Check out Permission Website Marketing’s August’s Newsletter Update.
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So how profitable is your online advertising spend? Finding answers to this question is not as hard as many business owners may think. In this short note I’ll take you through a fictitious dialog with a prospect to show you the steps we follow to reveal if their existing online marketing is forging a path towards future business profitability or short term loss.
I remember the first time I was introduced to this concept of “creating a path to profitability”. I was employed by a dot com company that was full of promise, investor’s funds and unbridled enthusiasm. We had lavish offices, fancy art on the walls and only the best advertising agencies to work with.
Just to give you a guide on how much money was involved back then. We were part of a larger company that between us shared two floors of a recently built office block overlooking Auckland harbour. So it was decided that rather than use the stairs to move between us we would arrange for a building firm to cut a massive hole in the middle of the top floor and build a marble staircase to link the two. I was OK with using the lift.
Anyway, the company was fortunate enough to hit the market at the right time with the right type of product. Low and behold after three months of trading the financial results were in and we had made a profit. Yippee! I was asked to come into the CEO’s office immediately when the figures were released and was told to sit down as he shut the door behind me.
Yes the result was good. I had apparently shown them a “path to profitability”. Now my job was to widen the trail, hire more staff and open more offices to grab as much of the market as we could. We never achieved the same profit figures again. Fortunately this company had deep wallets and a plan to keep moving while the funds were leaking out of the company.
Anyway, back to applying this to online marketing. Frequently people start a conversation with us when they think they are in situations like this, spending too much to achieve very little.
Within a few minutes of us talking we can generally see where the focus needs to be applied and have outlined a very simple path to profitability to follow. Here’s how the conversation usually goes. To make this work I’ve included a fictitious business owner Mike who runs a service business in Auckland. Mike is struggling to make his online marketing pay its way. He spends around $750 per month with Google AdWords and is not sure if this is too much or too little. He is convinced it’s the former.
Ring ring…. we join the conversation after Mike has told me a bit about what he does and how long things have been going.
Chris: OK, so let’s start with the ideal end result – you making sales. When this occurs, what would be its average amount?
Mike: Well it depends on what they buy. But on average I would say $450.
Chris: Now of this amount how much would you be prepared to spend on marketing?
Mike: As little as possible J
Chris: Thank you. I know that every business owner would want the same so let me put it another way, what would be the most you would pay before the cost of creating the sale exceeds the profits it would produce?
Mike: OK, so I know I was a bit glib with the first answer so let’s go with $50. If it costs me $50 for each sale then things still work. I can pay for all my materials, pay the staff a wage and have a bit left over for a rainy day.
Chris: Great, now just so I’m sure – how many of your clients would you expect to buy from you more than once?
Mike: While our industry should have repeat business I must admit that we are not that good at generating it. However, if we were I would expect 20% of clients to repeat within two years BUT I didn’t allow for it when coming up with my very rough $50. I expect my current leads to be paid for by the money we create from their first sale, not those they may produce in the future.
Chris: OK so working back from the sale being made. How many prospects do you need to talk to before you make a sale?
Mike: Again this all depends on the type of work people are looking for. The quality of our leads really fluctuates – especially from the website. But to break it down into averages I would pick that half of those we talk to will become a client.
Chris: So for every two prospect leads you create – one will become a client.
Mike: Yep that’s true, but quite often we cannot get hold of the leads that are generated through the website. I would say that allowing for this we would need five leads to create one sale.
Chris: OK so the $50 needs to be split between these five, leaving $10 as the most you should pay for a lead. Anything more than this and your marketing costs are looking too high. At the start you mentioned spending $750 per month with Google – which should represent about 75 leads at the average cost of $10. How many leads are you getting?
Mike: Not that many. Probably on a good month we would get around 30. I’m not exactly sure – I’ll have to go back and check my email to count them up but it’s nowhere near 75. Sounds like I might have to put a stop to all that Google advertising… I thought it was costing too much!
Chris: Hold on… Before you jump ahead, instead of checking your email can your website analytics tool provide that lead count?
Mike: What analytics? We don’t have any for the site. I do get a raft of reports from the people who manage my Google advertising. Clicks, and impressions – is that what you are referring too?
Chris: Nope. What about visitor counts and page views? The details giving you insights on how your website is performing with the traffic it is currently receiving?
Mike: Sorry – I don’t have anything like that.
Chris: OK. So let’s not jump into cancelling anything with Google just yet. First off let’s set up some analytics on your site and let it run for a couple of weeks to collect some data. Then we should see which keywords you are buying clicks for that are actually delivering the right types of people to your site who then go on to fill in your quote request form. There could be some that do this for $5 and likewise others that do it for $100 and of course some which arrive and don’t convert at all.
Mike: So I presume we would dump those that don’t convert or convert at too high an amount and focus our spend on those that fit below our target $10 per conversion rate?
Chris: You are on the right track but not exactly there. Yes to focusing on the low cost conversions but no to automatically dumping those that don’t convert at all or do for too high an amount. For instance we may find keyword phrases that are responsible for traffic which doesn’t currently convert but between us we feel should. It may not be a problem with the wrong sort of visitor – it may be that the site is not set up to convert them yet. The same goes for those costly converting keywords. Let’s not dump these as again we could have a content issue. And not wanting to layer too much complexity on it too soon, but there could be leads that cost a lot to convert but represent the best types of customers for you.
Mike: You had me all the way through until that last part. Let’s get some tracking going and then we can dig into what spend is creating what.
Chris: I know there’s a bit of complexity in here but just remember that the path to profitable online advertising starts with your ideal cost per lead and works backwards. We know this so with some analytics running between us we can find out the rest.
Yes, I know it’s a very simplistic view and the numbers were made to be nice and neat. However this short dialog should provide some insight on the steps ahead. Give us a call today if you would like to move forward like Mike did.
“We are not keeping up. There’s too much change occurring within online marketing and I’m concerned that we are not moving fast enough to apply all we learn.”
This remark came from a Senior Marketing Manager who has been a Permission client for a number of years. We had just finished briefing him and his team on the changes recently released from Google that were relevant for their situation. It was not a small list.
Feeling overwhelmed with the pace of change is a sentiment I think that many business owners would share. Google especially seems to be on a fast track of product development this year. Whether it’s from their advertising system – Google AdWords – or their comprehensive Website Analytics offering, it all seems to be in a constant state of updates.
Thankfully there’s a handy piece of management theory that can be applied to help those struggling. When applied correctly it provides insight to isolate which areas of change can be selectively ignored and which require focused attention.
The Theory of Constraints is an area I have talked about before on our blog. However with the pace heating up and with the growing overwhelming feeling I thought it was time to visit the theory again.
(Here’s the link to the Wikipedia article on it to pick up on its history.)
In its simplest form the theory states that there are very few constraints that are responsible for holding back a system from performing at its optimum level. And by very few I mean – one. So while the complete system may be made up of many intertwined parts – such as you find in a manufacturing system (where the theory has its roots), or say an online marketing system – there will usually be just one part of this that will be holding everything back.
Just knowing that one item is holding back the lot can be enough to make most sit back and breathe a big sigh of relief. That’s it – just one – not four, six or thirteen. Everyone can focus their energy on one area at a time. Trying to achieve the same for the remaining six is the issue.
Knowing this, the task moves to locating the troublesome area and then fixing it. And once this is sorted – guess what – another part of the process steps forward to claim the prize of holding the rest back.
Here’s an example of how this theory works in practice. This month we had a client come through who had taken up our initial review process. This is where we pull apart their Analytics, Paid Advertising and overall Website Conversion work and score them out of ten for each. Then we take them through what they need to do to achieve 10/10 scores for each area.
They came to us with an e-commerce store in trouble. It was loaded with thousands of products being marketed to a wide range of consumers across multiple regions. They had been reasonably active in the online marketing space so there was a lot to review. Thirty five slides later we were all ready for a strong coffee.
Their Analytics was in good shape, as was their search engine rankings. Paid advertising needed some help but nothing too dramatic here either. So overall traffic looked good – the right types of people were arriving, but that is where it seemed to come to a halt. Their real problem area was conversions – or lack of them.
So hunting for that illusive single constraint we dug into the conversion space to find what was at fault. We dismissed the shopping cart process itself. A high proportion of those who started the check out process went on to complete it. The problem was further back from there – people just weren’t putting enough products into carts to start with. This was the real constraint of the site. Lots of people browsing but very few wanting to even start the buying process.
Knowing this the client could ignore any tactic that didn’t affect a change here. So off the list comes – Search Engine Optimisation, Mobile Marketing, Paid Advertising, super smart Display Based Re-marketing and even my old faithful Email Marketing. Discount these areas and you naturally remove a good 85% of the noise of change that comes across a desk.
This left items such as product selection, product merchandising, product descriptions and images, and general site navigation. Any research or insight in these areas needed to be poured over in detail to solve this current constraint.
This is not going to be an easy task to solve. And when starting out with a client we usually face big chunky issues like these. However, as these are solved they are thankfully replaced with problems that are less strategic and more granular. For instance going from no one adding any products to a cart to now lots of carts being filled, but a troubling amount not being completed due to the confusing design of the form on the last page of the shopping cart.
The Theory of Constraints works when you have the luxury of looking at the whole process from start to finish. Fortunately our approach to online marketing fits with this well. So when we go hunting for the constraint we look at all facets that make up the complete online marketing system. It’s a different approach from those whose attention may focus on finding the problems just within the area they specialise in – say search engine optimisation. These could be valid problems but changes applied here may not affect the result of the whole system. In comparison we are not really that fussed where the constraint is located we just need to find it quickly and then get to work fixing it.
Call us today if you would like to kick this process off.
Every month we hold a customer conference call that all of our customers are invited to join. At the beginning of these conference calls we have a section on what is new in the online marketing world that we believe is worthy of your attention. This is a video of the introduction of July’s conference call 2013.
This month we talk about AdWords Enhanced Campaigns Bid Adjustments Reporting in Google Analytics, How Search Engines Work, Duplicate Content and SEO a great new Google Feature, the Google Timer.
Check out Permission Website Marketing’s July’s Newsletter Update.
For more website marketing information, take a look at our online marketing services, or give us a call on 0800 893 477.
Like you, I also receive those emails that start with the guarantee of ensuring a top ranking inside Google. The use and style of English prompts leads you to believe they were sent from a far away land. How nice. Someone from far away who his concerned about your experience with Google. And all this for a fraction of what you would expect to pay. How could you resist?
A year ago picking a vendor this way may have had a very slight chance of working. These strategies were especially enticing as they required little involvement from you, the business owner. Vendors like these just did “stuff” on websites other than yours which would magically have an effect on your rankings.
This was a time of creating enough links to your website in whatever way they could. Let’s not worry too much about the quality of the sites those links came from – just get them and move on. I remember meeting the owner of a supposedly reputable SEO company telling me that they purchased all their links. So once their customers stopped paying their fees these links were retired and the rankings with them.
Anyway, surprise, surprise the positive effect that all this type of work used to deliver has finally come to an end. In late May Google went through quite a large update which included a change that specifically negated any positive effect strategies like these had produced.
So with this change, what’s left for Google to interpret when deciding which web page should be at the top of the results and which should sit at the bottom? Well to tell you the truth nobody exactly knows. If they say they do then beware. But all is not lost. Google widely distributes details on the over aching principles that when applied help it to find and successful rank your website. Follow this link to read one of the many documents they have published on the subject area. https://support.google.com/webmasters/answer/35291?hl=en
One key principle they mention highlights the need of producing a steady stream of good onsite content. Links to this work will follow as people naturally find what has been produced and link to it. The last part of letting the links to your site grow naturally conflicts exactly with the previous strategy of manufacturing these links in a very unnatural manner.
Now there are still some ethical things you can do to help push along this natural link building process, but let’s talk about the first task at hand – producing great content.
Remembering that this content needs to be read by everyone – humans and those tenacious Google spiders – the task ahead can seem quite daunting. Especially when the style and quality of this work will more than likely have an effect on it converting “readers” into “sales leads”.
All of this makes the offer of effective Search Engine Optimisation from those in far away land seem even more interesting. Who would you like to produce your content? Someone who can barely produce an email describing what they offer? Or a business that can take the time to learn the business you are in and then work with you to help create a stream of quality content that your audience will want to read?
Now I understand that the road ahead looks a tad more difficult for those struggling with poor rankings. For instance a year ago a business owner could just pay someone to “do something” and their only involvement going forward was settling their account. All this has been replaced by a ongoing time commitment of them to work with a third party to not only produce content that makes sense but also place it on their website in a way that ensures it is read and has the desired effect of improving conversions.
I’m convinced that those with a half hearted level of commitment to the online space will find this all too daunting and will give up. Leaving the control of the organic results in their industry to others who can see the real payoff for their effort.
I liken this change to altering the type of work Search Engine Optimisation is for the business owner. Consider it moving from an “expense driven purchase” – where you bought it each month from someone who did “stuff” you never really understood – into one of creating “search assets”. They take time to create, and probably cost more in the process. Nevertheless, just as assets should, all this investment is rewarded with a positive return over an extended period as they sit solidly within the Google search rankings providing clicks to your website at zero marginal cost.
Last week a client summed all this up with a statement that in their opinion that if was hard to do, and still ethically fitted with what Google wanted to occur, then it was probably a good SEO strategy to embark upon. And conversely if it seemed too easy, and had question marks over the ethics – then there’s a very strong chance that Google will penalise them for using it, if not now then eventually in the near future.
Let me know if you would like to know more about how we can lighten some of the load.
In May this year, Google updated the Maps desktop version to make it easier to use. It also allows you to solve new problems like – which cafes are near my client’s office for a quick catch up? Or which of my friends has reviewed a Japanese restaurant in Auckland that will make my decision to pick one so much easier?
This is all good news for the “directionally challenged” like me. As I’m possibly one of the world’s worst navigators, Google Maps has been one of my all-time favourite applications.
The desktop addition of Google Maps was the precursor of all things mobile. It launched a whopping eight years ago, which is an eternity in Internet time when you realise that Facebook started the year prior. The “Street View” option found here is a particular favourite. Knowing what the outside of an office looks like can save precious time when struggling with Auckland’s cryptic street numbering system.
The mobile version is also a winner. I used to find it within the native mapping app on my iPhone until Apple replaced it with its own. Remember the disaster that was? (I just checked again and still Apple Maps tells me that Bondi Beach is just on the edge of Cornwall Park in Auckland.) Needless to say it was a quick rush back to Google when they launched their own iPhone app.
Changes to the desktop version
The core desktop part of Google Maps received a complete refresh in May. Thankfully what remained of the old version was the super-simple way to find where you want to go. However, Google tells us this is now achieved by using a mapping environment that’s more personalised than ever before. As you click, apparently Google learns.
As I write this, access to the new Google Maps is by invitation only. By the time this is published I expect everyone should be allowed in. Once you have access, the first obvious difference is the way in which it looks on the screen. Here’s a snapshot to follow:
Notice how the search box sits in the top left of the screen. It’s a place that works well. Just type away and see the map move before your eyes as it hones in on the location you are looking for.
Or, if you don’t know where you want to go BUT do know what you want, then you can use the map to help as it suggests a range of options nearby. For instance, type in “cafes near Jervois Road, Auckland” and ba-boom – cafes and their location are shown directly on the map.
All of this relies on businesses having previously registered their location with Google. This is not an obvious process to follow for most business owners – which is probably why I only see four cafes suggested for the full length of the latte-rich area of Ponsonby’s Jervois Road.
Anyway, once you find the place you want to visit it’s a piece of cake to learn how best to get there. Just pick where you are leaving from, “home” or “work” (both are configured settings) and Google will plot the best route for your pick of transport options – walking, driving or taking public transport.
The opportunity for business
The new opportunity for business owners is to advertise to a new set of potential customers – i.e. those who know what they want, but not where to find it. In this new version you now have two options available to achieve this task. The first involves placing your paid advertisement below the search box AND on the location of your business directly on the map – as bold as brass. Below is a snapshot of a business doing both.
The second option is a relatively plain alternative where your ad sits just below the search result. However, it isn’t that much more complex to do the first, so that’s our suggestion for those of you wanting to give it a try.
I’m picking that the “search within the map” interface is one that will catch on with many. It just seems to work well. This will drive traffic, which drives clicks, which should drive conversions.
The only thing that could spoil all this fun is the content that people see when they find the location they want and click to read more about it. Think of this as a mini Google website that you populate describing your business. Google calls it your Google Plus Local page. Born of Google’s social media tool, Google Plus, this naturally includes a space for people to place reviews. You cannot disable this feature, so it pays to regularly monitor what people are saying.
Other benefits for personal use
If you are a Google Plus user with a bunch of Google Plus friends, then these reviews become even more relevant. Now you can filter the results you see on the map by those reviewed by people in your “circles”. Or you can pick a rather nebulous category, “Top Reviewers”. See the screenshot below which shows how I can filter my options when searching for a Japanese Restaurant in Auckland.
Tips for getting started
If you’d like help with any of this, then give us a call at the office and one of our team will help you move forward. Happy Mapping!