Google AdWords is a popular form of internet marketing because it is easy to grasp what it’s all about. It’s a lot more straight forward than Search Engine Optimization so ends up being most small businessmen’s preferred method. At the risk of offending some I think this meme is another reason people use AdWords: Is it the best marketing method for your small business and how would you know if it is or isn’t unless you’ve done both? This article will help you make a more informed decision. Generally speaking, SEO provides a better Return On Investment than Pay-Per-Click and I wouldn’t be using AdWords unless all of the following conditions are true:
1. You Have Given SEO A Chance
My usual advice is let’s see what an SEO campaign will do for you first. Then we can identify opportunities where SEO is lacking and we can use the smart-bomb accuracy of Pay-Per-Click to target those opportunities. The one exception to this is when you just don’t have time to wait for SEO. SEO is a long-term marketing strategy that takes time to implement and to see results. If you just have to have some new business this month no matter what the cost then AdWords can serve as a good “filler” until your SEO campaign is up and running and making your phone ring. Since you won’t know how a Pay-Per-Click campaign will stack up against an organic SEO campaign it only makes sense to start with what is generally accepted as providing the best Return On Investment, which is Search Engine Optimization.
2. Your Business Is Short-Cycle Sales
Short-cycle sales means your customers buy a product or service quickly after they have begun their Google search. A good example of this is emergency plumbing repair. If someone’s water pipe has broken and is flooding their crawlspace or their toilet is plugged, and they don’t want to use a plunger or don’t know how to use one, they aren’t going to spend a lot of time researching who is the best plumber to call. They are just looking for the first phone number they can find. In that type of situation having your phone number at the top of the Google results page for the search term “emergency plumbing repair” is being in the right place as the right time. Chances are they won’t even click on your ad to look at your website because they just want to know two things: can you fix their problem on Sunday afternoon and if so what’s your phone number. Long-cycle sales is when a customer spends a lot of time and does a lot of research before buying. A good example of this is someone looking for a builder to build them a house. Nobody rushes into this quickly. But wouldn’t AdWords be a good way to get a builder’s website in front of them in the first place, you might be thinking? Yes, but you can spend a lot of money on AdWords and never know if you wouldn’t have gotten your conversions (paying customers) anyway without the AdWords campaign. What if you had a good SEO campaign in place instead? How would you know which one provided the best Return On Investment? And if you had both campaigns running at the same time you might be paying for clicks when the searcher would have found your organic (non-paid) listing had he or she not seen your AdWords ad at the top of the search results page. With short-cycle sales an AdWords campaign gives you the ability to somewhat measure your success while with long-cycle sales that ability is diminished and makes it nearly impossible to accurately gauge your success. It should be noted here that Google AdWords campaigns can give you a metric called Attribution which will tell you the first point of entry of a customer to your website, whether it is through organic search or AdWords, and so will attribute a sale to AdWords if that was a customer’s first interaction even though their last point of entry was organic search. But again Attribution won’t tell you if they would have found your site through organic search in the first place even if you didn’t have an AdWords campaign in place.
3. You Have A Compelling Offer
The best use for AdWords is if you have a compelling offer that sets you apart from your competition and you are able to capitalize on a short-cycle, ready-to-buy customer who is just looking for a good deal. With this kind of offer it is much easier to attribute the sale to the AdWords campaign. Product shoppers are a good candidate because they often search by product name and you can target your campaign to reach only those searching for what you have to offer. If you don’t have a compelling offer, one designed to make the sale, but are just trying to be informative about you and your industry, you will be paying for clicks for someone who is not ready to buy. Such a customer may be looking at several websites before making a decision. These aren’t the kind of customers you want to target with Pay-Per-Click. It’s better to use what could be called “flat rate” marketing such as SEO where you pay the same rate no matter how many times they and others click on your search results listing.
4. You Have a Sufficient Test Budget
Very rarely is an advertising campaign profitable right out the gate. Usually it takes some tweaking to find the best search keywords, bids, ads, and landing pages. So it’s best to think of the first couple months as your testing period. If you can break even, then that’s a win because you’ll be able to optimize the campaign to make it profitable. A sufficient test budget would be what you would estimate it would cost to make 10 sales. If your conversion rate is one sale for every 100 clicks and your estimated bid per click is $5 then it will cost you $500 to make one sale (100 x $5) and $5000 to make 10 sales. If you just spend enough in your test to make one sale then you don’t have enough data to tell you how much your cost per sale is going to be. Statisticians will tell you the more sales you have in your test the more accurate your results and will want to see you get at least 100 sales but chances are you really can’t afford to spend $50,000 to run a test. 10 should be sufficient, 3 would be a bare minimum to get the law of averages working for you. If you only spend enough to make one sale you don’t know if you just got lucky and found a buyer quickly or you got unlucky and ended up spending twice as much as it would normally take to get one customer.
5. You Have a Shot at Being Profitable
Do some number crunching and predict what your Return On Investment will be. Figure out how much you are willing to spend to get that sale. Will you be profitable if you have to spend $100 to make a $300 sale? Give yourself a range of possible conversion rates higher and lower than 1%. If you can make a profit spending $100 to get a $300 sale will it cost you more than $100 in a worst-case scenario regarding your conversion rate? Can you make a profit if your conversion rate is only one half-of one percent? If the numbers tell you that you will only make a profit if you have a 10% conversion rate or better then you really don’t have much of a chance of having a profitable AdWords campaign. What is a “good” conversion rate, you ask? It depends on the industry. Here’s a chart I pulled from a WordStream article that is helpful:
6. You Have Sales Tracking
As you may have noticed there are a lot of unknowns when launching into internet marketing and without good tracking you are just stabbing in the dark and never really knowing if your advertising dollars are actually working for you. There is one particular kind of sales that affords you the kind of tracking you need to be able to gauge the success of your campaign and that is e-commerce online sales. At least with e-commerce sales Google can attribute an actual sale to an actual click on your AdWords ad. You will also want a good system for phone call tracking so you can tell how many people call your number without even clicking on your ad. Tracking numbers are phone numbers that are unique to you and forward calls to your regular business number. Phone tracking systems can provide a regular log of calls and even provide digital recordings of your calls so you can monitor how well your employees are handling those incoming calls.
Is AdWords Right for You?
After reading this list of 6 conditions that should be met before launching an AdWords campaign you might get the impression AdWords should be used only rarely and that’s exactly the impression I’m trying to convey. AdWords is a great marketing tool if it’s used for what it’s best used for: targeted, compelling offers designed to produce a verifiable sale in a short-cycle sales environment. You may have heard of companies that don’t fit the conditions listed here getting great results with AdWords but those days are behind us. AdWords has attracted a lot of your competition who have driven up the bids. My suggestion is unless you can meet all of these 6 conditions you should let your competition go ahead and spend their money while you find a better alternative.