John Addessi, Kansas SBDC Advisor
Fresh off a Kansas City Super Bowl win, let’s talk conversions! No, not the ones on the gridiron… We’re discussing ad conversions, specifically from a Pay Per Click ad campaign such as Google Ads (formerly AdWords).
Social media may be a marketing darling, but Pay Per Click (PPC) ad campaigns can be tremendously effective. The reason is simple: on social media, advertisers are casting a wide net to try to find likely customers based upon their likes, profiles and engagement. However, PPC ads are shown only to searchers in the geographic area specified by the advertiser, and then only to those individuals who are actively searching for their goods and services. These potential customers are on their phones or keyboards, typing in “[some service] near me” because they need that service. That’s a pretty hot lead! And advertisers should be willing to pay for those leads or clicks. Hence: Pay Per Click or PPC.
But how many clicks does it take to make a sale? And how much will all of that cost? Those questions are central to the concept of conversions – and ultimately, the Cost of Customer Acquisition. Let’s do the math:
The typical conversion rate of search ads is 3.75% (see: What is a Good PPC Conversion Rate? (And How to Increase It). Some industries do better; people looking for love on dating sites may click nearly 10% of the ads they see! But many industries don’t fare as well, so let’s go with the 3.75% figure overall.
When your ad is shown, it’s known as an impression. Let’s say that, over a month, your ad is shown 10,000 times or 10,000 impressions. If 3.75% of people click on the ad, that’s 375 potential customers that have landed on your web site or other page, perhaps on social media. If you contracted with Google or Bing to pay $3 per click, you’ve spent $1,125.
But that ad just got them onto your web site. How many visitors need to visit your site before one of them calls or clicks? Hopefully you have Google (or other) Analytics on your site, and that may shed some light on your web site’s conversion rate. Typical web site performance is between 2% and 5% (see: What is a Good Website Conversion Rate? Industry Averages.) Taking the middle of that estimate at 3.5%, we got about 13 of those customers to click or call (375 clicks to the site X .035).
So, 13 customers contacted you – or tried. This is where many businesses fumble (Super Bowl week, remember?) They don’t answer the phone or their e-mails, either at all or fast enough. Perhaps the person that answers the phone is a great closer, though, making a third of the sales that call. That’s a little more than 4 paying customers (13 X .333 = 4.37).
How much did those 4 customers cost us? About $257 each ($1,125 / 4.37). That’s your Cost of Customer Acquisition via this channel. Now, if you’re providing services that cost thousands of dollars (a new roof, for example), $257 per customer may well be worthwhile. If you put on a $15,000 roof, your advertising has only cost you 1.7% of revenue ($257 / $15,000 = 1.71%). We can quickly see, however, that we can’t pay that much to get a customer to our pastry shop – unless they eat a LOT of pastry!
Advertising is far less Mad Men and far more about math, and your return on investment for your advertising dollars. Conversion rates are central to this equation.
How to do all of this better? How to spend less and sell more? The key is improving your conversion rate at each step:
- Choose key words, key phrases and PPC ad copy that truly resonate with your best prospects (use a tool like Google Keyword Planner for some great insights)
- Point the PPC ad to an effective landing page, or specific page on your site that speaks to the solution you offer. Your customer went to the web with a need – with one click, they can land on your solution! That page should present your value proposition and a call to action: as Jerry O’Neil says every 10 minutes on TV, “Click or call NOW!”
- Answer the phone and check your messages!
- Then it’s all up to your personal selling skills. And to extend our football metaphor once more, there are great coaches that can help you with your sales skills. Jeffrey Gitomer’s Little Red Book of Selling is a great place to start. Even Patrick Mahomes has a great coach!
