If you watch what’s going on in the SEM and Google Adwords world you hear some interesting things… Like…
I can get you contacts for $34 per contact…
Our Click-Thru-Rate is 5%…
So what? What exactly does any of that mean to your business?
In online marketing, numbers like that can easily be manipulated, tweaked, and adjusted to basically make you hear what you want to hear… Gasp! I know. Shocking, isn’t it?
So how do you get down to the brass tacks and know which marketer is actually going to perform the best for your business? Well, you need a bit of an online plan and strategy for Google Adwords and SEM. You also need to understand a bit about how Google Adwords marketing, bidding, and prices work…
For starters, you need to determine if you would be happy with 1 contact/week for $35. Or you’d prefer 5 contacts/week for $500 ($100 each). Until you answer that question (that your Google marketer should have asked you), you’ll have no idea if your online marketing is actually doing what you want.
Let’s consider a few examples…
It’s relatively easy to be #1 on Google. If the Average Cost-per-Click for a particular word is $5, then bid $10. Voila! You’re at the top. But that doesn’t really tell us if we are actually benefiting from being #1. Here’s why…
Whether you’re #1 or #10 your website hasn’t changed, right? Your website will have a certain conversion rate. The average for most small businesses is 3-4%. That means if you send 100 people to your site, 3 or 4 will contact you.
Let’s be generous and say in the scenario above, your website has a 4% conversion rate so for your 100 clicks you paid $1,000 and you got 4 leads at a cost per lead of $250.
For some businesses that might be well worth it. If you’re selling products and services worth 10’s of thousands of dollars, a $250 lead cost could be a real bargain.
However… Maybe that’s a bit high… And instead you decide to bid $5.00 per click… So this time you only get 50 clicks and 2 leads for a cost per lead of $125. Same keyword… Same market… but we just dropped your cost per lead 100%.
BUT… You missed out on 2 good leads in your market.
Let’s take it even further and say you decide to bid only $2.50 per click… You get 25 clicks which generates 1 lead at a cost of $62.50…
Hot Dog what a bargain! A lead for only $62.5, now we’re talking!
However… You’re only getting access to 1/4 of the POTENTIAL leads in your market.
So are you happy to get “cheap” leads and give the majority of the rest to your competitors? Or can you afford to pay to dominate your market and get all the leads possible?
Now that you understand that, can you see how someone telling you you need to be #1 on Google or that you can get contacts for just $35 a piece isn’t the whole story?
Unfortunately, that was the simple part… The cost per lead and ROI for marketing is never that simple with Google Adwords (or any marketing) because there are hundreds of other factors to take into account. Google’s algorithms are a bit more complex than just pay more and get to a higher position…
In fact, the guy bidding $2.50/click can actually get a higher position than the one bidding $10/click if his ads are more “relevant” according to Google… And that’s where things really start to get interesting.
That’s also why it is almost always cheaper to hire an SEM specialist than to do it yourself or work with a one-size-fits-all, we-can-do- anything marketing agency.
The entire approach to SEM is completely different than any other form of marketing and ultimately your cost/contact should be going down each month while your actual contacts should be going up!
Let me repeat that… This month and next month it’s going to cost you the same amount to run a TV ad. You’ll have the same market reach and you’ll probably even get about the same results because you’re showing the same TV spot… If anything, the effectiveness of the TV ad will diminish over time as it saturates the market.
Not so with online marketing… Every month you should be getting better… Which increases your relevance and drops your costs while targeting the searchers who are more inclined to actually act.
There’s no other form of marketing like it. It requires a unique approach and a unique Google Expert to know how to harness the power.
To add just one last piece of complexity to this puzzle, Search Engine Optimization should also be a significant part of your online marketing strategy. Why?
Because 75% of searches click on the Organic (SEO) results instead of the Paid (SEM) results. And that number varies proportionately to the education level of your buyers. For instance, studies have shown that searchers with Phd’s click on paid ads only 1-2% of the time.
Disagree? Let me know in the comments.
To your Google marketing success, Bryan
P.S. Some marketers seem to be afraid of educating their clients on the inner, top-secret workings of Google. I’ve never really agreed with that philosophy so here’s an interesting infographic on how Google makes money.