Why The Cheapest Cost Per Click in local Google Advertising Doesn’t Always Make More Cents.
Just chasing the lowest cost-per-click in your local search engine marketing campaign? There’s a good chance you’re doing yourself an injustice.
Don’t get me wrong, there definitely ARE certain situations where going for the cheapest cost per click (CPC) in local Search Engine Advertising campaigns DOES generate the best return on ad spend. This article (& accompanying graphs below) aims to help local business owners and marketing managers understand why the cheapest cost per click doesn’t always equal a better result for your PPC (Pay Per Click) budget. I have seen a few businesses lately being tricked into signing up for long term local Google AdWords campaigns solely on the basis of a promise to deliver a lower overall cost per click compared to their current campaign.
The Problem with Focussing Solely on Lower CPC
Delivering more clicks is EASY, anybody can do it. Some of the common tricks I’ve seen used by Australian PPC agencies include bidding on irrelevant, cheap keywords that drive lots of traffic but aren’t specifically relevant to their client’s site. This tactic looks great on your monthly Google Analytics traffic figures, but it might leave you wondering why the phone isn’t ringing in your sales office. Another sneaky (or perhaps just ignorant) tactic I’ve seen lately from a well-known Australian advertising company is to let the majority of their clients’ SEM budget spend across content networks instead of on Google Search – where over 90% of search happens in Australia. I have seen real campaign reports in recent months claiming that 65% of a businesses’ PPC traffic was coming from “Yahoo”. This is absolutely IMPOSSIBLE in the Australian market, because very few people actually use Yahoo’s search engine compared to Google.com.au. To the average small business owner, the monthly stats look great, because clicks on the “Yahoo” content network are cheap as chips. Funny how these “clicks” aren’t generating any leads or revenue for the client though…
You can absolutely understand the logic from a business owners’ perspective, especially if they haven’t had much experience with AdWords – “With a lower cost per click, I can buy more traffic to my website for my monthly PPC budget. Therefore, I’ll get more new customers and revenue from my advertising investment.”
Unfortunately (or fortunately) the solution really isn’t that simple. Why not? Because all keywords are not created equal. Not all search engines are created equal. Not all ad networks are created equal. Not all websites are created equal. Not all markets are created equal and most certainly Google searchers (your potential customers) are not all created equal.
Let me try to explain what I mean by that with this hypothetical example:
Let’s use the example of a glass & glazing company servicing Newcastle, Maitland & all over the NSW Hunter Valley. (By the way, that link is a shameless plug for one of my mates’ companies, Dee Glass – They do a great job if you need glazing work done in Newcastle or Maitland!). They need to be found on Google when potential local customers are looking for glass & glazing, shower & bath screens, as well as glass splashbacks, mirrors & even security doors. Because they have such a broad product range, there are literally hundreds of different keyword variations that people may use to find them. If you have had experience with Google AdWords or Search Engine Marketing, you will understand that each keyword costs a different amount to buy and those prices (Costs-per-click) will vary throughout the day depending on a range of factors including competition, max CPC bids/ad positioning, quality scores etc.
Consider the equation below with just 3 keywords and some hypothetical static CPCs.
Glass Replacement Newcastle $2.50
Commercial Glaziers Newcastle $3
Shower Screens Lake Macquarie $2
When choosing and analysing keywords for a local search engine advertising campaign, it is important to consider the nature of the keyword and try to put yourself into the shoes of a potential customer searching online for your products or services. How far down the buying cycle are they likely to be? For this Newcastle glass company, (plug again!) each of the keywords above will hold a different value. For example, if they are specifically targeting commercial customers, then they will probably be more than happy to pay a few cents extra for a click to their website when someone has typed in “Commercial Glaziers Newcastle”. Especially considering that a decent commercial glazing job could result in tens of thousands of dollars worth of business. On the flipside, if this advertiser is not as keen on travelling out to the Lake Macquarie area for domestic work – They might not be too keen to pay a premium for a website visitor who has just searched for “Shower Screens Lake Macquarie”. Especially considering that the average residential shower screen job might only be worth $400 and they’d have extra travel costs to cover.
Now of course, these are just hypotheticals. It would be near impossible to predict the success of every single keyword in a campaign without using some sort of conversion tracking technology to analyse the data. Most local businesses still rely heavily on the phone as a means of customer contact, so some form of phone call tracking is absolutely essential for any local Search Engine Advertising or Google AdWords campaign.
By tracking & listening to voice recordings of their inbound phone enquiries, this glazing company could properly assess the effectiveness of their PPC campaign and better understand what type of leads & sales are coming from their monthly budget.
This leads us to the essence of measuring REAL return on ad spend from any local search engine advertising campaign – Revenue/Profit generated from the paid website traffic.
If you were the marketing manager for this glass business, which scenario would you prefer:
Campaign A – Run by a PPC Agency focussed on lower cost per click. Bidding on a range of broadly targeted keywords and locations, with no optimisation towards keywords that are converting over time:
$1000 Ad Spend at $2 Avg. Cost Per Click = 500 Website Visits
500 Visits turned into 50 leads
50 leads turned into $8,000 of closed revenue
Campaign B – Run by a PPC agency focussed on a better cost per lead & higher ROI. Nature and buying intent of the keywords are taken into account, in consideration of the client’s goals & target customers. Ongoing manual & automated bidding optimisation is undertaken, taking into account keyword-level specifics such as the average phone call length & other quality metrics:
$1000 Ad Spend at $2.50 Avg. Cost Per Click = 400 Website Visits
400 Visits turned into 60 leads
60 leads turned into $18,000 of closed revenue.
Which would you prefer? Pay 50c less per click, or generate $10,000 extra revenue?
This is a really basic example of how the cheapest cost per click doesn’t always make more sense in local search engine advertising campaigns. It’s more about finding the most valuable keywords that convert into revenue and profit for your business.
This case study is just a hypothetical example, but I see this kind of scenario folding out all the time running local SEM campaigns for Newcastle & Hunter Valley companies. Metrics like Click Thru Rate & Cost Per Click are important, however they are useless without detailed phone call data & clever, ongoing conversion optimisation against that data.
So the next time a local AdWords expert knocks on your door offering you the cheapest cost per click, feel free to direct them to this article and ask them how they’re going to show you real value on your ad spend. We regularly take over local SEM campaigns being run direct through AdWords (with no conversion tracking or ongoing optimisation/management) and generate a far stronger return on investment. Until you’ve had the experience of running and optimising campaigns based on trackable offline leads, you don’t really know what you’re doing with local search advertising.
I hope this article helps. Please use the social buttons below to share with people in your networks who might find this content useful. If you have any questions about how to generate the strongest ROI from your local search engine advertising, please don’t hesitate to give me a buzz or shoot me a message on LinkedIn.