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Aug 1, 2009
by Eric Leuenberger
1) It costs too much to run PPC. False.
I've heard it said too many times, it takes a big budget to yield results. This is untrue. In fact, I've run very successful paid search campaigns on as little as $50 per month. The competitiveness of your market and your business objective will no doubt dictate an acceptable budget and target ROI, but to be successful you only need to invest an amount that you can get a return on. Sure, some products in highly competitive niches have small profit margins, and achieving a positive ROI is going to be very difficult, but not impossible.
In fact, you can run a very successful paid search campaign with just a few hundred dollars or less. Don't focus on the amount of traffic you want from the campaign (this attitude will indeed cost you money). Focus on the quality of the traffic you receive. Stick to targeted keyword phrases of two to three words or more (often called, "long tailed keywords"), and set your match type to anything other than broad. You're looking for "phrase match" or "exact match" here.
2) You need an expert to succeed at paid search. False.
Having an expert in your corner can certainly help, but if you are not fortunate enough to have one at your disposal, you can still run a profitable paid search campaign with the right knowledge and tools. For starters, if you follow the steps I've outlined in the two previous articles and pay attention to what your statistics tell you, it is possible to generate profits from your paid search efforts.
Start with thorough keyword research and build your list, laying the foundation for success. Then set a monthly budget based on your individual marketing budget needs and traffic goal. Want to get an idea of how much traffic you can expect from your efforts? First determine the industry average CPC (cost per click) for your niche.
To calculate your industry average CPC, simply take the reported CPC of the keywords you built into your list, given the position preference you desire, add them up and then divide by the number of keywords in the list. Now you can take that number and divide it by your marketing budget, to get an estimate of the number of visitors you can expect.
For example, if you have a list of 10 keywords with an average CPC across all keywords of $.25, and you have $250 to allocate toward paid search each month, you can expect somewhere in the area of 1000 visitors (clicks) for your investment. To make profit as your campaign moves forward, you must ensure that your own average Cost/Conv. (cost per conversion) is less than your average order value. The further those two are apart, the more profit you generate. For example if your cost per conversion is $10 and your average order value is $20, you are making profit. If on the other hand your average order value is $8 and your cost per conversion is $10, you are losing money.
3) You need a long list of keywords in order to get results from paid search. False.
This couldn't be further from the truth. In fact, to win at paid search, you should focus your efforts into smaller, more targeted groups of keyword phrases that fit your market. This will not only help you generate more targeted traffic, but will also help your quality scores, which several of the engines use to determine relevancy of your ads. Higher relevancy means higher search placement, at a reduced CPC.
Start with the most influential (from the buyer's perspective) list of long tailed keywords and build from the knowledge you learn. If you have limited resources and time, your first attempt should not be a sweeping list of every keyword under the sun. It should include the top 10 or 20 keyword phrases that best describe the product you are trying to sell.
Keep your groupings of keywords low, and for an added advantage, send the traffic from each group directly to the product page on the site that the ad references. This will be the landing page for that set. Again, keep your keyword lists small at first. I've had great success on a number of paid search campaigns in which only one to five total keywords are utilized, which target the exact niche. Leaving the broad targeting to your competitors and sticking to the more focused campaigns should both reduce your monthly cost and increase the quality of your traffic; both great strategies for success!
4) Organic search is cheaper and yields far better results than paid search. False.
While natural SEO can at times cost less than paid search, it can also cost just as much, depending on the company you hire to do it for you. In this case, I have found that the old saying of, "you get what you pay for," often rings true. Pay for less, get less. Pay for more and get more.
There are yet a few key distinctions that should be noted when comparing natural (organic) SEO and paid search. Natural SEO is a long term strategy. To do it right takes time, often many months. Paid search on the other hand can drive traffic to your site in just a few hours. In general, the traffic that SEO drives to a site is more general and harder to control or prep from the start. With paid search, you have the ability to qualify traffic from the start and alter those qualifications at any moment, through changing your ad text and landing page.
The ability to more effectively measure, change course, and persuade potential buyers is a big reason I like including paid search as a key element in any ecommerce marketing plan. If you can control the mindset of the visitor starting at the very point in which they click your link, you have a far greater chance of converting them on the back end.
Before closing this point, let me make one thing clear. Natural SEO traffic can yield nice returns. Paid search can as well. Both should be utilized in conjunction with each other, under any planned marketing campaign. The fact that one is cheaper than the other or yields better results is purely dependant on the approach and planning.
5) Going for The Number One position is best. False.
Depending on your budget and purpose (brand awareness for example), the number one position may or may not suit your needs. The conversion rates from position one to say position 4/5 vary, depending on market demand and more. However, my experience has shown that shooting for a spot near position three to four tends to yield nice conversion results. Why? I suspect it is because the traffic is more qualified to buy. The theory is that if they read the first three or so and are this far down the page, they know what they are looking for and haven't found it in the first few results. You can capitalize on this by providing ad text that supports their need and describes your product. Winning the click at this point should result in more targeted traffic that is further along within their buying cycle.
This option of targeting positions three through four also works well for those with smaller budgets, because the CPC from higher positions is often significantly more than it is at these lower positions. Keep in mind that depending on the competitiveness of your market, entering at positions three or four may even be tough, given your budget. Do the math to find out the magic numbers you should target. In the end, you should be careful of trying to compete for that number one spot. Shoot for positions three to four write your ad copy according to your objective, and measure what works best for your business.
Ultimately, doing the math will help you determine if paid search is right for you. This article has hopefully put to rest any remaining thoughts you may have about taking advantage of paid search as an advertising channel for your business. You can predict if it is worth your time if you know your:
- Margin per sale
- The average CPC in your niche
- Your site's conversion rate
To find out whether the CPC is too high in your niche to meet your budget and ROI, use the following calculation:
Break-even CPC = Margin - Conversion Rate
You'll also need to know the conversion rate it takes to break even. It can be calculated as follows:
Break-even Conversion Rate = Niche Avg CPC / Margin Per Sale
Sure you want to turn profit, not just break even, but if you can break even on your investment, you should be able to optimize the campaign to improve those results without losing any money. With this ability, you have a shot at profiting on your PPC investment.
Eric Leuenberger is an ecommerce conversion marketing expert and author of a leading Ecommerce Optimization blog (www.zencartoptimization.com). He coaches ecommerce store owners on how to increase their website sales through skillfully crafted online paid search advertising, targeted marketing strategies and website sales strategies. He can be contacted at 1-877-481-2323.
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