We talked about organic SEO, which is these pieces, these terms at the bottom. Now let’s talk a bit about paid search. If you’re doing a search on business telecom systems Denver, these are paid results up top by Google AdWords. If you were to be pursuing Google AdWords for this term, and somebody clicked on that, you would pay for the click that they made back to your site. AdWords are paid searches for what we call a bid system. The higher you bid, the higher you’re going to get placed. The company that bid here, [inaudible 00:17:42], paid more for this result most likely than somebody over here. There’s more to it than meets the eye, it’s not simply that. The relevance of your ad is important. Also, it can have to do with how well you write your ad. The quality of your ads are important.
Two things to think about with AdWords. A lot of people use to think that this is the easy way to drive business. In the past it was more successful, but it’s become competitive. AdWords can be profitable. It can help for your business, but it can also not make money especially in the short run. Once you begin the process, a lot of times you need to spend a month or two, or maybe 3 determining which AdWords terms are actually thriving business and are profitable for you. In order to do this you need to know your customer. You need to know what’s the average revenue per customer and what’s the average gross profit for customer, because you also then want to figure out what it costs you to get a new customer. You need to know how much traffic you get, how many leads you get from that traffic, and then how many of those leads actually turn into a customer. Then do the math to figure out how much did it actually cost you to get that new customer. If that cost is less than the gross profit of the customer, then it makes sense to do AdWords. If it’s not less than the gross profit of the customer, it doesn’t make sense to do AdWords.
You have to think about this also from the standpoint of what’s the lifetime value of the customer. If the customer is only going to buy from you once, that gross profit of that first transaction is the important consideration. However, if they’re going to come back to you 2 or 3 times, you need to know how often an average customer comes back. Let’s say the cost to acquire a customer the first time is $1600. The gross profit of that average sale is about $1000. So it would make sense, if that was the case, not to pursue AdWords. However, if you know that the customer comes back say 2-3 times, or comes back 2 and a half times, then the lifetime value of that customer is more around $2500-$3000. Then it makes sense for you to do AdWords. As it says up here, it may not be profitable in the short run but it can be profitable in the long run. In same cases, we have some clients where, lawyers for example, where they might lose money because they got a lot of small cases. All they’ve got to do is catch one big one and it pays for all their advertisement. In their cases it’s a bit of a gamble. You have to know your business well and you have to understand the cost of AdWords for you to decide if you want to do it or not.
Paid Search Case Study
Here is a case study where we actually look at how we actually determine the cost of the client acquisition. These are the different keyword terms, then the searches for each keyword term, what is would cost to bid on each one … So for the term, voice, there might be 40,000 searches and the cost from each click from an AdWords standpoint is $12. That click through rate, from an industry average, is about 4%. That would get you about 1600 clicks. The budget you would need, just for that term alone, would be $19,000 per month. If you ad all of these up, you could potentially spend … For all these terms, if you were to target all these terms, you could spend upwards of almost $60,000 in a month. Using some industry averages, these are the numbers of clicked, you might get … If you were to pursue all these, you’d get about 3800 clicks in a month. About 5% of those would convert into actual leads. This is the number of people that random searched, this is the number of people that clicked on the ad in the search engine result page, and this is the number of people that would then, 50% of them, would convert into actual leads. So they would come to your website, they’d come to your landing page, or they would call you on the phone. Using industry averages, you would get about 190 leads for this $57,000. So the cost per lead that you have here is about $300. We’re still not done yet because they’re not customers yet. So the question becomes how well do you close a new lead. If you’re closing 10% of those leads then you’re going to end up with about 18 or 19 new customers. So that cost, for $57,000, and 19 new customers, your cost of acquisition for each customer is a little over $3,000. This is using some industry averages to get a sense of what this would cost. If you knew that your new customer, the gross profit of a new customer, was greater than $3000, it would make sense for you to pursue AdWords. If it was less than $3000 then you would not want to pursue AdWords.
This is another example, a similar situation. Here we see that this would be for worker’s compensation. If you’re looking for worker’s compensation attorneys, you’d spend $3000 a month and at the same conversion rates you could generate 18 leads. The cost of leads is about $1800. Conversation to sales you would get a couple of new clients a month, so it would be about $1500 a client. In this case it would be a customer, the profit was about $2000 per client so it made sense for them to pursue AdWords.
Social Media Case Study
We also have a case study here from the [inaudible 00:23:55] looking at social media because we’re looking at [inaudible 00:24:00] before this. The question we have here is, is social media worthwhile. Social media has a lot of buzz. We always seem to have a lot of people who attend social media seminars and webinars that we give. We find that it’s something that you have to be very careful to watch. It’s a large investment to actually get the social media to generate leads, and it’s also hard to track. You want to be very careful about how you’re tracking it and looking at your cost, and making sure that you understand how much business you’re generating through it. We have seen it work for our clients. In some places we’ve seen it work in situations where you didn’t think it would necessarily work for that kind of business. You think of social media as being Facebook, or Twitter, or LinkedIn, a lot of consumer facing businesses where you’re going to have … Maybe restaurants, or some sort of consumer products. In this case we actually had one with a real estate investment company. If you’ve seen those placards in medians and streets around the city that say, we buy ugly houses, we buy houses cheap … This is a company like that. They’ve actually done a Facebook campaign and they were able to find that they did an investment of about $5,000 per month, they generated about 10 leads. The cost of the lead was about $100, a little more than that. They had one sale. The cost of that sale for them to acquire that was about $2000, but they made a gross profit of somewhere between 10-30 for the transaction. So the return on their investment was significant, at least 5-1, potentially much more than that. Social media, organic, AdWords … As long as you track it, you know what your cost is going in, and you know how many leads you’re getting coming out you can have a really good idea if it’s worth it for your business on how well you’re doing. If you don’t track it, it’s not going to be easy for you to determine if it’s actually worthwhile for you or not.
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