect names and numbers of toothpick prospects for follow-up calls since the total cost of a pack of toothpicks can be less than $1, right?

But if you are selling real estate or expensive professional services, such as accounting work or legal services, a “conversion” for your business would more than likely be the collection of a name and phone number or e-mail address – or perhaps a phone call from the prospect since it is highly unlikely that someone would buy real estate or contract for professional service without a one-on-one consultation either in person or over the phone first.

No matter how you define a conversion, you must know your conversion rate. So after having determined what a conversion is for your business, you need to know what percent of those who land on your site turn into conversions. Let’s say that you have 100 unique visitors to your site and in the process you end up with 9 conversions. Your conversion rate is 9% (9 conversions / 100 visitors X 100).

Now in the case of the tooth pick company, if the average sale is $2, then 9 conversions means $18 in sales. For companies who define conversions as leads, you have to go a step further and determine which percentage of leads turn into sales and the average value of a sale. In the case of say an attorney with an average “sale” of $500, if you can convert 2 of those leads into paying clients, then those 2 conversions (or sales) are worth $1,000.

Armed with that knowledge you can now determine the value of a click. It’s easy. If you are the toothpick seller, each click is worth $2 ($18 in sales / 9 sales). If you are the attorney, then your clicks are worth $111 ($1,000 / 1 sale). NOW you will have a better idea of what you can afford to pay per click.

But those aren’t the only metrics that you need to know. To be truly successful, you need to know more than your cost per click. You need to know the cost-per-click-per-keyword that you are bidding on. You can track this by hand or you can use special software that does it for you, but you must know exactly what you are doing and how to use these tools.

If you feel like you are in over your head, then perhaps it is time to outsource your Adwords campaign management to a professional who can manage it for you. If you have already outsourced your campaign, but your Adwords campaign management company has not worked with you to determine your “numbers” then it may be time to find a new Adwords campaign manager or take back over the Adwords management yourself.