Clicksharp Marketing

For low-priced consumer goods, the pay-per-click bid system seems to work against small advertisers. While everyone else is watching from the sidelines, here’s what you can do to compete.

Someone recently approached me with a very reasonable concern about SEM (search engine marketing), specifically about pay-per-click (PPC) advertising.

In short, they were concerned that, as a retailer of low-ticket items with price tags in the $10-15 range, it would be difficult to run a profitable campaign.

And she had a point. Under what might be considered average circumstances — say a $12.50 price tag and 25% gross margins — that leaves only $2.50 per sale. Factor in fixed marketing costs like website design & hosting, plus other common costs of doing business (legal fees, insurance, etc.) and this does not leave much left to bid on clicks… unless you’re selling a million of what you’ve got.

Well, one day you will be; SEM will get you there. But until you hit that benchmark, your job is to squeeze the most non-monetary value out of your marketing campaigns.

Where to begin? Start by articulating the problem. In this case, the cost of a click doesn’t amortize as sweetly when you’re selling items for under $15, compared to items with bigger price tags whose gross margins far outweigh the investment in one click (at least more often than not).

There are a few things you can do to cajole the program in your favor:

1. Set maximum bids below the going rate… this will drop you down the rankings and you won’t get as much raw traffic. But that doesn’t necessarily mean that the visitors you do get won’t convert into sales. With well written ads and targeted landing pages, you can circumvent the effects of a low bid, raising your Quality Score and retaining your competitive edge.
2. What about retail-side measures to increase the dollar amount of an average order? For example — buy three, get one free… or free shipping on orders above $50. Grow your potential absolute return per click, and your ROI improves.
3. Invest in good customer retention (for instance, future email marketing campaigns, or referral programs) so that incremental profits come your way long after the invoice is paid.
4. Most importantly, you should really take a long hard look at why you started with AdWords in the first place. Hopefully it’s because you see a lot of inherent, non-monetary benefits. Measurability, scalability, momentum, competitive insight — these are assets to your campaign, however much the cost-per-click eats into your bottom line.

Sure, it’s a gamble. But marketing always is. Big money PPC advertisers have other risks… for instance, they can lose thousands of dollars per day by simply neglecting one negative keyword. This vulnerability doesn’t afflict the small business marketer… and we all know the happy ending that David found against Goliath.

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Paul Burani
Clicksharp Marketing
New York, NY

This entry was posted on Monday, April 28th, 2008 @ 9:27 pm on the category Marketing Theory, Pay-per-click advertising, SEM, Small business. You can follow any responses to this entry through the RSS 2.0 You can skip to the end and leave a response. Pinging is currently not allowed.


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