One of the agencies for whom I consult asked me this question today that I get quite often:
How can we predict the potential profitability of an Adwords strategy before implementation?
Here was and is my answer:
If it is a service business with a click to lead to sale model, and you have targeted rather than tertiary keywords. In other words, keywords where people are searching for exactly what you do, rather than searching for things similar to what you do and you are offering an “alternative”, these are the metrics I use:
Let’s say the Google Adwords or SEMRush keyword research tool tells you your cost per click is $20:
- Best Case scenario:
- 20% click to lead rate – Cost/lead = $100
- 20% lead to sale rate – Cost/Sale = $500
- Worst case scenario:
- 5% click to lead rate – Cost/lead = $400
- 5% lead to sale ratio – Cost/Sale = $8,000
- Realistically, I expect this scenario:*
- 10% click to lead rate – Cost/lead = $200
- 10% lead to sale rate – Cost/Sale = $2000
If it is a retail business/eCommerce site with a realistic chance of having people purchase without having to first become a lead or talk to someone:
Let’s say the Google Adwords or SEMRush keyword research tool tells you your cost per click is $20:
- Best Case scenario:
5% click to sale rate – Cost/Sale = $400 - Worst case scenario:
1% click to sale rate – Cost/Sale = $2,000 - Realistically, I expect this scenario:*
3% click to sale rate – Cost/Sale = $3,333.333333333
To achieve the best case scenario, this is what you have to do to have successful programs:
- Targeted search terms, set up with the correct keyword match types, negative keywords, modified broad keywords for keyword discovery.
- A professional setup campaign with callouts, ad extensions, split testing,
- Properly grouped Ad Groups
- Targeted, engaging messaging in all of your text and display ads
- Display Remarketing as 10% of the budget.
- Well designed landing pages with the awesome messaging and all of the components needed:
- Calls to action, dynamic call tracking and downloadable assets that address prospects in different stages of the buying cycle
- Video testimonial
- Differentiators
- Tracking form submissions and landing page calls (using dynamic call tracking) at the keyword level
- Considering click to call, but realize it is not always the right way to go
- Lead nurturing, which should include a combination of personal and automated
- Be able to handle the leads quickly (some people actually forget this part)
- Continued data analysis and optimization
- Tracking sales and attributing them back to the original keyword or display ad click that drove not just the lead, but the sale.
*Variables that throw off these metrics:
- Not having a high enough budget to get enough exposure over the first 1-3 months and realizing that you may be lucky to break even during this time
- Initial Cost per click is often higher by 2x to 4x-even 10x – especially early on. After 2-3 months of a healthy enough budget, you can expect CPC, CPLead, and CPAcquisition to go down-maybe to what was originally estimated.
- Competitiveness of the market grows quickly. Once I worked on a national tort campaign for “Loew-T”, we were first to market and our Cost Per Click was $.50, but within weeks it went up to $50+.
- Not taking into consideration the lifetime value of the client. If your competitors have done this, and they can cash flow the program they may be willing to lose money on customer acquisition for months or even years
- Stupid “marketers” driving up the cost of Adwords because they throw money at it, have no idea they are losing money because it’s part of an overall strategy and they are not paying attention to what is and is not working.
- Thinking you can rely on Google to support you and show you what to do. Often times the people you deal with at Google have very little experience, let alone successful experience.
To be good at this you need to hire a professional and/or get some training from a professional and realize you will make a lot of mistakes.
You can learn more by sheduling a free consultation, or joining one of our training classes.