Be an Ethical Entrepreneur, Marketer, and Business Builder

Avoid Venture Capital and Outside Investors for your Startup

One of the most exciting days for a startup company is the day they receive money from an investor. The day someone believes in your idea so much they show up with their checkbook. The TV show Shark Tank unabashedly captures the exuberance that comes with that financial backing.

This guy is not your friend.

This guy is not your friend.

However, the opposite should be true…

Instead of popping open champagne in celebration, a lonely evening with a bottle of scotch would be more appropriate. Getting VC money, particularly if your business is pre-profit, is practically a kiss of death.

You have a better chance of winning at craps in Vegas than your company does of succeeding and becoming profitable after your VC check.

Let me clarify that VC money and outside investors, are the same thing. Whether money comes from a major VC company or your father-in-law, outside investment too early is the real problem.

The facts are simple, 75% of venture backed businesses fail according to research by Shikhar Ghosh, a Harvard Business School lecturer.

By comparison, overall only 55% of business startups fail after 5 years. In other words, venture backed businesses are 36% more likely to fail than startups overall in the first 5 years.

So if you’re spending most of your time as a startup seeking out VC funding, you are, statistically speaking, setting yourself up for failure.

Why are so many startups obsessed with outside investments?

The answer is pretty simple. The VC’s want you to be.

Anyone familiar with silicon valley knows of Peter Thiel and how he made his billions on Paypal (a company he co-founded) and Facebook which he bought into in 2004 for $500k in exchange for more than 10% of ownership.

What most people don’t realize is that he’s also invested in over 40 other companies of which you’ve probably never heard of any of them.

This is how venture capitalists work. Even if only 1 out of 4 businesses last, they can still be way ahead of the game. More importantly, they can still win big with an IPO even if the business fails shortly thereafter.

In other words, they don’t much care if your business succeeds.

Why do VC-backed businesses fail at such a high rate?

The Business Genome Project studied over 3200 startups to find out why they fail and their results should be common sense…

The #1 reason 74% of startups fail is premature scaling.

In other words, pre-profit, pre-revenue, or sometimes pre-customer start-ups start hiring and investing in infrastructure.

This is, quite frankly, insane!

Until you can get a sale and a customer, you have no business whatsoever trying to “grow” your business through hiring.

The reason these VC-backed businesses fail is the same reason government is so inefficient. The startup is now playing with someone else’s money.

The founder now no longer feels the pain of losing everything or the need to scrape by on table-scraps when he has $1,000,000 in the bank today after having $0 yesterday.

In the 2 years since my internet lead-generation business started, I’ve had numerous offers from investors that I’ve never accepted for one main reason:

The only thing more money would do for us now is make us less efficient more quickly.

This is true of every business in the early stages.
Even the 25% of VC-backed businesses that succeed are made less efficient with large checks.

As a start-up, you lose either way.

If you get VC money, most likely you’re going to fail. If you don’t fail, then you just gave up a very sizable chunk of your business and control.

The whole concept that to be successful at business you must take risks is ridiculous. The greatest entrepreneurs rarely take major risks and any risks they take are painstakingly calculated. The Heath brothers discuss this in their free Kindle book, The Myth of the Garage.

High risk examples of VC-backed businesses

If you’re still looking forward to that first VC check, let me give you a few examples of businesses that went that route.

  • SnapChat – Valued at $4 billion dollars with $0 in revenue and no plans for generating any revenue.
  • 4Square – Valued at $600 million dollars with $2 million in revenue.
  • Living Social – After being one of the hottest tech startups in the country, it posted a $566 million 3rd quarter loss in October 2012 and I wouldn’t bet on it being around in 10 years.
  • Groupon – Which IPOed at over $26 to drop all the way to $2.60 only to now start rebounding back to $10.65 while still losing $.15/share.
  • Yodle – Though this business is currently profitable and will probably stay that way, they took a major gamble when they took a profitable start-up with $700k in revenue and leveraged it until it wasn’t profitable again until they had over $100 million in revenue. That’s an extremely large risk to take. I do commend them, however, for proving the business model first.
  • Zynga – IPOed in December 2011 around $9.50 before being hyped up to $14.69/share and since tanking to $2.09 and hovering between $2.60 and $4 for the last 52 weeks. Not surprisingly, it’s still not profitable.

Even when you take a group of industry veterans who should know better and put them together to make a “super team”, the injection of too much money too quickly inevitably causes inefficiency and often failure as we saw in the case of BlueGlass SEO.

This list could go on all day. The number of great business ideas and innovations that have been harmed by too much money too early is far larger than those helped.

The concept of riding your idea to change the world a la Mark Zuckerberg is so strong, here’s a list of companies who turned down $100 million dollar buyout offers including Viddy, 4Square, Qwiki and Path.

Keep in mind, many of the VC’s who invested early in the businesses above made a killing when those companies went public or simply sought additional rounds of funding. They made their money on the hype of the IPOs not on the profits of the businesses.

The point is, it’s good business for the VC’s but rarely good business for the businesses themselves.

Private Companies with Higher Profit than their Peers

Here are a few examples of how growing profitably has created great companies.

  • Chick Fil-A – $400 million in revenue with no outside capital investments (privately owned)
  • Leo Burnett – $600 million in revenue with no outside capital investments (privately owned)
  • State Farm – no outside capital investments and now has over 18,000 agents.
  • Northwestern Mutual – privately owned and the largest provider of individual direct life insurance in the US

All of these businesses were case studies from the book The Loyalty Effect.

What’s most impressive is that the author didn’t seek out privately owned companies with no outside investments when searching for the most profitable businesses within an industry.

Instead, once he found the most profitable businesses in an industry he realized those were a few things they had in common.

He then examined these businesses and their industries and learned that avoiding outside investments was a major factor in their successes.

Lessons from VC’s

As of the end of 2012:
Apple’s Market Cap was $392BN on Revenue of $156.5 BN for a multiple of 2.5x revenue
Amazon’s Market Cap was $115BN on Revenue of $61BN for a multiple of 1.88x revenue
Netflix’s Market Cap was $12BN on Revenue of $3.6BN for a multiple of 3.33x revenue
Facebook’s Market Cap was $64BN on Revenue of $5.1BN for a multiple of 12.5x revenue
Recently 4Square’s Market Valuation was $600 million on Revenue of $2M for a multiple of 300x revenue

In other words, to match the revenue multiplier of Facebook, 4Square will have to grow its revenue by 2,400% to $48 million.

Maybe 4Square has something up its sleeve to grow revenues 24 fold in the next few years… After all, these VC guys have made billions so they know what they are doing.

Not exactly.

It’s a gamble. A big one. One that’s reliant on public opinion more than actual business fundamentals. That’s what VCs bank on. That’s why Thiel quickly sold the majority of his shares when Facebook went public while making $1 billion dollars.

In other words, early-stage VC’s couldn’t care less if most companies they’ve invested in fail. All they need is for the company to go public to cash out. Even then they only need a small percentage of their investments to go public to make money.

Take the story Tony Hsieh told in his book Delivering Happiness.

After making $30 million on his first web venture, he became a VC and lost almost all of his money by investing in around 30 different ideas. He finally decided to take Zappos over himself and pour in everything he had left in terms of time, money, and passion.

Considering he grew Zappos to over $1 billion in revenue before selling to Amazon, you could say that one paid off. But he was extremely close to losing everything.

He didn’t have to drive himself to the brink of bankruptcy (something he seemed to learn as well) to build a profitable business.

Most ideas don’t need millions of dollars prior to turning a profit to prove a concept. That’s one thing that made Zappos unique. The founder who came to Hsieh with the idea actually proved that it worked by creating his own crude website, selling shoes, and then going down to local shoe retailers to buy the shoes and ship them off.

That method wasn’t profitable but it did PROVE that people would indeed buy shoes online. Once you know that, it’s a lot easier to determine how buying shoes at wholesale, eliminating expensive store fronts, and utilizing an efficient nationwide delivery system can make internet sales of shoes highly profitable.

Considering Hsieh seems to have forced out the original founder (a topic he doesn’t explain in his book) that’s also more proof that VC’s are rarely your friend.

Unfortunately, the rare stories of companies like Instagram and 4Square, along with Shark Tank and the Inc 500, do not put the focus on how to grow a business profitably. They put the focus on securing funding, top-line growth, and cashing out.

That’s how the VC and early-stage outside investors like it.

Unfortunately, that’s very rarely what’s best for your startup.

To your startup success, Bryan

P.S. People who point out problems without providing solutions rarely fully understand the issue. Hopefully my next blog on funding your startup will provide you ideas on some better alternatives to venture capital.

Easily give your Brand a Concrete definition and watch all of your Marketing explode

The Power of Branding Speedometer

To improve your marketing, define your Brand.

People seem to believe Direct Response marketers don’t like Brand marketing. That we’re somehow arch-enemies in the world of advertising.

That’s just not true.
We directs love great branding.

And there’s a simple reason for this.
It works.

Within a month or 2 of starting internet marketing for a new client, we can tell if a business has a strong local brand. The search volume relative to population, click-thru rates on those clicks, and even conversion rates of the website all give us clues to the strength of your business name in your local market.

Defining Branding

When you ask most people about branding they start thinking of broadcast media, logos, and slogans.

However…

Are your service trucks and the decals painted on them part of your branding?
Are your uniforms?
Is your website?
What about how you answer the phone?
Is the quality of your work?
Can your pricing be part of your brand?
How about your team culture?

Yes!
All of these are part of your brand.

So what is branding? Flint McLaughlin of MECLabs has the best definition around:

Brand is the aggregate experience of your value proposition.

I love branding because the data shows that it works. In other words, if you have a great business that delivers a truly unique product or service in a way that retains customers, then getting results from any form of advertising is a whole lot easier.

Recently a company came to my home to clean my carpets.

They cultivate their advertising by building up relationships with locally influential people, like my realtor friend who referred them to me. That’s great marketing.

They come to my home and about 45 minutes later I notice they are packing up so I go to check on things. They forgot about my area rugs that we discussed twice. They also never let me know they wouldn’t move anything. Not even the chair in my office (on wheels).

From my perspective as a marketer, their marketing DID work. I DID hire them, however their branding was very poor.

The worst part is, they did a great job, had a fair price and were very personable.

Just a few quick tweaks could transform this business…

Imagine how much more effective every dollar they spent on marketing would be if they:

  1. Introduce themselves and explain exactly what they are doing today and that they don’t want to move things that are valuable so if there is anything they need to clean under, please move those now.
  2. Double-check with you before wrapping up that everything is done to your satisfaction.
  3. Share a handout with their invoice that includes a list of all of their services. (I overheard them talking about a tile cleaning job, yet they never once offered to clean my tile.)

They did ask me how often I cleaned my carpets and then recommended I clean them every fall and spring.

Fat chance I’ll ever remember that.

Instead, they should have said, “You seem to be happy with your fresh, clean carpet and since you’re a new customer, in 6 months Bonnie in my office will give you a call, remind you it’s been 6 months and get you a 10% discount on your next cleaning. As long as we come out every 6 months you’ll always get your 10% discount.”

How many people get their carpets cleaned regularly every 6-months?

Imagine the impact on that business from offering this one service.

The lifetime value of each customer would sky-rocket which would allow the owner to spend more in marketing to acquire each new customer.

THAT is branding!

Branding is setting an expectation.
The strength of your brand is in how well you foster that expectation.

Branding cannot exist without a Value Proposition

Your Value Proposition

Great branding requires a unique value proposition.

If you want to improve your marketing and get better results, where do you start?

You could call me and I guarantee my team will get you better results online, however we will ask for your value proposition (also called a Unique Selling Proposition).

Most marketers will never ask you for this.
Most “brand experts” fail to understand that a brand cannot exist without a value proposition.

This is great news!

This means that 90% of your competitors are never going to define their value proposition and therefore will never be able to create a lasting brand.

MECLabs has developed a simple way to create your value proposition by answering 1 question:

If I’m your ideal customer, why I should do business with you rather than your competitors?

Can you answer that question?
If not, go to your calendar right now and schedule 2 hours this week to sit down, block out all interruptions, and figure that out.

Great Marketing Starts with a Great Brand

In the early 1900’s, legendary direct marketer and author of My Life in Advertising and Scientific Advertising, Claude Hopkins, took on Schlitz Brewery as a client.

Here’s what Claude had to say after visiting the brewery:

I saw plate-glass rooms where beer was dripping over pipes, and I asked the reason for them. They told me those rooms were filled with filtered air, so the beer could be cooled in purity. I saw great filters filled with white-wood pulp. They explained how that filtered the beer. They showed how they cleaned every pump and pipe, twice daily, to avoid contamination. How every bottle was cleaned four times by machinery.

I came back to the office amazed. I said: ‘Why don’t you tell people these things? Why do you merely try to cry louder than others that your beer is pure? Why don’t you tell the reasons?’ ‘Why,’ they said, ‘the processes we use are just the same as others use. No one can make good beer without them.’ ‘But,’ I replied, ‘others have never told this story. It amazes everyone who goes through your brewery. It will startle everyone in print.

So he put their story of quality control and purity in print and as a result they jumped from 5th to tied for 1st in market share.

Often your Value Proposition isn’t something completely unique. It’s just something that you communicate more clearly than your competitors.

Clarity always beats persuasion!

Branding isn’t fuzzy

I’m an engineer so I don’t do wishy-washy and touchy-feely very well.
Which is why I love great branding.

It’s precise.
It’s direct.
It’s crystal clear.
It’s measurable.
It can be tested.

When you understand that your brand is the aggregate experience of your value proposition and you have a great value proposition, you understand there are plenty of ways to test and measure the power of your value proposition.

It’s easy to measure the power of a value proposition in Google Adwords Click-Thru-Rates, A/B Split-tests on websites, email headline experiments and even in conversations with customers.

That, however, is the easy part.

The hard part is for your entire business to deliver on the expectation created by your advertising by living your brand.

To your branding success,
Bryan

253% Increase in Web Page Contacts with One Little Test

The Optimized-Marketing laboratory is buzzing with new experiments, however the results from one test have been blowing us away…

Optimizing your website to convert more visitors to contacts is crucial!

Optimizing your website to convert more visitors to contacts is a crucial part of your web strategy!

The numbers are simply staggering. Almost unbelievable.

This test was run in 4 different states for 4 different businesses in the same industry and all produced the same winner at a statistically significant level.

Overall, the winner increased contacts an average of 253% over the control representing 200 more contacts per year for those 4 small businesses.

Did you catch that last part?

With no additional investment in TV, Radio, PPC, SEO, or any other form of advertising, combined those 4 businesses will have 200 more web contacts this year than without this test.

The answer is at the bottom.

The Unbelievable Power of Conversion Rate Optimization

This is the hardest thing for my team to explain to our clients because it just sounds ridiculous.

If the message on the page is the same and all the information is there, then why in the world would “minor tweaks” have such a drastic difference?

The answer to that has to do with a combination of eye movements over a web page, the “trigger points” of your visitor, and also understanding how to “optimize the thought process” of that visitor.

This is called Conversion Rate Optimization (CRO) and Chis Goward has a great definition:

Conversion Rate Optimization is the science and art of getting more revenue-generating actions from the same number of website visitors.

Here are a few common aspects of CRO:

  • Optimizing page layouts based on eye movements from click-tracking data…
  • Optimizing the thought process of the visitor by presenting information in the best order to maximize the chance that she will contact you… (i.e. You don’t put a contact form at the top of a page if the visitor still has to be convinced to contact you.)
  • Optimizing the “flow” of visitors to direct them to the highest-converting pages…
  • Surveying visitors to learn what problems you can best solve for them…
  • Experimenting with all of these concepts to see what works best in the real world.

Conversion Rate Optimization is the most powerful tool available in the internet marketing world.

Imagine the potential improvement in all of your marketing if you KNEW scientifically which headline or offer generated more leads!

With that information in hand, you could now make your TV, Radio, direct mail and cross-marketing efforts more effective than ever before.

How much can your website truly grow and improve?

Most service-based business websites convert less than 10% of visitors to contacts (6-8% is on the high end). That means 9 out of 10 visitors leave your website without taking an action.

Increasing that to just 20%, 2 out of 10 visitors, is possible in almost every instance and we guarantee to at least double your contacts.

My Optimized-Marketing.com team and I were joking recently that our business probably wouldn’t even exist if the ad agency for my water treatment business in New Mexico would have been able to tell me what to expect for a conversion rate and cost/contact for our marketing.

That lack of information is what kicked my engineering brain into high gear to figure out a way to use the internet to scientifically answer those crucial questions for small businesses.

Since then, we’ve learned how to take technology, science and expertise that Fortune 500 companies use, and bring it to small businesses.

But unlike those large companies with entire departments dedicated to the task, we’ve figured out how to do Conversion Rate Optimization for small businesses for as little as $400/month.

Optimizing your website isn’t a quick process because it takes mountains of data and bucket loads of testing but, over the long-term, it’s the most powerful way to get the absolute highest percentage of your website visitors to contact you.

The best part is, your competition has never even heard of this so you can be confident they aren’t doing it.

If you’re the first business in your market to learn how to scientifically get more leads per marketing dollar spent…

  • You can start bidding more for Adwords and for more keywords.
  • You can run more TV ads on more stations.
  • You can mail out more postcards.
  • You can increase the wallet share of your current customer list.

While your competitor is cutting back his marketing because “nothing is working”, you’ll be going full steam ahead because all of your marketing just keeps getting better and better results.

The Science of Conversion Rate Optimization applied to your website in just 15 minutes

The most eye-opening 15-minutes you may ever spend with your website will be on a Conversion Rate Optimization walk-through with one of our scientists.

You will “walk-through” your website with us step-by-step to learn where our research has proven you are scaring away good leads.

You are then welcome to compare that to one of our websites to see the “psychological tricks” we use to increase sales that most people would never even notice.

Fortune favors the bold so don’t be the last one in your market to have a CRO team on your side.

Carpe Diem!

To your conversion rate optimization success,
Bryan

P.S. In this experiment, we moved the contact form from the sidebar into the body of the page. That’s it. The wording, form requirements, and other details were all the same, they were simply laid out differently.

Contact us for a 15-minute CRO walk-thru of your website. You’ll learn exactly where your website is bleeding away good leads.

Make internet leads 7x more effective with 1 simple trick

You might not realize it yet but, like my internet marketing team, you live in the world of the slight edge… Tiny improvements over your competition can tip the scales in your favor in a major way.

When we see a 10% improvement we do a quick chair dance and then go mine for the next golden 10% increase. Over time, all those 10% increases add up to massive results.

So when we find an easy way to get a 700% increase in lead effectiveness that requires absolutely no special skills, knowledge or training, some table-top river dancing may be on the horizon.

This is legit so put it on your schedule to start implementing right away!

These are the facts from the Havard Business Review:

These results are especially shocking given how quickly online leads go cold—a phenomenon we explored in a separate study, which involved 1.25 million sales leads received by 29 B2C and 13 B2B companies in the U.S. Firms that tried to contact potential customers within an hour of receiving a query were nearly seven times as likely to qualify the lead (which we defined as having a meaningful conversation with a key decision maker) as those that tried to contact the customer even an hour later—and more than 60 times as likely as companies that waited 24 hours or longer.

In other words, if you respond within an hour, you’ll close more deals. Period.

Any time someone tells my team that the quality of the website leads they have been receiving isn’t very good, my first question is always, “how long does it take you to respond to the leads?

When I say it’s almost not worth responding if it takes you more than an hour, most people are shocked.

Obsolete Yellow Pages BookBut really, is it that hard to believe?

Back in the days when Yellow Pages (the actual big, fat books, not the online variety) were a primary method for people finding service businesses, everyone knew that if you couldn’t respond to inquiries quickly, they were just going to move down to the next listing, your competitor, and call him.

Consider a different example. If I’m shopping online for a water softener Saturday morning, I’m probably going to contact you and a few other companies. Heck, I may even decide to take a ride over to Home Depot and see what they have to offer. If one of those companies responds to me before I get in my car to go to Home Depot, then I’m obviously going to trust them more than the guy I don’t hear from until Monday afternoon.

Do automated emails help?

E-mails can be scheduled to be automatically sent to everyone who fills out a contact form on your website and they can be a good idea to help confirm for the customer that their message did indeed go through.

It may buy you an extra hour.

But I’ve personally received automated emails from a company and that’s it. No follow-up whatsoever. Actually it just happened to me when trying to get my rims fixed for my car.

WheelsI contacted 3 companies.

The first had the best website and an automated email response… But that’s it. No follow-up and their phone line was just a voice mailbox so I didn’t leave a message.

Another emailed me back the next day saying he couldn’t help me.

The 3rd website probably hasn’t been updated since it was created in 2006. But…
He called me within 30 minutes of emailing him, explained what they do and what makes them unique, answered my questions and truly allayed my concerns about straightening bent aluminum rims.

He also got my $170. His website was outdated but his service, guarantee, and personal attention were great. More importantly, he delivered exactly what he promised since my fixed rims look great!

How do you get your sales reps to respond quickly?

So you see the value in a quick response, but aren’t real sure your salespeople will instantly start responding right away.

4 tips to improve your web lead quality and sales closing ratios by helping your reps respond quickly:

  1. Show them the data I listed in the first paragraph of this blog. Everyone responds better when they know WHY it’s important for them to do so.
  2. Make a list of your top 5-10 most common web inquiries a sales person would receive and then write up the perfect email response for each. Then have each sales rep save a copy of those responses in their email client and smart phone in “Drafts”. Now they can quickly copy and paste the best response for each inquiry while still having it come from an individual’s email address to make it personal.
  3. When your rep’s email a response, have them CC the sales manager. That way he can see when the lead came in and how long until a response was sent. Put up a chart or whiteboard showing the average response times for each rep each week. Salespeople are competitive (some with others and some just trying to break their own personal goals) so use that competitiveness to your advantage.
  4. As with all marketing, as your ROI improves, re-invest more marketing dollars online to keep your business growing.

What if my reps are paid on commission?

In my experience, paying commission does not translate into not providing any tools, resources, education or assistance for your sales team because they are all perfectly organized and hyper-motivated.

In other words, no matter how you pay people, provide them the tools they need to be successful and everyone wins. Especially your prospective new customers.

If you’re not already responding to all of your web inquiries within 60 minutes, or you really want to set yourself apart and respond to everyone within 5 minutes, then make internet lead response time a high priority in your next sales meeting!

To your success in closing more web leads, Bryan

93% of Word of Mouth happens on this Social Network… It’s not Facebook

Before I tell you the name of this social network, think for a second about your marketing budget.

Word of Mouth

How much are you investing in Facebook? Twitter? LinkedIn?
Don’t think just in terms of money.
How much time are you investing in each of those?

If you could get 93% of the results with a single social network, are you willing to invest your time and money where you can get the best results for the least amount of effort?

According to research by the Keller Fay Group, only 7 percent of word of mouth occurs online. The other 93% occurs offline.

You know… Face-to-face, people talking to other people.

In other words, if you want to grow your business with more referrals, you may need to start focusing your energy on getting your customers to start talking about you OFFLINE.

How to leverage the original social network

It comes down to this, how do you get your customers to talk about your business and tell their friends?

The book, Contagious: Why Things Catch On, by Jonah Berger lists out a 6 step process he calls STEPPS to make your ideas interesting so people want to talk more about them and tell others. It’s loaded with examples of contagious ideas like:

  • A “secret” bar in NYC that does no advertising and you enter through a secret door in a phone booth.
  • The book company that sends 2 copies of pre-print books to prominent figures whom it would like to receive an endorsement. The second book is for them to share with a colleague to get them used to recommending it.
  • The discount luxury goods website that ditched the standard online discount retailer and replaced it with a “members only” online discount luxury retailer that you have to be accepted into.
  • The gourmet Philadelphia restaurant that offered a $100 cheesesteak sandwich to get people talking about their new restaurant. They got featured in USA Today because of it.

These are all great ideas, however let me break it down with some simple actions you can take in any service-based business.

3-Step Process to get Your Customers Talking about You

  1. The Original Social NetworkAsk – Find out which customers LOVE you and which are just satisfied. Online survey’s are a great, low-cost way to do this with your customer base.
  2. Segment – Find out which customers have already recommended you and which would never recommend you.
  3. Develop Exclusivity – Give a limited number of special offers and services to your top customers for them to share with their friends and family.

Ask

In one Nebraska business, we sent out written surveys with self-addressed return envelopes to over 3,000 of their current customers. On it was also a link to complete the survey online. About 1/3 of respondents opted for the online survey. At last count, we had around 450 responses.

This provided a gold mine of information, however the most important question was:

  • How likely are you to recommend us to your friends and family? The answers ranged from, “I’d never recommend you.” to “I’ve already recommended you.”

This business had 97.4% of respondents say they would recommend them. The other 2.6% were neutral. No one said they would not recommend them!

Another part of this survey was to find out how each customer preferred for us to communicate with them.

  • Text
  • Email
  • Social Networks
  • Phone
  • Letter

For this particular business, not a single customer wanted us to communicate with them via Facebook or G+. However 49.6% preferred email with another 36% choosing a phone call and 12.8% requesting a text.

Your market and customers may be different which is why you need to ask. It’s not just about what you say, but how you get your message to them.

Segment

Now that you know who has already recommended you and who is very likely to recommend you, focus on those groups. These people are basically telling you, “I love your business and service and will gladly tell others if you make it easy for me.”

These are your Brand Lovers. All they need is a little friendly assistance and some easy ways to communicate to others what makes your business unique.

In the survey, 32% of respondents said they had already recommended the business. Another 47.2% said they are “extremely likely.”

Let me put this into perspective.

In a business with about 3,000 customers, 450 people responded to a survey in which almost HALF of those people, about 212 customers, are ready and willing to recommend their services but NEVER have.

That’s over 200 people who can be out “selling” their products and services if we just tell them how.

Develop Exclusivity

Now that you have your list of people who have recommended you and those “extremely likely” to recommend you but never have, your goal is to figure out how to get them talking about you.

Here are a few ideas:

  1. Offer Preferred Customer deals. Give your preferred customers 1 card per year to give to a friend with offers that no one else has. The only way to get this “secret” deal is by knowing a preferred customer. Since you’re only giving them 1 it makes it even more exclusive so they have to consider who they really want to tell about your business. Test with different quantities.
  2. Offer Insider Only landing pages. Picture this. John Smith is one of your customers who said he is extremely likely to recommend you. So you send him a couple of cards each year with his name and your business on it, a website with a landing page like http://mybusiness.com/john-smith, and a QR code. On it is an exclusive deal just for his friends. This deal isn’t advertised anywhere else. It’s John Smith’s deal to offer to a couple of friends per year. Scarcity is just as powerful as exclusivity to have people clambering to join and talk about you.
  3. Provide free, useful, interesting gifts. Most people entertain friends and family at their home. So what if you provided them with something to talk about? A unique mug with fun facts (think Snapple). An entertaining BBQ apron or spatula.  A cool brain teaser for their coffee table. If it can relate to the benefits of your services, even better. The goal is a conversation starter that may just lead into why that customer does business with you.

Try to offer the special offer cards without providing any gifts or benefits in return to your current customer. Actually tell them that.

“We don’t want to bribe you. If you’re happy with our services, then here’s an easy way to help your friends with some money-saving deals. If you’re not happy, then please tell us.”

People know a bribe when they see one.

However, if someone asks you if you know who can help them with a kitchen remodel, you have no reservations in telling them who to call and who to avoid. The same is true for your preferred mechanic, plumber, air conditioner repairman, insurance agent, dry cleaner or water treatment dealer.

Now imagine you follow that up with a sincere,

“Bryan’s Plumbing is the best. They’re always on time and charge a fair price. Because I’m a good customer, they gave me this card with a special deal on it to give to a friend. You can’t find this deal anywhere else and I don’t get anything in return for sharing this with you. I know you’ll be happy with them so you might as well use my deal and save yourself a few bucks.”

Helping a friend with an exclusive, scarce deal because they will honestly appreciate it, is often much more motivational than a $50 referral fee or credit.

You should have a record of your preferred customers so that the cards aren’t really necessary. If someone calls up and says, “John Smith said I need to talk to you,” then give them the John Smith Special.

Did a web expert just tell you to kick it old school?

It seems somewhat ironic and even counter-intuitive that the owner of an internet marketing business is telling you the opposite of what all the talking heads are.

If the message isn’t crystal clear yet, don’t waste your time and money with online social networks unless your ideal customers want you to.

For many small, service-based businesses your business is… uh… Boring. Your customers may not really care to like their plumber’s Facebook page. This isn’t an opinion. This is what hundreds of customers have told us so you need to Ask your customers how they want you to communicate with them.

In reality, the best way to determine which local service company to use is still the old fashioned method of asking your friends.

Face-to-face. Person-to-person.

You may just find out that 47% of your customers are “extremely likely to recommend you to friends and family” and just need a little reminder and guidance on how to do so.

 

To your success in developing better relationships with your customers, Bryan

P.S. If you want real, actionable ways to generate more leads online for your business, sign-up for my email news in the footer below.

Do TV & Radio work for small business? How to measure broadcast media

The more difficult question to answer is, of course, HOW do I determine if broadcast media is working for me?

This isn’t 1950 with 3 TV stations. You have to generate interest before you can generate a lead

Ok, one more question, what is the goal of your broadcast media? Go ahead. Take a second to answer that question.

To generate leads and grow your business, right!?

Actually…
No.

This isn’t 1950 with 3 television channels and a captive audience. If your goal with a TV ad (by itself) is to generate a bunch of phone calls or walk-in traffic to your business then you’re shooting for the stars.

The goal of broadcast media is to generate interest.

Hopefully enough interest to get them online visiting your website or searching for your business and what you do.

From there, it’s up to your internet strategy to take over because the TV ad did its job.

This presents 2 massive shifts in the way people market using broadcast media.

  1. Your message to pique curiosity and generate interest is MUCH different than one to sell a product. A “direct-response” TV or radio ad may focus on a special offer or discount. One that is just designed to generate interest instead focuses on what you need to do to get people to take the next step.
  2. You can now track the performance of your broadcast media to probably the highest degree of accuracy ever.

Don’t get me wrong, TV ads that market Black Friday Specials, discounts, coupons and offers absolutely can work assuming a few criteria are met.

  1. People know your business already. In other words, they trust you.
  2. People know where you are. They know how to find your business if it’s retail or how to get a hold of you for service.

If those 2 criteria aren’t met, they’re going to either ignore you or do additional research.

Guess where they are going to do additional research?
Online.

Generating Interest Not Leads

Studies show that up to 31% of Americans browse the internet WHILE watching TV.

The current way 1/3 of Americans watch TV

The current way 1/3 of Americans watch TV

So let’s put this in perspective.

Most people watch TV at night when your office is closed.

About 1 in 3 do so with an iPad, laptop, or other internet-enabled device at their fingertips ready to do further research on things that catch their attention.

Which means for 15-60 seconds you have a potentially captive audience primed to learn more about your business, products and services.

But…

Only if your ad is more interesting than the one that came on 30 seconds earlier and the one that comes on 30 seconds later.

And once they find your website, they must be engaged enough to stay on your site long enough to fill out a contact form.

Remember, it’s after hours so if your goal is to get them to call you the next day when you are open to generate a “lead”, best of luck. That’s a much harder task.

Tracking Broadcast Media

The 2nd major advantage of redefining your goal to Generate Interest instead of a Lead is now we can track the impact of the ad…

We can track visits to targeted landing pages and the number of online searches for your business before, during, and after your ads are running.

We can break it into the time of day or segment the months when the ads are running and when they aren’t.

How accurately can you track broadcast media?

First off, how accurately can you track it now? Not very well, huh?
So any tracking would be a step in the right direction, right?

In one market, I was able to see a 135% increase in branded searches sustained over several months while running a TV campaign compared to without running any TV ads.

Additionally, the low performing month was during the normal seasonal peak and the increased search months were during slower times of the year. So the results were actually even more drastic than the 135% increase we measured.

Now are you ready for the scary part?
The data we gathered wasn’t for our client’s TV campaign. It was for his competitor’s TV commercials.

Get your competitors to pay for your marketing

Let that digest for a second. We can watch a TV ad that your competitor has spent thousands or 10’s of thousands marketing and not only measure it’s impact, but also get into the middle of the process.

In other words, when the TV watcher types “competitor” into Google, we can pop-up and cut them off at the pass.

Are you doing this right now? If not, hopefully no one else is doing this to you.

To your broadcast media success, Bryan

P.S. There’s a reason my team only works with 1 business per market and won’t take on direct competitors as clients. What we learn about your market is just too valuable to get into the hands of your competitors. So take 2 minutes, get in touch with my team, and take control of your internet marketing before you waste another dollar on untested methods that you still aren’t sure are working.

How 1 sentence can increase web conversions 1244%

There are 2 ways to approach your internet marketing:

  1. Assume you know everything and can guess what your target prospects want to see.
  2. Assume you know almost nothing and need to test to learn what actually converts prospects to customers.

If you’ve ever worked with an Ad Agency or Web Designer you are probably intimately familiar with #1. Often you go through an interview process where your agency or designer asks about your business services and then either writes up the pages on your website for you or asks you to fill in the blanks.

This method is all based on guesses… You, your web designer, and your agency are all guessing at what headlines, calls-to-action, offers, designs, videos, images, contact forms and other things will result in you getting the most new customers.

What few people realize is that there’s a much more powerful way to generate leads with your website.

Let me give you an example…

Recently I was going through an analysis on one of our clients, as we promise to do every month, and found the phrase, “Best <local> Customer Reviews!” in a Google Ad increased our Click-Thru-Rate over the control by 32.5% but, more importantly, also increased our conversion rates by 1244%!

Both were at a statistically significant level.

One sentence in a Google ad, with traffic being sent to an optimized landing page, increased actual contacts 12-fold over our original ad.

How hard is it to create a sentence that generates a 12-fold improvement?

To learn that 1 sentence we tested over 130 different Google ads and about half a dozen different page designs over about 6 months. That’s only part of the story as we’ve tested over 1,000 different ads in that industry and have performed dozens of tests on different site layouts for similar businesses.

Keep in mind, the results in one part of the country are not always directly applicable in other areas of the country as you have different competitors, demographics, local problems, and knowledge levels.

So it’s not quick or easy.

However, imagine what those type of results look like over a year of testing and optimization! A few percent improvement each month can result in doubling your online contacts and cutting your cost/contact in half over the long term.

How does online optimization work?

The first step is breaking up your internet efforts into 2 sections for targetting:Optimized-Marketing.com Equation

  1. Traffic – Where and how you’re getting visitors to your website.
  2. Conversion – How you’re converting the highest percent of visitors to contacts.

For a service-based business, your website’s job is to generate a contact. It’s your sales department’s job to turn that contact into a customer.

We break up your online game plan into Traffic and Conversion because both are necessary. If you have the best website in the world but no one ever visits it, or you have thousands of visitors but a low-converting website, then you’re throwing money out the window.

The traffic portion is relatively easy for people to understand…. It’s all those buzz words that have been thrown around for the last decade. Pay-per-click, Google Adwords, SEO, online directories, Facebook Ads, LinkedIn networking, email marketing and any other place you can run an ad to direct people to your website.

Conversion is all about getting the highest number of visitors to contact you. The most important part of this is your conversion rate which is defined by the percent of visitors who contact you.

Think of it this way… If you develop great marketing and give 10 leads/day to your sales person but he only converts 1 to a customer. Your Traffic is excellent but your Conversion, at a 10% conversion rate, is pretty poor.

If that happened in your office would you increase your marketing budget to get 20 leads/day or invest in training a better salesperson?

Obviously you are going to work on your salesperson first!

Well the same is true on your website. If out of 100 visitors only 4 people contact you (which is about average for most service industry websites) then why not figure out how to get 8 out of 100 to contact you before spending more on SEO or PPC?

That is what website conversion rate optimization is all about. Saving you money by learning what converts the highest percent of your website visitors to contacts.

According to a study done by Adobe, for every $92 marketers spend on Traffic they spend only $1 on Conversion.

Let me put this in more reasonable terms. If your marketing costs for a new lead are $92, to match the findings of this survey, you would then pay your sales person a $1 commission to close the deal!

Think of your website as your 24 hour salesman and you can start to see why investing in ongoing testing and optimization is a crucial part of your online strategy.

How to know if your agency or designer is focused on testing?

You don’t go to your accountant and say, “This is how much tax I’m paying, do the paperwork for me.”

The same should be true for your web guys.

If your web experts say, “Your website is done, let us know when you want us to update it“, then you have a problem. Unless you’re an expert at web analytics and testing, how will you know what needs to be updated or when?

My team, on the other hand, are the experts online and don’t expect that every sentence, graphic, formatting, color change, or call-to-action we’re testing needs to go through you first.

We work best when we test the ideas and then let you know what works and what doesn’t. It saves you a ton of time and allows us to put the results of all of our tests to work for you with minimal effort.

That’s the difference between a web designer and a team of optimization experts.

To your optimization success, Bryan

 

The cornerstone of your Marketing RoadMap – A solid Positioning Strategy

A positioning strategy is the position you occupy in the minds of your prospects and customers.

As a start-up, you have the awesome power to define that position from scratch. For an existing business you need to know your current position before you can plan how to change it.

First some background…

Thirteen months ago I started an internet marketing company.

My expertise and experience were in IT, mechanical engineering (BS from Kettering University), technology consulting, small business management (which I learned at the first business I acquired), and then a bit of business brokerage.

So starting an internet marketing business seemed like the best way to leverage all of those experiences, right? Right?

In fact it was…

First, I had to understand what would make my business and team unique.

Why would someone hire a computer-geek, mechanical engineer, entrepreneurial-junky to generate leads online instead of maybe someone with actual experience marketing?

In those words it actually sounds somewhat ridiculous. (Now that we’ve repeatedly proven our team can outperform anyone we’ve come across in internet marketing for service businesses, I’m finally fessing up.)

Here are the steps I took to position ourselves uniquely in the market as a start-up going up against multi-million dollar teams with more years of experience than I had years breathing.

  1. Study your competition – Know what they do, why they do it, and how they communicate.
  2. Study yourself – What does my team have that no one else does? What problems can we truly solve?
  3. Study your target market – If possible, survey them. What is important to them? What annoys them? What one thing would most help them?

Now take all of that information and formulate your Positioning Strategy. Your Positioning Strategy is the BIG PICTURE of what people will think of when they think of you.

It’s the stake you drive into the sand that separates you from everyone else. 

If you don’t know what makes you unique, your customer’s don’t know either.

Know Your Competition

Our competition fell into 2 primary segments… Web Developers and Ad Agencies.

By reading through their websites, reviewing their marketing, and talking with their customers, it was quite obvious that they both positioned themselves basically the same way.

They focused on:

  • Advertising Awards
  • Creativity
  • Uniqueness
  • Cleverness of phrases and headlines
  • Branding
  • Decades of Experience in the above
  • Measuring success objectively by the client’s appreciation of the design

It was obvious we could not possibly beat them at their own game. Instead, we defined our Position in the marketplace as:

  • Results Driven
  • Analytical (we use the scientific method not popular opinion)
  • Systems focused
  • Constantly testing to learn what works. (We openly admit we don’t have all the answers while pointing out that  no one does.)
  • Direct-Response
  • More experience where it mattered (in the industry and with a new marketing medium)
  • Success measured objectively by the number of increased leads

As engineers, we could present a completely new skillset that was perfectly aligned with the internet marketing world. For the first time in history, we can test and optimize ALMOST EVERYTHING. Headlines, pictures, offers, videos, buttons, and calls-to-action can all be tested.

None of our current competitors knew the power of testing, or they simply weren’t communicating that they did, so we positioned ourselves against them to highlight our unique skillset. 

Hence our (thoroughly tested) business name, Optimized-Marketing.com.

Know Thyself

Yeah. We’re geeks and we know it.

  • Engineer– This has numerous advantages in the world of internet marketing. We understand how to setup scientifically sound split-tests  for Google Ads, landing pages, and other online marketing.
    • We are trained to build systems to solve problems. The problem is you need more leads and the solution we built is Traffic, Conversion, and Follow-up. Notice I didn’t say it’s about websites or SEO or Social Media. All of those things can change… But the system to leverage all of them may only need slight adjustments to keep up.
    • We love numbers. Of course, you can’t measure absolutely everything, but we can measure a whole lot more than most marketers will ever tell you.
    • We focus on the outcome. Ever watch an episode of the Big Bang Theory? Engineers dislike fluffy, opinionated people. Until you show us the results, we don’t believe anything you say. That obsession with results, in the form of generating leads, makes us quite unique.
  • GM’s in the industry – I’m one of you! Amanda and I can identify with our target customer’s struggles because we’ve both been General Managers in the water treatment industry. Identifying with their struggles goes a long way in building trust.
  • Technology consultant – Experience doesn’t matter when the technology is brand new. Every time a new marketing medium like Adwords, Facebook, or YouTube comes out, we’re all back to square one. So, even though I had less marketing experience, I had a lot more experience using technology to improve businesses. Which is EXACTLY what we do.
  • Obsession with motorcycles – A lot of our target market, small business owners, are men with an appreciation for cars and motorcycles. I’m about 10 steps beyond fascination to full out obsession so I often use that connection to become more memorable. On a regular basis I hear things like, “Oh yeah, you’re the motorcycle guy.”

You have to keep in mind that, in a small business, building your “brand” is as much about your corporate positioning strategy as it is about how people perceive you personally.

Know Your Target Customer

Let me reveal one of the most under-utilized secrets in marketing.

If you actively do this, you are one in a hundred businesses… Maybe one in a thousand.

If you want to know your target customer, <drum roll pleasesimply ask them what’s important to them!

Here are a few ideas:

  1. Ask your customers AND prospects what’s important to them, including the prospects who don’t buy. Don’t forget to ask the ones who don’t even take the time to contact you why they didn’t contact you.
  2. Track ALL customer complaints to Fix, Review, and Follow-up with them. Only about 1 in 8 customers who have an issue will complain about it so treat those complaints like gold. There are few better ways to learn how you can make it easier for customers to do business with you.
  3. Use surveys to ask the same question the same way. In other words, hearing 10 customers say similar things 10 different ways is not the same as their quantitative response to the question on a 1-5 scale.

How did we learn about our target customer?

I joined the trade organization of our target market to get access to our target customers’ emails and, instead of sending out an email saying “buy from me,” I sent out a survey.

The survey was a free tool for businesses within the industry to benchmark their marketing plans against other businesses within the same industry. All for free. Whether they were interested in our help or not, it was a great value to the market.

That’s how I got my first 4 clients.

My first few emails never even told them what I did or how I could help. I simply asked them where they needed help and then built a business around those needs.

Eliminate Competition

The net result of a strong positioning strategy is that you become so unique, you literally don’t have any more competition. No one can compete with you because you don’t offer the same products or services as anyone else.

So, what is your Positioning Strategy ? If you don’t have one yet, when are you making the time (open your calendar and schedule it now) to create one?

To better positioning yourself for success, Bryan

Your “experience” is what’s holding your managers back and limiting your growth

If you hired the right managers, who are better than you in their areas of expertise, then the key to getting them to excel is simply to unleash them.

In other words, get out of his or her way!

You just need to let him make his own decisions, his own mistakes, and allow him to lead his own team. Once you realize that your “experience” and knowledge is actually holding your team back, then real growth can start.

If you’re doing ANY of the following, you’re holding your leaders back:

  1. Addressing issues with the team members who should report to him. This should be clearly defined in your organizational chart.
  2. Addressing issues from customers who should be talking to him. If your customers have been trained to go to you to get the best deal, then un-train them by making sure all pricing goes through your chosen leader.
  3. Vetoing ideas and making decisions in his department. Your job as the CEO, Owner, President or Team Leader is to explain why you think something will or will not work. Not to make the decision.
  4. Dictating that leader’s schedule. Sure you can ask him to take care of an issue or help you with something, but dictating a schedule without his approval is more like putting on a choke collar and then asking him to chase away the rabbits. He can try as hard as he wants but he’s never going to get the job done.
  5. Second-guessing or analyzing every decision. The details are not important to you, only the results are. Allow him to work out the details. (I explain below what to do if you think he’s going to implement a bad idea.)
  6. Holding regular meetings to ensure you ultimately get to make the “big” decisions. Quite often this is done indirectly. You might never come out and say, “It has to be done this way because I said so.” But saying, “You know, I really think that idea won’t work but it’s up to you,” is interpreted as “You better not try that!“, when it comes from most bosses.
  7. Ignoring mistakes that are made. This is a major misconception. Allowing people to make mistakes, in and of itself, is pretty worthless. Not addressing those mistakes is downright harmful to your business and the mistake maker. Mistakes should only be made once and the only way to ensure that your leader knows that it was a mistake, and has a way to prevent it from happening again, is to openly discuss mistakes. Biting your lip because you’re afraid to hurt his feelings by pointing out a mistake, is a sign that you still have him on a leash.

So how do you keep tabs on your newly free leaders?

  1. You need some “Rules of the Game” in the form of a written Vision, Mission and Culture. Think of these like your 10 Commandments of business. Everyone on your team doesn’t need to memorize them. However, your key leaders do need to know what’s expected of them and the clearest way to do that is in writing.
  2. You must have a Weekly Action SnapShot (WacSnap) so you can keep regular tabs on the key areas of your business. Depending on your function on the team, this may be included in a weekly meeting with your key leaders.
  3. You need Key Performance Indicators for each leader. For example:
    1. Service leaders need to demonstrate a profitable service department with minimal call-backs and customer complaints.
    2. Marketing leaders need a target acquisition cost, marketing ROI, number of leads, and conversion rate.
    3. Sales leaders also need to know conversion rate along with average dollar sale and lifetime value of a customer.
    4. Finance leaders need to know cash on hand, cash in receivables, and pending payables at all times. She also needs a target goal for savings and capital available for upcoming large purchases.
  4. At least twice a year you need to conduct a 12 Questions survey with each leader.

What if a leader is going to make a bad decision?

Have you ever made a bad decision? Since you’re reading this, then you somehow managed to survive it. Most poor decisions will fall on that side of the coin – They’re survivable. Keep that in mind.

  1. Ask him (don’t tell him) why he thinks X will work out well.
  2. Ask him if he knows of anyone else who has implemented it successfully. If not, and you have a resource for him to talk to on this topic, then offer it. You don’t have to pretend to be the expert on every topic. It’s much better to have a list of resources available.
  3. Let him know you’ve tried something similar to that before and ask if he’d like a few ideas.
  4. Find out how he plans to measure if the idea is successful or not. Every idea should have a measurement for success and just defining that allows most people to see the flaws in their own ideas.
  5. If he still thinks it’s a good idea, no one is going to die, the business isn’t going to go under, and an account worth more than 5% of your gross sales doesn’t have a highly likely chance of getting lost, back off and let him implement the idea.
  6. Once he realizes he’s made a mistake (which will be obvious if you did step #4), ask him what went wrong. Again, don’t just tell him. If you ever want him to think critically and figure out how to catch mistakes before they’re ever made, you have to stop spoon-feeding him all the answers. 
  7. If the idea does work, congratulate him on a job well done! Now go celebrate because allowing a leader to do something you didn’t think would work and being proven wrong, just helped you take a giant leap towards growing your business without it depending solely on you.

Won’t that take more time than me just making all the decisions?

Yes. At first.

You can only physically make so many decisions so your growth will be limited. Additionally, your freedom and ability to take vacations will also be limited.

More importantly, the ability for your team managers to be fully engaged and satisfied with their work will also be very limited.

One last thought…

For some people, “unleashing” your managers is going to be a BIG change. You’re not quite ready for it and they don’t quite believe you’re serious.

So during this transition, when someone comes to you to ask a question, don’t assume she wants your opinion. Chances are she doesn’t. She just doesn’t fully believe the decision is in her own hands and still doesn’t want to do something you won’t like.

Before you answer her question, you need to ask directly, “Are you looking for my approval or my opinion? If you want my approval, you have it. If you want my opinion, I’ll only give it to you if you treat it for what it is. Ultimately, it’s up to you to make the best decision for your team.

More importantly, when you say that, you better mean it!

To your success in unleashing the talents within your leaders, Bryan

Why are my Adwords CPC going up, leads going down, and position getting worse?

This question has come from a few business owners who outsource their Google Adwords management and are wondering why  their average cost-per-click (CPC) has jumped from $3 to $6 or $9.

This blog will actually address a few questions:

  • Why are my Google Adwords CPC going up?
  • At first we got a lot of leads but now it’s dropping off, why?
  • We used to be in the Top 3 paid spots for <favorite search term> but we weren’t yesterday. Why?
  • Is there something my SEM expert can be doing to improve all of this?

These actually seem like a quite broad range of questions but, in fact, they are all related.

Overview of how Google decides which ads to show.

Google Adwords is an auction market… But it’s not a PURE auction where the highest bidder wins. You see Google is in business to generate revenue so they take a bit longer term approach to their auction.

Let’s look at a very OVERSIMPLIFIED example.

WaterMan and WaterBoy are 2 different businesses that are bidding on the keyword “water filters”.

WaterMan is well established and decides to bid $4/click. WaterBoy is just getting started and decides he can only afford $2.01/click.

So which ad does Google show on top???

We don’t have enough information yet… You see, WaterBoy understands how Google works and realizes that if he invests a bit more effort in his ads, he can actually get better placement than WaterMan.

So he creates a Highly Relevant ad that 4% of Google Searchers click on for a 4% Click-Thru-Rate (CTR). WaterMan doesn’t have time to be bothered with all that, puts together a basic ad and so ends up with a 2% CTR.

So let’s do the math for Google to see which advertiser will make Google more money.

  • If Google shows WaterBoy’s ad 100 times, 4 people click on it at $2.01/click for total revenue of $8.04.
  • If Google shows WaterMan’s ad 100 times, 2 people click on it at $4/click for total revenue of $8.00.

In other words, Google can make more money showing an ad with a LOWER bid price.

Again, this is a vast oversimplification, but this helps us answer our first question.

Why are my Google Adwords CPC going up?

Your competition is creating ads that are more relevant (i.e. have a higher CTR) than yours or new competitors have recently entered the market resulting in more people bidding on the same words.

Ok, so let’s take this a step further…

WaterBoy started his marketing at the beginning of the year on January 1 however WaterMan is a bit slow to get on board with new technologies and didn’t get started until June 1st.

So when WaterMan’s ads start running, Google doesn’t yet know if his ads are any good because there is no history. So Google gives the new guy on the block, WaterMan, top placements for his ads until Google has enough data to do the calculations above.

Which answers our next 2 questions –

At first we got a lot of leads but now it’s dropping off, why? –

Google at first gave you the benefit of the doubt and top positions however, over time your competition developed more relevant ads that get more clicks and therefore make Google more money.

We used to always be in the Top 3 paid results for <my favorite search term> but we weren’t yesterday. Why?

  1. Your ad became less relevant compared to your competition.
  2. You competition is now willing to bid more.
  3. More competitors have entered the market to bid on the same keywords.

Keep in mind, not being in the top 3 isn’t always a bad thing and is pretty much impossible to guarantee unless you are just willing to drastically over-bid everyone else. Sometimes it’s just not cost effective to pay $10/click to get top position.

Which brings us to our final and most important question…

Is there something my SEM expert can be doing to improve all of this?

Yes.

Here’s the thing, we hired a new team member to help with copy writing, marketing, and Google Adwords. She’s been with us for about 7 weeks, has received regular training, and is probably 50% up to speed on Adwords.

Of everything we do, Search Engine Marketing is the most complicated and fastest-changing.

Granted, we’re fanatical about being the most knowledgeable around in our given area of expertise so our training and our definition of “expert” status might be a bit higher standard than most.

That being said, here are 4 of the most important things your SEM expert can (and should) do:

  1. Set Benchmarks – The most important is your cost/contact or Cost Per Acquisition (CPA). Know if it should be $10 or $500 by knowing the lifetime value of your customers. The lifetime value can vary significantly for residential, commercial, and industrial clients and so should your CPA.
  2. Become obsessed with testing – We’ve done tests where a single word in the headline of a Google ad can change the click-thru-rate nearly 300%.  If our CTR is going up 300% your CPC is going down but the only way to know which word is going to make that difference is to test.
  3. Adjust your individual keyword bids – This concept is pretty simple but rarely done in small business because it can be time intensive. The idea is that if “water filter” has a CPA of $100 and “water testing” has a CPA of $25 and your target CPA is $50 then you need to cut your “water filter” bid in half and you can afford to increase your bid on “water testing” by double. All words are not created equal and the best words vary from one locality to another.
  4. Build up Negative Keywords – This again takes a lot of work to build up but is crucial. Google allows you to block your ad from showing up when it’s not relevant. For instance, if you sell filters to remove iron from water and bid on the keyword “iron in water” you don’t want your Google Ad showing up when someone types in “can I improve anemia by drinking iron in water?” In that instance, the negative keyword would be “anemia.”

Even though there are dozens of other things you can do to improve SEM, keep your CPC down, and get more leads, these 4 things are important enough that if your current SEM expert was just doing those, your CPC wouldn’t be going up.

If you don’t want to be an Adwords expert, how do you know if your hired expert is doing his job?

If your cost-per-click is going up, your leads are not, and you didn’t have an influx of new competition in your market, then your SEM expert isn’t doing his job and you should replace him or her.

Simple enough?

To your SEM success,
Bryan