Why Adwords is not for every business
My early business experience taught me plenty of lessons – most of them expensive. But one thing you gain with experience is the ability to filter out the wheat from the chaff, and this is particularly important when you’re talking about the many forms of marketing available to a business – not just the digital stuff.
Many clients make the mistake of thinking the more dollars you pump into Adwords the more money you’ll make. I’m hear to tell you that if it was that simple every single one of us would be millionaires. The fact of the matter is that Adwords must be managed in a way that maximises its return to your business without becoming a financial drain on it at the same time.
Not all businesses are the same
I think these days we are too reliant on computers to provide us with all the answers and that’s why I believe too many businesses just get lazy and decide to blindly place their faith in Adwords.
It’s not uncommon for me to see clients who believe that increasing paid traffic to their site will suddenly cure their business of lagging sales. There is no doubt there is a correlation between traffic and sales and I’ve seen incredible results with some of my own clients, but not all businesses are the same. Each business I see is unique from the way they’re managed, to their marketing budget and the type of product or service they offer.
From an SEO standpoint, the biggest difference I see is the ease in which some businesses acquire new clients where others struggle.
Enter cost per acquisition
If you’re vaguely familiar with Adwords you might have heard of the term Cost Per Acquisition (CPA). Broadly speaking, it’s a metric that we use to try and ascertain how much a business needs to spend in order to acquire a new customer. This metric is an interesting one because it varies so wildly between different types of businesses and throughout different industries. But one way I like to look at CPA with clients is to relate it to the real world.
For example, in the real world would you be willing to spend $1000.00 to gain a single client?
The answer is not as simple as you might think because various factors come in to play, such as:
What is the life cycle of a new customer?
How much can I expect them to spend on each and every order?
How much repeat business can I expect?
How much would the initial order be worth?
How much of my profit margin is eaten up by acquiring the customer?
Obviously, the list of factors to be considered in calculating a suitable CPA for any business varies greatly, however you must honestly ask yourself questions like; “Would I spend $1000.00 to gain a client worth $1100.00 over the next five years in the real world?”
The answer would most certainly be no.
But alas, businesses do this constantly with their Adwords marketing and I see part of my role being that handbrake – the person that steps in and says enough is enough.
But aren’t you an Adwords specialist?
Yes I am ! However, I would also call myself an advocate for small business owners first because I hate seeing anyone lose money or go broke. I guess that comes from decades of owning my own businesses and understanding the importance of controlling costs and avoiding con artists.
In that sense, I try to find what is the optimum amount a business should spend based on their desired outcome and available funds. It’s not uncommon for me to set up an Adwords account for a client and then recommend they keep tight constraints on their daily budget until we work out exactly what they should be spending and no more. It’s usually around about this time we also talk about Search Engine Optimisation (SEO).
Where SEO can win where Adwords can fail
One of the greatest benefits of using a professional SEO consultant is that you can achieve higher organic rankings for your business which has a much greater impact over the longer term with a much lower cost.
It’s true that most consumers would prefer to click on a highly ranked organic search result than a paid ad listed above it, and that’s why you should treat your SEO strategy with the due diligence it deserves.
Improving Cost Per Acquisition with SEO
Now that we’ve ascertained what CPA is, and we’ve established that some businesses have a very high CPA with smallish returns, we can start to realise just how dramatically SEO reduces your CPA. Yes, it can be expensive to begin with, however the cost tails off quickly as time goes by.
Like to know more?
If you believe you could benefit from SEO or would like to discuss your Adwords goals, budgets or CPA, simply call, email or complete the online form on this page.
Thanks for reading
Tenacity Business Consulting – Perth