“Buying Google clicks is just too expensive for us so what other online marketing options do you have for us to consider? How about renting an email list – can you guys help with that?”

There I was sitting in a prospect’s office in Auckland’s central city, listening to the story of why they were looking for Google AdWords Campaign Management services from someone like us. It was just a few minutes into our discussion when – Bam – out came this bombshell. A failed AdWords experiment was there sitting across the table from me.

Now, some would miss the opportunity a comment like this can bring. They may jump into the many reasons why buying an email list was probably the least favourable of all options worth pursuing. But not me. Nope, this was just gold. So I started to question exactly what they had experienced with AdWords and how their failure here could reveal some startling truths about the overall health of their online marketing.

I asked some more questions and my prospect shared all he could, in all its tragic detail. How their cost per click was in dollars not cents. The AdWords budget was in thousands not hundreds and after all this there were pitifully few leads produced at what ended up to be an abhorrent individual cost per lead. The first two parts of the story were actually good news of what could lie ahead – that I will expand on later. But losing money with Google is never fun to experience for anyone, so I took my time to explain what this all meant and how it was worthwhile to take on Google again – but perhaps with a few tweaks to their methods of engagement.

I began with why the strategy was worth pursuing. You see, your ability to run a successful on-going Google AdWords campaign is a real-world gauge of the lead generation effectiveness of your website compared with all those of your bidding competitors. Yep, your ability to purchase clicks at a profit can reveal how effective your website is at turning traffic into leads – compared with everyone else in your market who tries to do the same. This in itself is some quite cool live data with which to benchmark your business against others.
I followed this with a few words on why expensive keywords are a good thing to find when you enter a bidding market like the one AdWords operates. Let’s not think cents here, nope we are really looking for those keywords that are worth dollars per click. For instance, Google and its Keyword Tool can tell me that for the keyword “cash loans nz” I should be prepared to pay around $4.00 per click. This is an amount that would make most online marketers think twice before paying. Nevertheless, trust me, it’s a good sign. Prices like these reflect what competitors are prepared to pay day in and day out because for them the investment is worth the return. And in most cases, large dollar clicks are there because for the majority of bidders they are producing large dollar returns.

The prospects behind those clicks have a strong need that they want met AND they are prepared to take action online to help them find a solution. In comparison, super-low click costs – say sub 10 cents – are warning signs that you are possibly entering a troublesome market. Here you may find clickers but those willing to take some action – and a profitable one at that – may be a bit more elusive.

As an aside, for those interested in knowing their keywords bid price but who are not yet running an AdWords campaign, fortunately Google makes it relatively easy to get a guide on this value. Just head over to the Google keyword tool, then login to your AdWords account (you don’t need any campaigns running – just an account set up) and search the keywords of your market in your region. You should see something like the image to follow.

So by now we had discussed how his keywords were in the costly part of the market and how this was a good thing. And just by looking at who was bidding on these words we could also assume that others in his market were living with these costs. This left the simple question of whether he wanted to make the necessary changes to enter the market and survive.

Well, with 90% of NZ searchers using Google as their tool, he really didn’t have a lot of options. That left the task of finding out the areas he needed to focus on to make these dollar clicks start to pay. Here’s a short overview of just four of the points we covered.

Conversion rate was the starter. Yep, the hard truth could be that your bidding competitors may own an e-commerce website that converts at 4% while yours struggles to get above 2% for exactly the same items. Or for those of you in lead generation land, your competitor’s offline sales process could be twice as effective as yours. It could be their lead follow-up, their phone script or even their face-to-face presentation. Any one or all of these could be a good rung or two above your own, which ensures they convert twice as many leads into customers as you do. Even though their lead quality is, once again, exactly the same as yours.

Next up was the method by which his competitors were valuing the total of each sale or lead and then allocating a proportion of this to marketing. For instance, they could be valuing each sale just on its initial amount. So when a typical first-time customer may spend just $100 then a proportion of this amount would go towards their AdWords costs. Now it could be that over the next 11 months these “typical” customers will purchase another nine times. And if all goes well after this they will do the same for an average of three years, moving their lifetime value to $3000 rather than the paltry $100 of the first sale.

Those who are super-confident in their customer retention strategies can afford to invest with the $3000 value in mind, leaving the rest to struggle, trying to compete in a world where their sale begins and ends at $100. With work, they could look at each lead not as $100 coming in the door but as $3000 of long-term value. Strategies to move your world beyond the first sale include an email newsletter, a rewards program, or whatever it takes to transform single-purchase customers into multiple-purchasing machines.

Following on from the economic power that comes to those with a strong customer retention plan there’s also the hard fact that your competitor could make more money per sale than you do. So while you may both bid on and sell item A, your bidding competitor could then go on and sell to the same customer items B, C and D, none of which you offer. This pushes up their average revenue and therefore profit per transaction. Maybe even to a value that allows them to sell item A at a loss, knowing that the other products will make this up and then some. Not such good news for those who only sell A :((.

Unfortunately, it may well be one or all of these strategies at play with your high-bidding competitors. It would be so much easier if you could wave a magic wand and have revealed exactly what they are doing to make it work for them when it doesn’t for you. Nevertheless, there are some very crude maths you can run to help reveal how far you have to go to get things back on track.

So to follow on from my cash loans example – here we have an average $4 per click amount. Allowing for a fictional goal application conversion rate of 5%, the cost per application would be $80. The first question is, if you operate in this business, could you live with this cost? And if not on your first sale, could it work if your looked further down the lifetime of your customer? If the answer is still no, then what conversion rate would it work with and is this realistic?

We answer questions like these during our Online Marketing Review process. It’s the first step we take new customers through when they are looking to join Permission. Yes, it’s a paid service but comes with some performance outcomes that ensure you only pay for what you want. Call us today if you would like to learn more about this first step.