Identifying your biggest movers in PPC marketing is one of the most significant factors in running a successful Google Ads account. This means identifying the keywords, ad groups and other strategies that are producing the biggest results and the most returns.
When you know what keywords are providing tangible, significant results, and which are just wasting your time and money, then you can optimize your spend to provide the best results. This means more clicks, more conversions and more revenue.
The Pareto Principle and accompanying Pareto chart analysis are designed specifically to help marketers locate the vital few PPC activities that produce the majority of the results. Then, the marketer can prioritize these tasks above the useful many activities that produce only minimal results.
This discussion is designed to help demonstrate what a Pareto chart analysis actually is and how it can be used to improve your project and PPC account. A Brief Summary Of The Origins Of The Pareto Principle Vilfredo Pareto is the creator and namesake of the Pareto Principle. He was an italian economist with a keen interest in wealth distribution. The first origin of the Pareto Principle was to describe the disparity of wealth and land ownership in Italy. Pareto found that 80% of the land in Italy was owned by only 20% of the population.
This 80-20 ratio is a rule that applies to many different circumstances and has come to be called the Pareto distribution. Essentially, 20% of your inputs create 80% of the outputs. Applying The Pareto Principle And Distribution Law To PPC Marketing This 80-20 rule can also be used to examine PPC marketing inputs and outputs. For example, 20% of your keywords (inputs) will be responsible for 80% of your clicks, conversions, etc. (outputs).
Another way to think of this 80-20 breakdown is to think of activities as either vital or useful. The 20% of keywords that produce the 80% of results are vital to the success of your campaigns and are deserving of the most budget and attention. However, there are also a lot of other tasks that, while not providing as big of a boost to performance, are still useful. These tasks should come second.
When you apply the 80-20 rule to your PPC data you can start to identify the small inputs that lead to very positive changes. This allows you to allocate your time and budget more efficiently. Identifying Vital Few And Useful Many Tasks With Pareto Chart The Pareto analysis results in a helpful PPC chart that makes it easier for a marketer to distinguish vital versus useful campaign components.
The Pareto chart is really just a bar chart that orders each bar by size, with the largest bars being listed first. This has the immediate benefit of allowing you to see which data items are producing the most results for the given dimension.
In terms of PPC, you may be looking at clicks for 12 different keywords. The keywords that produce the most clicks are at the top of the chart and then listed in descending order.
how to read pareto chart? in pareto chart also uses a curved line to help showcase when the shift between vital and useful occurs. A Sample Pareto Chart From ChartExpo To understand what a Pareto chart looks like and how it functions with PPC data, here is a sample provided by ChartExpo. When it comes to visualizing your marketing data, ChartExpo is the largest library of PPC charts designed specifically for the needs of advertisers and marketers.
Here is ChartExpo’s Pareto chart:
There is a lot going on in this chart. In this example, there are 12 keywords being measured based on impressions. This is a breakdown of what each element means: ● Top Horizontal X Axis: This is the axis measuring your targeted metric. In this example, impressions are the metric being measured. ● Vertical Y Axis: This is the list of keywords being analyzed. ● Blue Bars: The total number of impressions for each of the 12 keywords in the current period. ● Gray Bars: The total impressions for each keyword for the previous period. This allows a marketer to see the progress from the last measurement to now. ● Cumulative Line: The arching line that falls over the chart is demonstrating what percentage each keyword is contributing to the total number of impressions. Where this line makes its dramatic curve is when that shift from vital to useful occurs. ● 80-20 Box: To make it easier to identify and distinguish your vital performers against your useful ones, the ChartExpo Pareto PPC chart features a 80-20 box that shows exactly where this separation happens. It’s important to note that the ratio does not always break down into a perfect 80% and 20%. Improving PPC Performance With The Pareto Chart Analysis Now that you understand the different components of the Pareto chart, you can begin to see how to apply this chart and use it to improve PPC performance. Budget Optimization As mentioned, one of the key benefits of the Pareto distribution, as well as this distinction between vital and useful activities, is knowing where to spend your money in PPC. The Pareto PPC chart makes it easy to see your best keywords based on the metric you’re measuring. Falling And Climbing Keywords Keywords are dynamic, which means your top keywords are always changing. By including data from the current and previous analyses in the chart, it is easy for a marketer to identify the keywords with the biggest movement, whether up or down. Spend Your Time Wisely Similar to budget optimization, identifying your useful and vital tasks also means that you always know the best use of your time. You don’t have to continue wasting hours each week on keyword dead ends! Multiple Metrics As mentioned, the Pareto chart isn’t just useful for measuring impressions. You can use this PPC chart to look at clicks, wasted spend, conversion spend, conversion value, costs and more. This gives you multiple angles to examine your keywords from. Conclusions The Pareto chart is an incredibly useful tool that can save you time and money in your PPC accounts. By identifying the top performing elements of your campaign, you can better understand what strategies work and which do not. Then, you can spend your time and money to maximize these efforts, while also minimizing waste.