Creating a Google AdWords campaign is both exciting and terrifying for many business owners. AdWords has the power to change your company’s fortunes, but whether it will be for good or ill can be tough to predict. Fortunately, following a proven recipe for success can remove a great deal of the guesswork and vastly improve the chances that your campaign will be profitable.

1. Verify Customer Demand
No matter how amazing your AdWords campaign is, your hard work and money will be for naught if the search volume is simply not there. Use Google’s free Keyword Planner tool to check the keyword phrases for which you want to optimize. This tool lets you analyze a great deal of data, from how often a phrase is searched to how much you’ll likely pay per click to advertise on the keyword. You can also get suggestions for similar phrases.

2. Basic Math
Once you have narrowed down the keyword phrases that interest you, it is time to perform some basic math. Calculate your maximum cost per click (Max CPC) according to the following formula:Max CPC = (average profit per customer) x (1 – advertising profit margin) x (conversion rate)For example, your average profit per customer might be $200. Perhaps 1 in 100 prospects turns into a sale, and your target profit margin on advertising is 20%. Then the formula would look like this: Max CPC = ($200) x (1 – .20) x (.01) = $1.60*Note that if you are just starting out, you will need to estimate these numbers. Later, you can use historical data to calculate your real numbers.*Compare your max CPC to the estimated CPC in the Keyword Planner tool. If your max CPC is higher than the estimated CPC, you are in good shape. If it is significantly lower, then you’ll want to put off using that particular keyword phrase because it will likely be unprofitable.

3. Monitor Your Competitors’ Intelligence
KeywordSpy and SpyFu are incredibly useful tools that let you track your competitors’ historical ad data. You can see at a glance which keyword phrases your competitors are using and how well they are performing. You can also scrutinize your competitors’ ad copy to see what kinds of ads resonate with your target market, and figure out how to differentiate your company within the marketplace.

4. Find Your Unique Selling Proposition (USP)
After reading through several competitors’ ads, you should have a good feel for the kind of ads you want to write. Now you need to decide how your ads will answer your prospects’ most basic question: Why should I choose you over every other option, including not making a purchase at all?Play to your strengths. What does your company do better than anyone else out there? Is it something that customers find valuable? How can you turn that strength into something that differentiates your company from everyone else’s?A great example is Domino’s 30-minute guarantee. Those ads don’t even mention taste or quality. Domino’s focused on a single aspect — fast delivery — and turned it into an empire.

5. Create an Irresistible Offer
An irresistible offer is what convinces your prospects to take the plunge. To be successful, your offer must:

  • Provide Value: The benefits must outweigh the price.
  • Appear Believable: Shoppers are skeptical, especially online. Tell them why you are running a sale or giving something away for free.
  • Reduce Risk: Provide some sort of guarantee.
  • Include a Call to Action: Tell your prospect exactly what you want him to do next, and make it crystal clear how to do that.

6. Write Compelling Ads
Each ad needs a strong 25-character or less headline that repeats the keyword phrase and convinces your prospect that you can solve a problem or fulfill a need. You also get two lines of 35 characters each to describe your USP, benefits, and call to action. Get creative, using the work you already did in the previous steps.

7. Develop Congruent Landing Pages
Rather than directing your ads to your homepage, develop a tightly tailored landing page for each ad that fulfills the promises made in the ad. The more congruent the experience, the more likely a prospect is to continue along the path towards conversion.

8. Use Conversion Tracking
Conversion tracking is the only method you have to determine which ads are generating sales. To track online conversions, just grab the tracking code from the Google AdWords tool and add it to your e-commerce receipt page or your webform thank you page. To track offline sales, invest in a separate phone number that you only use in your ads and landing pages.

9. Change Your AdWords Settings
Google’s default settings are not always in your best interest, but they are easy to change. Set the Keyword Match Type to Phrase, which displays ads when a prospect types part of your keyword phrase. Also add a list of negative keywords. When a searcher uses one of your negative keywords, your ad will not be displayed. For example, if your keyword phrase is “office space,” make “movie” a negative keyword to avoid displaying the ad to people searching for the film of the same name.

10. Optimize Your Campaign
After you enable your AdWords campaign, the next step is to optimize it based on your tracking data. Raise your bids if your keywords are profitable but you are not yet ranked No. 1. If a keyword is not profitable, lower your bids or pause that keyword. Test different versions of your ads to maximize your click through rate. Also test different variations on your landing page to determine which one maximizes conversions.

Starting an AdWords campaign is always a bit of a gamble, and there are no guarantees. But following this recipe and staying on top of your data will help increase your chances for success.

Want more Google AdWords tips and advice? I put together an AdWords checklist to help you get your campaigns set up for success.