Hi everyone. I’m Alex.
We’re here to talk to you today about, is Google AdWords right for your business.
Now at a high level it’s not that simple. I was actually at Starbucks the other day and I kind of filtered through some emails and wrap up some odds and ends and I came across a guy who was a CPA. Now as I was talking to him he started asking me a couple of questions. I started telling him what I did and believe it or not, AdWords is not right for every business.
I think it’s an interesting point and I want to hear more from you. I’ve seen personally across a lot of different industries, AdWords when managed properly can be a tremendous tool. I have also seen in some instances, whether it’s from improper management or from some other reason, it was not as effective as it could be. So Michael, please can you elucidate the point?
Yeah, AdWords can be either a very profitable investment or a very expensive expense.
So how do you know if AdWords is right for you? What are we looking for?
So I think the first thing that people need to consider is what’s the customer value? Now, paid acquisition, paid channel, paid search, pay per click, call it whatever you want. It is a paid channel. So if a customer has a low value, first question is what’s the end goal for doing this form of marketing? Now, if you’re looking to get a return on your investment off of a first purchase from a customer, say you sell mattresses where it would be uncommon someone’s going to come by and buy multiple items from you over a period of months. So if a customer has a high value likely it would make for a good investment.
However, if it’s a onetime purchase where someone might not come back or the cost of goods is very, very low, depending on the business objectives it may or may not be a good idea. For example, if you are a yogurt shop, your cost of acquisition versus the cost of sale might not necessarily be profitable on the first sale. However, if you’re able to attract that person that just moved into the neighborhood perhaps it could be profitable if they come back to you.
So Mike, what you’re saying is some businesses they’ve got a better chance of bringing in a customer more than one time. Obviously if they have an expensive product, more than likely they’re only going to be purchased once that’s another situation. Overall, if they can expect the customer to purchase more than once, we have to ensure that we understand what is the proper value that we can assign to a new lead. So is it a onetime purchase, is it a five time purchase? I like to look at it from what is a yearly value of a potential customer to your business and that’s very industry specific, correct?
That’s certainly correct. However, I do want to make one point where it might not necessarily be profitable even if someone buys from you multiple times. And that would be where if someone would buy from you two, three, four times and then that’s it and the cost is not necessarily that high. For example, there is a group that attracts brides to be. Now this group charges I think $25 a month. However, the typical span is only about three or four months for someone to be in that group. Now that would not be profitable if your cost of acquisition is $75.
I got it. So in the case of the CPA that you explained before, is this a person that could benefit from AdWords or did he give you the feeling that he wasn’t the right choice or the right fit?
So he is new to the digital advertising market. Now, with that being said, there’s two aspects of his business, which I find to be very interesting in respect to becoming a paid search candidate or to evaluate it for a business standpoint. For him to advertise for tax refunds does not make sense. The cost of acquisition is too high considering what he would make. If he charges $100 to prepare someone’s taxes factoring in time, advertising expense, he would likely be left with very little money. However, where he does make money is on his corporate accounting and that is certainly very profitable for someone who wants to compete on Google Ads.
Mike, it seems to me that we don’t want to be in a situation where we are, as you have said many times before, a race to the bottom. We don’t want to be competing with in this case, the H&R Block and all of these do it yourself tax services, get it done for you at $29.95. This is not going to be a situation that this person wants to find himself in. But as you said with some thought and with some planning we can say to our clients, “What are the most profitable services that you’re currently providing? What’s the competition look like in your area?” And I think all of these things need to be taken into consideration in order to make an intelligent decision.
Sure. So I think you hit something spot on and it’s about the area. For businesses that are very locally targeted, say a barber or a local tax person where someone is not going to want to drive 25 miles to meet with this person. Perhaps it can be very profitable even if it’s expensive. Because, when you geo-target who you want to reach, you are going to be saturating a very small confined market, making yourself much more profitable because your budget is going to be able to go much further and the chances of conversions are significantly higher.
Let’s break this part down because this is very interesting. As we’re talking, I’m hearing more and more. There are so many factors to take into consideration where we can gauge relative success or lack of success. In this case what you’re saying is, is a person that has an ice cream shop, they aren’t going to have business from people that are probably more than five, 10 miles away from the location. Nobody’s going to drive 10 miles to go there.
I wouldn’t even set it that far. I would do a three mile radius at most.
Okay. Three mile radius at most. So what you’re saying is, although maybe their margins are small for a particular sale. If we’re pushing ads in that particular, as you said, geo-target to that particular area. There could be a scenario with a couple of visits let’s say are in the black so to speak and it could become a profitable endeavor for them. Whereas other smaller margin businesses that are targeting a larger geographic area might not be as successful. Am I understanding that right?
Yeah. I would certainly think so. Where you’re optimizing for the customer lifetime value. Now let’s say you sell something like refrigerators. If you’re selling a refrigerator and say it’s $700 is the total sales price and the cost of goods is, let’s say it’s $500 and then shipping and delivery is another $150, no, Google Ads probably does not make sense to sell that specific item even though it’s a higher total sale.
What about the factor of the website itself? What if the person doesn’t have a great site? What if it’s five, 10 years old, whatever the case may be? How important is the website in the grand scheme of things?
In the grand scheme of things I think it does play a critical role. However, I think for many businesses, local businesses specifically a localized little micro-site can certainly act as a Band-Aid for the meantime or even a landing page depending on what exactly they’re advertising. If you’re a lawyer, if you’re a CPA, if you’re a plumber and you could certainly have a landing page, not a full website, just one semi long page. It has information, your services, a contact form, a couple call to actions, that can certainly suffice to be able to run an effective pay per click campaign.
I understand. Just to reiterate what you’ve said, landing page, just an explanation to our listeners. It’s a longer form page meant to direct a customer to an action either to pick up the phone, submit a form, whatever the case may be and in this scenario we are saying that maybe if the main website of the business is not up to par, we could develop some kind of a Band-Aid as Michael called it for the time being. It being a one really great landing page in order to direct traffic to maybe while we’re developing a new site for the business that is more in line with today’s digital landscape.
So what do we do next?
The next part to consider, you’re going to want to make sure that whatever industry you’re in that you have the opportunity to be able to bid on these keywords that have high volume and low competition. If you look for a plumber, sure you’re going to have high volume, but you’re also going to have high competition. However, if you start searching for a video or you have content on how to fix specific items or specific services. Maybe you’re looking for a commercial plumber in Fort Lauderdale. That’s a much more targeted search than just plumber. And a lot of people who are just getting started don’t really understand how ads work and they’re going to be bidding on plumber. You might have someone trying to sell a plunger and they’re just bidding on the word plumber, in which case, being able to target and bid on specific keywords that the user’s typing in.
At the end of the day it’s really about user intent. Google, while they’re a multibillion dollar company they need to find the right mix between advertisers and customers. Customers go onto Google and they search for things because they trust Google will deliver the right results and on the flip side as an advertising platform, the businesses that pay money that advertise on that platform need to have the confidence that Google is going to put the right type of prospective buyer in front of them and that’s really the key right there.
It’s really an ingenious system. Obviously they are. The success is absolutely stunning but exactly what you’ve said is such an important point. There has to be trust from the user’s perspective that, hey, I need some information. I need to find something. I need to do some kind of an action. Where am I going to go? I’m going to go Google it. Everybody does it. Mike, I want to go into more detail about targeted keywords and location settings. Can you explain please?
Sure. I think one of the coolest parts about digital advertising is unlike a billboard where you’re paying for anyone and everyone to drive by and in theory see your billboard. With Google Ads you’re only getting your ad in front of people who want to see it. At least if your account’s set up correctly. If someone is looking for a plumber or an electrician in Fort Lauderdale and you’re based in Miami, there’s no reason your ad should be showing up there because who’s going to call a plumber in another city? So let me break this part down. Targeting based on location is just one aspect. Now we can layer other elements into who we want to reach and who we want to target.
Now we start at a very high level with a city or a zip code of who we want to target. Now we can expand that based on miles or we can exclude specific zip codes. I’ve dealt with service providers such as general contractors that do not want to have their ads shown in areas that are either underdeveloped, low income areas that are brand new construction because, it’d be unlikely someone would need a contractor on a brand new home that just got built. So you can still target a city but you can exclude specific areas. Now by doing that, you’re making sure that you’re maximizing the output of your ad budget.
Can we look at it the other way as well? Is it possible not just to exclude but can we also include certain areas that we want?
100% yeah. I mean you certainly should start by including. I can’t tell you how many times I’ve jumped into campaigns with new clients and they can be whatever business you want, but if they’re a local business, you see them targeting the entire United States and they can’t figure out why they’re not getting a return on their ad spend.
Happens all the time. It’s really just poor management.
So what I’ve taken from you so far, if I’m looking at this from a 30,000 foot view, there are a number of criteria, of layers that we need to take into consideration when building an account and maintaining an account. There’s so many variables and with one variable out of line it could significantly affect how our campaigns are performing.
Sure. I think something else that often gets overlooked is finding something that is trackable yet still scalable. Word of mouth from say a doctor’s office is trackable because you can hear, oh, I got referred to you by John Smith. However, that’s not really a scalable marketing campaign. At the same time, billboards is certainly scalable. You go in, you write your check, they’ll give you as many billboards as you want to take. However, it’s not really a trackable marketing technique because how are you going to know where someone first heard about your brand?
So Mike, with the billboard, again, they could have seen the information, they could have looked it up later on. They could have placed a phone call later on who knows where their journey started.
Yeah, your guess is as good as mine.
So what do we do now? How do we know if Google Ads is good for a potential customer or not and how can we ensure that we give our listeners the best possible information upfront to consider when thinking about AdWords for their business?
So I think one of the first things that needs to be considered is what is the goal of getting involved with paid search? Now, if you’re a manufacturer, and I’m not talking about a brand, but if you actually manufacture an item, maybe paid search is not necessarily the right marketing channel to go down but you could explore content. You could organic. There’re other strategies. However, if you’re not going to acquire a customer because there’s not user intent looking for specific textile manufacturer, then Google Ads might not be the right solution. However, for most businesses the first thing is to determine what is going to be deemed as a success. What is a measurable KPI that someone would be happy with? Now, it doesn’t necessarily have to be a return on your investment.
It easily could be brand presence, brand market growth, acquiring customers. Because, at that point you can use it if you’re going to get people in, if you know you’re going to be able to convert them or upsell them later or sell them something else down the road. You don’t necessarily have to be profitable from the first click. However, it does need to be tracked and it needs to be tracked correctly and you need to understand the full value of what a customer is actually worth before you decide this is how much I want to pay, or this is the cost of a lead because is that lead profitable? Maybe, maybe not.
So understanding the total value of a customer prior to starting AdWords is priority number one. Then allocating a budget and saying, how much are we willing to spend for this marketing budget and how much should every lead cost us? This is all trackable. Everything is reportable with AdWords. That seems to me the best strategy from a starting point. Correct?
Yeah. That’s really where we start with all of our campaigns from the initial build.
And Mike, you do a significant amount of research as a starting point for any ad campaign that you take on. Is that correct?
Of course. We certainly start with keyword research, understanding what keywords are profitable, what keywords maybe it’ll generate clicks, but not ones that we want to prioritize to have the bulk of the spend account for.
All right, so that’s really what would determine if a business would be a good fit for paid advertising. And with that if anyone has any questions, please email firstname.lastname@example.org. Until next time.