When it comes to marketing for your small business, you have a million different options. From organic search engine optimization to social media promotions, in-store marketing and sometimes even billboard ads, you could easily max out your marketing budget by trying a little bit of everything.
In addition, you as a small business owner are wearing many different hats. When you’re juggling operations and sales with hiring and accounting, you need to be sure that the marketing efforts you spend your precious time on are delivering a return.
PPC marketing is one option many small business owners use to drive new business because there is often a clear correlation between money spent and customers acquired. PPC marketing, which stands for pay per click marketing), is an online advertising approach where you only pay when your advertisement is clicked on. Typically, you’d work with a PPC provider who owns one website or a large network of websites, which boast high numbers of traffic and can deliver many impressions to your ads.
For many, the most commonly used PPC marketing provider to work with is Google AdWords. Through Google and other search engines, you bid on keyword phrases that you believe should draw relevant prospective customers to your site. Other large providers include Microsoft AdCenter and Facebook’s advertising platform.
Or, you may work with content sites, such as Reddit or eBay, where you’d pay a fixed price for each time someone clicked on your advertisement, rather than bidding on a keyword in hopes of your advertisement showing up when a user searches for complementary or related content.
With so many options, how do you know that PPC marketing is worth your investment? To determine how much you should spend on PPC marketing, you must first know that you’ll have to spend a bit up front to see what’s working … and what’s not.
From there, there’s actually a pretty clear formula that can help you determine what to spend, and how to measure success. It starts with knowing how much a conversion is worth to you. A conversion is different for each kind of business, but it’s the ratio between website traffic you earn divided by the number of people who take a desired action, such as downloading a whitepaper, signing up for a free trial, or making a purchase. You must assign a dollar value to this conversion. For simplicity sake, let’s say the conversion is to purchase your product, and the average sale is $100. A conversion, in this case, should be worth $100 to you.
Let’s say you set out to spend $100 on an AdWords campaign, with a bid of $1 per click. Since Google’s Adwords average conversion is 2% (or, 2 clicks for every 100 impressions), at least 5,000 will have to see your ad to get 100 people to click on it. As long as one of those people makes a purchase, you’ll break even. The goal, of course, is to make a profit. If you increase your spend to $150 and two people purchase your product, you’re up $50 and your conversion costs you $75 per customer.
So, apply this math to your own small business. If you sell used kitchen equipment, and make an average of $400 per sale, you’re able to spend more per click than someone who sells socks and makes $9.99 a sale.
To stay out of the red, you shouldn’t spend more on PPC than what you get back in one conversion. But remember, just because you can spend a certain amount doesn’t mean you have to – this is particularly true for those site where you bid on keywords. Search engines elevate your place in paid search rankings when your advertisement and landing page is relevant to the keyword that is searched on. By ensuring that your keyword, ad copy, and landing page are all on-topic and unified in their message, you’ll likely be able to achieve a high click through rate (CTR) without spending more than is necessary.
Have you used PPC marketing to promote your business? What have you learned?
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