In my experience, small businesses can often be “penny wise, pound foolish” when it comes to online marketing. To understand the role of the Adwords Consultant it’s important to distinguish between “spending” and “investing.
Profit-Driven Marketing: Investing not Spending
Our company is committed to the new discipline of Profit-Driven Online Marketing. This means that our approach is to look at your company’s online marketing as an INVESTMENT opportunity. It is one of many things you can put your money into, and you need to evaluate it based on your Return on Investment! Thus you look to recover the capital you put into advertising, plus a profit.
When I had a small store in Athens Ohio, many years ago, I would try different ways of marketing my store. I was in the main downtown business area, but it was a small town, and much of the retail traffic had gone out to the Big Box Stores on the edge of town. So, despite having quite a bit of foot traffic my store was unknown to many people in town. So I tried sponsoring our NPR station, sending fliers out to students, advertising on commercial radio, and advertising in the newspaper.
For me the only thing that had a discernible impact on sales was sponsoring NPR. It hit my core customers and people mentioned it when they came to the store. But many channels I felt were failures. Sure, people mentioned seeing me in the paper or hearing the ad on the radio, and the ad sales reps were continually in touch with me singing the praise of their circulation and audience demographics, but had no good answer to “show me the money!”. Likely because of this, newspapers have been in freefall, losing ad revenue as Google has gained.
Businesses are understanding the power of the Internet, and over 80% of consumers are researching large purchases online, looking for information about local businesses online, and generally gathering information about purchases online.
But, ironically, the businesses spending money on online advertising are not using the main features that make online ads most effective! Many otherwise competent businesses have no handle on their online marketing data. Small businesses can use Google Analytics for FREE, and know how many people visited their site, what pages they looked at, where they came to the site from (paid ad, social media, organic searches), and even if they emailed the business or made purchases. But many don’t even have this in place.
To be perfectly frank, if you don’t have “conversion goals” set up for your business you are “doing it wrong”. Setting these goals for online sales, leads or engagement is what allows you to REALLY see what marketing is effective. If you have SEO, Adwords, or Social marketing consultants and they have not suggested you establish conversion goals,think about firing them.
If you are paying someone to manage your online marketing, SEO, PPC etc. and they havnen’t set up Universal Analytics, Remarketing lists, and Webmaster Tools, fire them now. Essentially they are flying in the fog without instruments. They may get where you want to go, but they will not do it most effectively.
If you DO have good data coming out of your account, THEN you are in a position to really do effective online marketing. You can analyze what’s happening, test approaches to improve, and create a continual optimization process.
That may sound expensive, and it does take money. But the idea is to invest in things that MAKE you money, so it is an investment, not just “spending”.
You can go beyond the fear that your ad spend may be wasted money, and into the zone of knowledge and the zone of confidence. When you KNOW what your marketing efforts are doing, and that the system is being well taken care of you can both worry less about it AND act more decisively and confidently to grow your business and leave your competition in the dust.
Once you can analyze what your ROI is on your ad investments, you can scale your marketing based on what is most beneficial to you rather than just spending money helping print newspaper because “it’s what you do”. Profit-Driven Marketing is about investing in things that give you a documented return, and focusing on how to maximize this return.
Profit-Driven Marketing vs. Spend-Based Advertising
An example of moving from “spending-based” and “fear-based” marketing to profit-driven marketing is a client I’m currently working with on the transition to PDM.
Yeah, I don’t think I make money on my newspaper ads. It’s just something I have to do. I mean everyone does it, right? What would happen if I stopped?
This quote describes the pickle that a lot of businesses are in. They don’t think they are getting enough from their current ad spending (in print, radio or online). But they are in a state of anxiety and ignorance. They don’t KNOW what would happen if they stopped and are scared to do it.
Recently I got a referral from a colleague who does web development in New England. They had a client who is a long established company that had taken some hits in the Great Recession and was working hard to come back. They were still struggling and wanted me to teach their part time marketing person how to do Adwords as they had an ad campaign that was largely unmanaged. I explained that I could do this but they were unlikely to get great results with a fraction of an inexperienced person’s part time hours. One Adwords expert recently estimated that Google make roughly 1000 changes to Adword each year, and while not all are important most good Adwords consultants spend hundreds of hours/year reading about current trends, best practices, and new features. Stretching their new marketing person into Adwords was a good recipe for doing things poorly.
Many people with Adwords accounts don’t even realize what they can do and what tools are available. This company’s clients are wealthy. The company needs to hit a specific demographic or their ads are wasted. Sure, they will get middle-class and low-income folks clicking their ads out of curiosity, but those clicks are worse than useless. The client has to PAY for those clicks and the expected value from most “curiosity click” is zero.
So when they rolled out income-based bidding in Adwords this year, it would have been something they should have done IMMEDIATELY. Every day that goes by they lose money from neglecting this feature.
But beyond this feature, released in 2014 (and callouts released just this September), they had really important features that were fully released in 2012 they were not using! So their competitors were really eating them for lunch, and much of their ad spend was wasted.
When I looked into the data, the keyword they were spending the largest amount on was giving them zero traction but costing them almost 10% of their entire budget! I bet it “sounded good” when they did it years ago, but nobody actually looked at the data in Adwords and Analytics, and analyzed how the clicks they paid for were actually benefiting them. Turns out, once I dug deeply into it the clicks were wasted. They had been dumping almost 10% of their entire budget on 1 keyword which was useless to them. And they had been doing this for several years.
Cheap can be expensive!
So, they were doing it “cheaply”, and they were paying their very talented marketing person to stare at the Adwords data and waste her time just becoming frustrated! If she had been allowed to focus on what she does really well she could have been making them money on the marketing she is great at.
As I looked more into the account I saw a LOT of keywords with Quality Scores 4 and under. Several scores as low as 1/10. Now Adwords folks reading this are probably getting nauseous. Your quality score is money. If you bid $1.50 with a QS of 10, another business with QS of 1 would have to bid $15 per click just to match you!
A QS of 4 will cost you TWICE as much to get the same click as someone with QS of 8.
Now, there are situations where you just can’t get a 10/10 or even 9/10 quality score. But in this case, they had a WONDERFUL business but TERRIBLE quality scores. Again, this one thing wasted probably 50% of their entire ad spend!
When I got a download of the actual value of the sales brought in by Adwords, I was able to calculate that their ad cost was roughly 40% of their profit per sale. While this is a lot, the cost of their advertising was paid back from profits AND they made additional profit!
If you offer to give me $15 if I give you $10 and you ask me how many times I want to do it, I’m not going to do it 10 times. I’d make $50 and that would be OK. But if I did it a Million times I’d have $500,000.
Now when you expand a campaign that’s profitable there WILL be a limit you hit. The cost per conversion will get higher at some point when you’ve used up all of your best performing search volume. But I could not understand WHY they would only do the deal 10 times when I KNOW they could do it 100. Or at least they could do it 10 times, and check on profit. Then do it another 10 or 20 times, then check on profitability.
The issue was that the organization was run like many are, where they set an ad budget for the year, and just spent it. Well, if I can spend that budget in 2 months, get you the same amount of sales they had the whole last year, with money left over, I’d tend to want to keep doing that and make you 500% more sales (at a profitable level) than the year before. Otherwise you’re leaving money on the table, and your competition is going to make that sale and take the profit.
So going into 2015 we’re moving to a profit-driven approach where we open up the governor on the marketing machine as long as the sales are profitable. Sky’s the limit. Their competitors will be surprised, and my client will likely grab significant new market-share.
That’s the type of success Profit Driven Marketing can bring. It is not about a 5% or 10% increase in sales, it’s about understanding your costs and revenue, being able to monitor it on an ongoing basis and attack all of the market share you can as long as you maintain profitability.
The client didn’t think this would work as they were buying all the ad volume that was available on their good keywords. Well, looking at it many profitable keywords were SHUT DOWN ENTIRELY by Google due to poor Quality Score.
Looking at the campaign with superficial knowledge, they thought it was going how it should be going. It was only by hiring me to do an assessment did I notice the lower quality scores (that were not displaying because the client didn’t know to show that column), and it was only because I went in on the keyword level and investigated the poor quality keyword could we see that the keyword was not even serving anymore because of the low quality score. Google “gave up” on the keyword for them and was only showing competitors. But you have to know where to look to see that.
The two take-homes from this story are, first, that if you focus on business analysis and building a profit-focused marketing system you are often able to achieve quantum-leaps in sales and profit that ultimately don’t cost you anything as you make your money back quickly and put it into the next iteration. Second, Adwords seems pretty easy really. But there can be extremely costly mistakes that are not apparent to non-experts. You could spend your whole life thinking you’re doing Adwords “right” and go to your final resting place never knowing how much money you were wasting.
While this example is something we’re doing for 2015, it shares the importance of shifting one’s mindset. For a past example I’ll share on this blog another example where a client already understood profit-driven marketing and realized a 700% ROI on what they invested in my management services because they were able to base decisions on good data and make strategic actions that increased their profit. They paid me $10k to work on their account, but made an additional $80,000 because of it.
Not every business can do this, but every business can choose to establish good data reporting and strive to become better at their online marketing based on real data.
Because businesses are often not knowledgeable about the details of Adwords, its potential, and what to look for in a consultant there are a lot of people out there who are really bad.
Some big agencies look great, and put out some sharp publications and have impressive expensive web sites and marketing machines. They market their agencies, they get you under contract, and the person who actually works on your account is some entry level staffer making $17/hour while they charge you $100. The people with business strategy experience and insight never touch your account unless you’re spending $100,000/month. You’re paying for a strategist and senior partner but just getting a “technician” to give your account a tune-up.
On the other end are the bargain basement “freelancers”. Before I became an Adwords consultant I had people offer to do Adwords management for me for $15/hour. Well, that’s great but you get what you pay for. The guy knew less than I did about PPC, even though I had not yet studied to become certified, and he knew NOTHING about my business.
So it pays for you to shop around, and to pay for quality. I would look for some credentials like Google Partner status and/or testimonials. Most of my clients come from referrals, which is the best way to find consultants.
But there are deeper issues with the practice. Many folks are good with the basics of Adwords and can manage things, tweaking campaigns based on the numbers in the account. But they twist the dials in isolation. Have they asked you about your business goals? Do you feel they understand your competitive advantages? Are they aware of your competitors, their strengths and weaknesses and your strategy for besting them?
If a consultant or agency doesn’t understand what you’re trying to do, and the dynamics of the system they are never going to do a great job. They may report exciting things but they will always be falling short of what a strategy-driven account manager would do.
One business bragged to me that they could do Adwords setup for $75 for a small account (one hour at their rate). Rather than being impressed I immediately stopped engaging with that company. They obviously do a different thing that I was about. They were putting zero time into understanding the business and what was strategic. They were just blindly cranking out cookie-cutter campaigns. If you’re only spending $100/mo on advertising maybe that’s OK, but if you are investing meaningfully in online marketing you want someone who’s paying attention.
At Root Deeper Marketing our focus is do develop powerful and excellent online marketing programs. We have to work within the ambitions and budgets of clients, but Small Businesses that want to GROW and to become excellent at understanding and executing online marketing can see profound changes in their online impacts and greatly increase sales and profit.
Not everybody wants to invest in excellence, but if you do please contact us as we are looking for a few good firms we can help become great.