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Is Pay-Per-Click Worth It?
If you’re like most service business owners (HVAC & plumbing companies, roofing contractors, etc.), you’ve probably asked yourself questions like, “is pay-per-click advertising worth it,” “how much can I afford to pay per click,” and “what should my monthly budget be?”
These are all critical questions worth asking. Unfortunately, most pay-per-click companies and traditional advertising reps turned online marketing gurus obfuscate an already murky situation combining sales schtick (read: hype) with inaccurate information. Next time you meet with a rep, ask yourself whether you’re dealing with a business expert and true online marketing pro or just another savvy sales rep with all the right lingo.
More often than not, it’s the latter.
Hint: If membership to SEMPO or having attended the latest industry webinar is given as proof of expertise, you might as well fake a medical emergency and leave the meeting immediately (you can thank us later)!
Most service businesses first become aware of pay-per-click advertising from a professional sales rep. Sales reps typically know little, say much, and rarely treat your business as if it were their business.
Sound familiar? Let us shed a little light on the situation!
Pay-Per-Click (PPC) Advertising Explained
One of the biggest causes for confusion amongst business owners about pay-per-click (PPC) advertising is caused by the fact that sales reps are constantly inventing new names for it. Pay-per-click (PPC) is frequently also called things like: cost-per-click, CPC, paid placement, paid search, guaranteed placement, sponsored listings, and many others.
When you’re being pitched any form of web advertising related to Google, always ask the rep what happens when you STOP paying? If the ads disappear instantly, chances are whatever they are selling is PPC. Fly-by-night Internet marketing companies are famous for creating new names for pay-per-click advertising to make their pitch sound unique or to prevent you from doing an apples-to-apples comparison.
Bottom line: If your search listings instantly vanish when you stop paying—no matter what the name—you’re almost certainly being pitched PPC advertising (as opposed to an SEO campaign).
With PPC advertising, you select or bid on keywords for which you’d like to rank. How high your ad appears on the search engine results page is (mostly) related to what you are willing to pay per click. Want to get on page one of Google? The only guaranteed way to do this is to outbid your competitors using pay-per-click ads. Pay more, rank higher and—broadly speaking—get more clicks/visits. You pick the keywords (harder than it sounds), adjust your bids (what can you afford to pay per click), write your ad copy and sip a cocktail while the leads pour in (pardon the pun).
Like most things of value, creating and managing an effective lead generation PPC campaign is complex and it takes quite a bit of work and expertise to be successful. Although it’s complex, PPC can be a highly effective form of advertising and it offers business owners an incredible degree of control and transparency.
Is Pay-Per-Click Worth It?
Now that you know a bit more about PPC advertising, we’ll go back to one of the original questions: Is PPC worth it?
The answer, like most things in life is, “it depends!” What are you willing to pay for a new customer? How much do you want to grow? How well do your sales reps convert leads into sales? How effective is your website at converting visitors (or clicks) into inquiries (leads)?
If you can’t accurately answer each of the aforementioned questions, it’s impossible to answer the question, “is pay-per-click advertising worth it?”
You see, one of the beautiful things about PPC advertising is that it’s far more science than art. Savvy marketers love PPC because they usually “know their numbers.” Once you identify what you’ll pay for a sale, your inquiry-to-sale conversion rate and your visit or click-to-inquiry (lead) conversion rate, deciding what you should pay per click and if PPC is worth the cost is a no-brainer.
What’s a New Customer Worth?
Whether you’re a dentist, doctor, HVAC tech, plumber, roofing contractor, etc., if you want to determine whether PPC advertising is worth it and what you can afford to pay per click, you need to decide what you’re willing to pay for a new customer. Think about it—what are you willing to pay for a new customer? What’s the lifetime value of an average customer? When it comes to marketing, “what am I willing to pay for a new customer” is perhaps the most important (and first question) to ask.
When it comes to PPC advertising, far too many business owners work in reverse. They set up a PPC campaign, bid $5 – 10 per click to be at the top of page one (assuming—incorrectly—that the top spots are always best) and then (incorrectly) determine PPC advertising to be too costly to be worthwhile. If you haven’t determined what you can afford to pay per click or your conversion rates, don’t start a PPC campaign!
There are a number of different philosophies with respect to coming up with what you can afford (or should be willing) to pay for a new customer. Much depends on where you are in the lifecycle of your business and what your long-term goals are. For example, suppose you’ve taken over your parents’ plumbing company. A new business or a business with aggressive growth goals should probably be willing to pay more for a customer than a mature business focused on maximizing profitability.
Here’s an example:
You own a small plumbing company and you’d like to grow aggressively to become a leader in your market. Your average ticket is $500 and about half of this is profit. You might be willing to pay $200 for a new customer. If your lead-to-sale conversion rate is 50%, you could spend up to $100 per lead, which opens up a number of options on the marketing side of things.
For example, print Yellow Pages advertising, something almost certainly too costly for a plumbing company only willing to pay $100 per sale, suddenly becomes a profitable marketing strategy capable of generating 30+ leads per month for a plumbing company willing to pay $200 per sale. With pay-per-click, many plumbing companies see a cost-per-lead of less than $40—making PPC advertising a virtual oasis of affordable leads!
How Much Can I Afford to Pay Per Click?
In order to determine whether PPC advertising (or any other marketing strategy) is worth it, you have to know your numbers. At a minimum, this means knowing what you’re willing to pay for a new customer, your lead-to-sale conversion rate, and your visit-to-lead conversion rate. If you own a plumbing company and you’re willing to pay $200 per sale and your lead-to-sale conversion rate is 50%, you should be willing to pay $100 for a lead. If you then find out (through accurate tracking) that your website converts 10% of pay-per-click visits into leads, you’d know that you could afford to pay up to $10 per click.
Starts to make sense, right?
How Do I Determine My Monthly PPC Budget?
Setting your PPC budget can be done a number of different ways. The easiest method is to pick a budget you’re comfortable with and review your campaign(s) every few days (or have the company managing your campaigns review things every few days!). PPC budgets are set daily, so by doing this you’ll probably find that every day your budget is exhausted by a certain time. Let’s suppose you set your initial budget for $30 per day or about $1,000 per month. If your budget is exhausted by noon the first few days, you can safely assume that there are far more clicks available than your current budget will allow. If you have the cash and see the value, raise your budget and see how much longer the campaign stays active. Note: In order for this method to work, you have to adjust the settings on your PPC campaign to “show ads as fast as possible” vs. “show my ads evenly.”
The Importance of Tracking
Blue Corona is in the business of tracking advertising—including pay-per-click campaigns. However, we cannot emphasize enough how important it is to have accurate tracking in place BEFORE you invest in a marketing strategy like PPC. If you fail to (accurately) track your advertising, you will waste unbelievable amounts of money. We have a client that, prior to us, was investing $1,800 – $2,000 per month in PPC advertising. He had been doing this for 3 years. We tracked his campaigns our way for two months and showed him that of his ~$1,800 spent, nearly $1,000 was going straight into the garbage due to an improper keyword match setting within his account (if you want to see the case study for this, contact us!).
Most service businesses (HVAC techs, plumbing companies, roofing contractors, etc.) receive far more phone inquiries than email or online inquiries, so it’s critical that you track the phone calls from your PPC campaigns as well as the online leads. And when you track the phone calls, you have to actually listen to and categorize each call! Most call tracking companies will record your calls, but you have to listen to them in order to determine which are leads and which are bogus.
You’ll get far more bogus calls and solicitations than you will actual leads so don’t base your decisions on gross call volumes. Blue Corona offers call tagging for business owners looking for a “do it for me” call tracking service (tagging calls is incredibly tedious and time-consuming, but critical for making the most intelligent PPC decisions). Learn more about our call tracking and call tagging for service businesses.
For most savvy service business owners, pay-per-click advertising is a gold mine. However, before you invest in a PPC campaign, you must know your numbers and put systems in place to accurately track your results. Pay-per-click advertising offers incredible flexibility and control, but the price of this control is complexity. Very few small medium sized service businesses can afford the time necessary to learn enough about PPC advertising to operate campaigns that produce a positive ROI.
Test the services offered by a pay per click management company, but make sure their fees are transparent; in other words, you need to know EXACTLY how much of your budget is going to the search engine (Google, Yahoo, Bing, etc.) and how much is going to the company managing your account! To learn more about search engine marketing, pay-per-click advertising or how to determine your marketing numbers, join us for one of our weekly webinars.
PPC Advertising can be a highly effective way to grow your business, but you shouldn’t forget about search engine optimization (SEO). Enter your website address in the box below to see if your website could benefit from SEO.
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About The Author: Ben Landers is the President and CEO of Blue Corona, a data-driven, inbound internet marketing company. Submit an inquiry to book Ben to speak at your next conference or event.
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