“The business that can spend the most to acquire a customer wins” – Den Kennedy
Is being business savvy going to help you with Adwords? Short answer, yes! For the long answer, read on…
One key element of the Adwords game is CPC or cost per click. With Adwords, you usually pay only when someone clicks on your ad.
And you can decide how much you are willing to pay, like an auction. So you select your keywords, write ads and then set bids. Based on your bid and some other factors collectively known as Quality Score, Adwords will decide at what position to show your ad if to show at all.
Obviously a lot of your competitors would want their ads to be shown near the top for the same keyword. But there are only so many spots.
So the person who sets higher bids and/or who can get a higher Quality Score (those other factors) gets top spots and their ads appear more often or always. Being Adwords and PPC experts, we help our clients get higher Quality Scores.
But what about bids?
Can you afford to outbid your competition?
That depends on your business skills. Let’s say you are a Family Lawyer in New York City. Now that’s a competitive location.
You make $500 profit for each case on average. And you close 1 out of every 8 calls so your closing rate is 12.5%.
Since you make $500 per case and it takes you 8 calls to get one job, that means if you pay $500 for 8 calls, you will breakeven at that point. Hence, you can afford $62.5 per call.
Now let’s say you find that for ‘family lawyer nyc’ keywords, your website converts traffic at 10% which means 1 person out of 10 visitors call you.
Since you can afford max $62.5 per call and you need 10 visitors to get 1 call, it means you can afford to pay max $6.25 per visitor/click.
And remember, at this price point, you are barely breaking even.
So what you’ll do is you will set a bid less than that to make profits, like $3 maybe.
Now there’s your competitor who makes same $500 per case but he has very good closing skills and he closes 1 out of 4 calls which means a 25% closing rate (double yours)!
And so, the math changes for him.
All else equal, he can pay $500 for 4 calls or $125 per call (as compared to your $62.5). Hence, with the same 10% conversion rates, he can afford $12.5 per click as compared to your $6.25 and so he can very easily outbid you.
To sum up, having good business skills is essential, especially if you can make more money per customer and your closing rates are better compared to your competitors.
In either case, you can afford to pay more per lead and hence more per click.
And the Adwords system will favor you…