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.