Due to the rising click prices in Google Ads, you as an online shop operator are increasingly faced with the challenge of using your advertising budget efficiently while at the same time ensuring the profitability of your shop. It is often no longer enough to evaluate the performance of your campaigns based only on sales or return on ad spend (ROAS). The crucial question is: How profitable are your sales really? This is exactly where margin control comes into play. It enables you to specifically align your advertising strategies with profitability and thus maximize your profit.
margin vs. profit
Before we dive into Google Ads strategies, let's quickly look at two important business terms: margin and profit . These two terms are often used interchangeably, but they have different meanings.
Margin describes the difference between two values. In the context afghanistan phone number data of an online shop, the margin refers to the difference between the selling price and the direct costs - usually the purchase price. It is calculated as follows:
Margin = selling price – purchase price
Profit , on the other hand, is the amount that remains after all of a company's costs have been deducted - not just the purchase price, but also fixed costs such as storage and personnel costs or taxes. The margin provides the basis for profit, but is not the same thing. It is important to note that the larger the margin, the higher the potential for profit.
In Google Ads, however, we have only limited influence over these other costs, such as warehouse or personnel costs. So when we talk about "profit maximization" in relation to Google Ads, we mean the Google Ads profit . This is calculated as the margin minus the Google Ads costs. This means:
Google Ads profit = margin – Google Ads costs
This focus on Google Ads profit enables you, as the operator of an online shop, to precisely control your campaigns and get the most out of your advertising budget . The goal is to use margin-based campaign control to promote products that not only generate high sales, but above all a high margin and thus a higher Google Ads profit.