- PPC thinking
- 2010-07-15: I have mixed feelings about some training I just listened to.
- It covered the idea with Pay Per Click (PPC) advertising (eg. Google Adwords) to test small and roll out big. So, if you can spend $10 and get back $12, then ramp that up to $100. If you get back $120, then try $1,000 to get back $1,200, and if that works go for $10,000 spend to get back $12,000 and make $2,000 profit. "Why wouldn't you ramp it up?" they say.
- Cashflow? Well they say that you'll get paid on the sale, and pay for your advertising each month so that's no problem.
- And they say basically you need to watch that campaign every day and make sure it's profitable every day, that's how you reduce the risk.
- That's kinda fine, but there are four places where this sticks in my throat a little.
- Firstly, I'm used to companies that spend maybe 10 +/- 5% of turnover on their marketing. OK, those companies have premises and overheads and manufacturing costs and so on, but to have a marketing spend of 83% of turnover puts you in some specific industries like affiliate sales of information products.
- Secondly, that's fine, but wasn't the Internet supposed to put you and your customer together for next to nothing? Paying Google 83% of your sale price just doesn't feel comfortable to me.
- Thirdly, when you stop your ads you've nothing. The only way to gain a sustainable business from this is to make sure that you build your lifetime customer value: keep their data, stay in touch, get them to buy again (and again) and turn them into loyal customers who recommend you to others. Well, if you're doing that, people will beat a path to your door anyway. But perhaps PPC gives you speed.
- Fourthly, $10,000 a month is quite a budget that could be used for SEO and social media marketing which otherwise brings you free traffic, and those methods tend to be for the long term. So you could use your PPC budget for, say, 6 months or a year of SEO/social media work instead. It would take a little longer to take effect, but the payback would be much better .. you'll be a lot more profitable.
- I think what's at work here is delayed gratification. Basically, unless we do the maths and stick by the numbers, we are programmed for instant gratification. PPC is built to take advantage of that: create your ad and it can be generating traffic and business for you within an hour. Good job I'm good with numbers.
- The rewards from SEO and social media start small and grow over time. Actually that means you may need sufficient cashflow to get over the hump (which is why I suggest spending a monthly amount that you can comfortably sustain for a year, not saying it'll take that long, but to set expectations). The payback is much greater, but some people can't wait.
- The people who play for the medium term and have the resources to sustain it will be significantly richer than those who want it all now.
By John Allsopp
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