Calculate and Optimise the L/R Ratio for Your Google AdWords Campaign

If you are looking to measure the performance of your PPC ad campaigns objectively, then there are several metrics that you can rely on. A key parameter is the L/R ratio.

Check out this quick guide on how to calculate the L/R ratio and ways to make it fall within the optimum levels.

What is the L/R Ratio?

Created by Will Lin and David Rodnitzky, the founders of PPC Associates (now 3QDigital), it’s a number that indicates the performance of your PPC account.

Formula:

L/R Ratio = CPA* of all search queries / CPA* of all search queries with one or more conversions

*CPA denotes Cost Per Acquisition


How to Calculate your L/R Ratio in Google AdWords

Before you begin:

Set up conversion tracking in your account and track conversion data for at least two weeks. (Preferably, 2 to 3 months)

Set your preferred custom date range in AdWords (anywhere between 2 weeks to 3 months).

Click on the Keywords tab and then click the “Details” button, and choose “Search Terms: All.”

In the search terms report, you need to have these two columns visible –

  • Converted Clicks
  • Cost/Converted Clicks

If the columns are missing from the report,

Click on Columns -> Customize Columns to add them to the report.

Click on Filter -> Create Filter.

In the drop-down button, choose Conversions -> Converted Clicks.

Select the -> sign and type 1 in the box, and click Apply.

Scroll to the bottom of the report, and you can find two numbers corresponding to Total: all filtered search terms and Total.

Divide the Total by the Total – all filtered search terms. You would get a number. This is your L/R ratio.

What does the L/R Ratio Indicate?

If your ratio lies between:

1.0 – 1.5

Your PPC account verges on conservative. Your account is missing out on crucial conversions, and you are receiving only traffic on queries that are generic.

1.5 – 2.0

Your account is optimised and well-managed.

2.0 – 2.5

Your account is aggressive. You are getting clicks on queries that are not driving conversions.

2.5+

Your account is hugely mismanaged, and you are wasting a lot of ad money.

What to do if the L/R Ratio is too Low?

● Try adding keywords that offer broad matches. 

● Include keyword phrases.

● Try out a Dynamic Search Ads campaign.

● Try out new keywords.

● You can implement a few suggestions in the Opportunities tab.

What to do if the L/R Ratio is Too High?

● Indicate poor performing queries as negatives.

● Lower the bids for keywords that have too low ROAS and too high CPA.

● Pause the campaign for the worst performing keywords.

● Increase bids for keywords that add value.

Pro Tip: The L/R ratio may not always be in the optimal range (1.5 and 2.0), especially when you are trying out new keywords. So, make sure that you calculate the value during a stable period.

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