Google Adwords Optimization - Lin-Rodnitzky Ratio

For those unfamiliar with this exotic sounding ratio, it is named after the founders of 3Q Digital (formerly PPC Associates) Will Lin and David Rodnitzky and is a quick way to assess the efficiency of your account.

So all credits go to its inventors and I’d highly recommend to download and read the official white paper at 3Q Digital. Most of the content of this post is based on that white paper.

And although the ratio sounds complex, it really is quite simple (or ‘elegant’ as mathematicians would like to say).

The Lin-Rodnitzky (or L/R) ratio is calculated as following:

Lin-Rodnitzky Ratio = (CPA of all search queries) / (CPA of search queries with at least 1 conversion)

How to calculate your L/R Ratio in AdWords

First of all, you need conversion tracking to be working in your account to be able to calculate this ratio. See the measurement part of this series for all about tracking conversions.

Secondly, you need enough click and conversion data in your account for significant results. The official L/R white paper suggests to evaluate at least 2 weeks of conversion data, but preferably a few months. I usually find that the last 2 to 3 months is a good time range.

Once you’re sure conversion tracking is working properly for the time range you’re evaluating, follow these steps:

  1. Set a date range of your choosing (somewhere between 2 weeks and 3 months) in AdWords
  2. Go to the “Keywords” tab, click on the “Details” button and select “Search Terms: All”
  3. Make sure the following columns are visible in your search terms report: “Converted Clicks” and “Cost / converted click”. If they aren’t, add them first by clicking on “Columns” -> “Customize columns”
  4. Click on the “Filter” button, then select “Create filter”
  5. From the drop-down choose “Conversions”, then select “Converted clicks”
  6. Use the greater than or equal to sign >= and enter 1 in the box. Click “Apply”
  7. Now you divide the total (grey) “Cost / converted click” by the filtered (yellow) one. For example, that would be: 4.99 / 2.91 = 1.71

What does the ratio mean?

So now you’ve calculated the L/R ratio for your account, let’s see what it actually means. In the official white paper we can find the following interpretation: “we’ve concluded that healthy accounts typically have a Lin-Rodnitzky Ratio between 1.5-2.0.

On a continuum of scores, this is what each score range generally means:

  • 1.0-1.5: The account is too conservative. Most likely this means that the only queries getting any traffic are brand terms or the absolutely most targeted queries. This means that the account is likely missing out on a lot of incremental conversions, most of which are likely to still be highly profitable for the business.
  • 1.5-2.0: The account is well-managed. There is a combination of consistent winners that always bring in sales and experimental queries that are being tested to identify growth opportunities.
  • 2.0-2.5: The account is too aggressive. There are too many queries getting clicks that are not driving conversions. This is either due to excessive use of broad match, a lack of attention to the account, or a lack of rigorous analysis of metrics.
  • 2.5+: The account is being mismanaged. Money is being wasted daily, and simple changes can save the business a lot of money.”

Note that not every account has to be in the 1.5 to 2.0 range all of the time. I’ve seen well-managed accounts with temporary L/R ratios between 2.0 and 2.5, for example right after adding many new keywords. That’s why it’s best to evaluate your ratio over a rather stable period (or only for mature campaigns).

So ratios below 1.5 or above 2.5 really mean there’s serious work to be done, but what exactly?

What to do when your Lin-Rodnitzky Ratio is too low

This means you’re hardly taking any risks. You’re probably mostly advertising on exact match keywords that are known to convert well. While this may seem like a great idea, as stated above, you’re probably missing out on a lot of additional interesting search queries. Besides, you’re not following the ‘always be testing’ principle in your account by trying out new keywords.

To increase your L/R ratio, you could thoughtfully:

  • Add keywords in phrase and/or modified broad match (that you currently only have in exact match).
  • Try new keywords by doing research with the Keyword Planner or other tools, as can be found at the bottom of the Keywords & Match Types post.
  • Try out the suggestions from the Opportunities tab (just the ones that make sense to you).
  • Add a Dynamic Search Ads campaign.

What to do when your Lin-Rodnitzky Ratio is too high

This happens more often than a too low ratio. This means you need to (seriously) cut the waste in your account.

The higher your ratio is, the higher there’s a need to:

  • Add poor performing queries or words as negatives.
  • Pause the worst performing keywords.
  • Lower bids for keywords with a too high CPA or a too low ROAS.
  • Increase bids for keywords that deserve a higher bid based on their value per click and your targets.
  • In short: you should spend less money on queries that aren’t working and more on the ones that are. By the way, make sure you have enough data (clicks) before deciding a query isn’t working.

And obviously, you should also investigate why those queries aren’t converting. Are they simply not relevant to your business? In that case you can freely exclude them.

But if the queries are relevant but still don’t convert (enough) after a significant amount of clicks, there may be other reasons for this like your website, offering, landing pages, ads, competition, prices, etc. In that case excluding the queries will save you money, but the real problems still need to be addressed.

All credits to Wijnand Meijer