First off, I’m a HUGE fan of paid advertising. It’s a way to quickly get to the top of the search engines and drive revenue immediately. It’s has a lot of advantages, which I touch on in my previous article PPC, Click Fraud and SEO.
I got a phone call from someone who said they heard good things about our PPC management service and wanted us to manage their campaigns. Well, we love getting referrals, so this got my day off to a good start.
I asked him the usual questions:
- What are you selling?
- Who do you sell it to?
- Where do you sell it?
He said he sold Laser Print Cartridges to home based businesses and small offices across the US.
ME: Great! Do you sell in bulk, or one or two at a time?
HIM: Usually one at a time, sometimes we might sell two.
ME: What are your margins? I mean how much profit do you make with each cartridge you sell?
HIM: Depends on the Cartridge, usually $5 -$7 each.
ME: OK, maybe we should run the numbers…
Let’s do the Math
OK, let’s suppose that you have a conversion rate of say… 10%, meaning that one out of every 10 people who visits your site make a purchase. Don’t assume that everyone who goes to your site makes a purchase because they are probably also looking at Staples, Office Depot and Costco. Those big companies can take a bit of a loss because they know they are going to sell you something else once they get you to their site.
Now, let’s suppose the actual cost-per-click (how much you pay to get a visitor to your site) is $2 per click (to use easy numbers).
That means that to get 10 visitors to your website in order to sell one cartridge, it will cost you about $20 to make $5-$7. This is probably not the best strategy for you.
HIM: I may have to go to plan “B”
ME: What’s that?
HIM: Get a job.
There’s a reason why Google is the top brand on the entire planet.
It’s because paid advertising is EFFECTIVE…very effective. For products and services with decent margins such as Education, Home Improvement and Legal Services to name a few, paid advertising is merely the cost of doing business, and the returns can be tremendous.
Now that I’ve inspired myself, I think I’ll tell you about a couple of cases where paid advertising resulted in substantial profit for our clients. Maybe tomorrow…. Follow me here on LinkedIn if you want to learn more about Digital Marketing.