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Brace yourselves, readers, we need to get a little bit mathy today.

I use pay per click (PPC) advertising for all of my businesses, and also manage accounts for several of my clients. PPC is a critical part of digital marketing strategy – yes you are paying (per click), but you can also target and budget with extraordinary precision, not to mention the benefit of virtually instantaneous traffic. With a well-defined funnel and a commitment to monitoring KPIs (click thru rate, conversion rate, margin, etc.) you can achieve and maintain a profitable campaign.

The basic flow goes as follows – define the product and create your funnel, then think about how to get people there. When looking at PPC networks, most notably Google Adwords, you build a campaign, define ad groups within those campaigns, create ads within those ad groups, and then define keywords on which you’ll bid for your ad to show up to online searchers.

Your budget is a key input here – there are two numbers to keep an eye on. First is your daily budget, which is the total you’re willing to spend on a given campaign for a day. Second is your default budget per click – what are you willing to spend on a single click for keywords in your ad group?

It’s this point that is very interesting to me. The reason is that all keywords are NOT created equal. You will no doubt encounter some high traffic keywords that could be valuable to your service. These are the obvious ones – if you’re selling shoes, go after “shoes”. But when you let Google manage your per click budget for you – a default choice, your clicks will tend to skew toward these more popular search terms. Why? Because math.

You’ve defined a limited budget for your campaign. Let’s say $20 per day. So if you are bidding on competitive terms, and let Google manage it for you, it’s going to do what it can to get you clicks on those competitive terms. 2 things happen – the price per click goes up (because it’s competitive), and it shows up more often (because it’s popular). Bye bye budget!

Where I have had the most success is reducing the budget on more competitive terms, without eliminating it completely. I would like to get some clicks for general terms – it may convert at high rates; we won’t know without data. However, if I’m running a long-term campaign, based solely on the numbers, it’s most important to me to get lots of visitors (aka maximize clicks) into my funnel. In order to do this with a limited budget, I must decrease my maximum bid per click on these competitive terms so that my mid-tail and long-tail terms have a chance to show up. This strategy can drastically improve your results.

The mechanics of this are a little ugly – first, you can’t be lazy and let Google do everything. Of course they want you to let them manage it for you – they make more money and get control over more of the process. Yes, they will deliver value and high quality traffic, but there is no doubt you can do better on your own if you’re willing to put the time in.

Running a profitable campaign requires constant review and maintenance — “pruning” as I like to call it — every day, where you’ll go in and see where your traffic is coming from, what search terms are driving views and clicks, etc. If you’re getting “bad clicks” from irrelevant search terms, add negative keywords to eliminate them from future views. Views down, click thru rate up, more clicks, customer happy!

I was recently able to increase clicks to one of my campaigns by 50% or more by reducing the bids on the most competitive terms. Let’s translate this into real terms – if I’m paying $100 daily for 100 clicks, and 10% of those visitors convert (e.g. purchase, share contact info, etc. – however a conversion is defined), then I have a cost per conversion of $10 (I spent $100, 10 bought, so $100/10 = $10). If I can increase to 150 clicks on the same budget, and my conversion ratio remains the same, then my cost per conversion is reduced to $100/15 = $6.67. If budgets are tight, that adds up quick – assuming all else remains the same, you’ve reduced your customer acquisition cost in this channel by 33%!

PPC is a growing part of Sitation’s digital agency business. It holds great potential, but can be complicated. Need help with your campaigns? Please contact us and let’s discuss your projects!