Strategic Marketing and Advertising Agency
Marketing ROI By The Numbers: Search Engine Marketing with Google Ads
We’ve helped a lot of companies determine if Google search engine marketing is a tool they can leverage to grow their business. Our clients are mature, profitable businesses, but when it comes to digital marketing, and specifically paid search, they simply don’t believe it has any place in their marketing plan because of some failed experiment years ago. Most commonly we find that somewhere in the past, someone tried to set up a campaign in house, put in their credit card information, and after a few days and a few hundred dollars, threw their hands up and said “this isn’t working, turn it off!”
If they’re being honest, they’ll tell you they know they should be doing more, but don’t know where to start, or even what questions to ask.
Finding your sweet spot with PPC
To help these companies explore whether or not paid search engine marketing (PPC or SEM) is a smart use of their marketing dollars, we start with a simple dollars and cents, ROI-focused math problem. If the math works, PPC could be a great option. If there’s no profit to be made, either find an alternative way to use search, or don’t waste your time.
Fair Enough? Let’s Get Started.
- First, understand the basics. I’m going to assume for this post that you have a basic understanding of how PPC works. You create an account, build a large list of words and phrases you want to show up for, decide where to target geographically, decide how much you’re willing to spend, what days of the week/times of the day you want to advertise, and you’re off. There’s a lot more to do to run a successful campaign, but let’s leave it there for now.
- Focus – Only Go After the Business You Want. If you don’t want dozens of calls and emails from cheap clients that are price shopping – don’t bid on generic, general terms. Most businesses make this mistake because of vanity. Let’s use a mid-market accounting firm as an example. They say “of course I should rank #1 for “Accounting Firm Maryland”, and then spend thousands of dollars to generate leads that are from people looking for a $300 tax return. If you’re an accounting firm that wants $25,000 annual engagements from privately held businesses, and their owners – you need to be bidding on specific words, phrases, and questions those people are searching for. Sure, there will be less leads, because there are less people searching for “accounting firm that specializes in government contractors”, or hundreds of other phrases, questions and terms someone might search for, but that’s the type of lead you’ll take all day long – not the $300 tax return. Bid on the business you want, and don’t worry about ranking #1 for basic phrases that appeal to your vanity, but don’t benefit your bottom line.
- Do the Math. Use a spreadsheet (or get your agency to do it) to calculate potential costs, conversion rate, # of leads, potential revenue and potential profit. There are some moving parts to this that you can’t control, but you can estimate search volume, conversion rates, close rates, revenue, and profit.
Let’s do the math
Let’s say you’re an accounting firm that has expertise in government contracting, and in helping companies that are fast-growth, have large capital needs in a highly regulated industry, and you would love a dozen more clients in that space.
Using Google’s tools to estimate search volume (search volume is how many people in the US search for a term in a 30-day period) we see that using the massive list of niche keywords and targeted phrases you’ve built, suppose there are 10,000 combined monthly searches for your terms/phrases. Let’s jump to using quarterly numbers to show this playing out at a larger scale:
90-Day Scenario:
Estimated Search Volume: 30,000
Average CTR (Click-Through-Rate) in B2B: 2.41%
Total Clicks/Traffic to Your Site: 723
Average Cost Per Click for B2B: $3.33
Estimated Cost: $2,407.59
Average Conversion Rate for B2B: 3.04%
Net Number of New Leads Per: 22 (rounded up from 21.9792)
Let’s stop there: that means for $2,407.59 you now have 22 new business opportunities. And not only are they new prospects, but they are prospects that were ACTIVELY searching for a solution, or new provider/partner. They’re ready to buy – not just new connections you have to cultivate for years until they might need your help. For whatever reason, they’re searching now. Back to the math…
Measuring revenue, and profit from ppc
Because your hypothetical mid-market accounting firm is not out here looking for $300 tax returns, you tell us that each client is typically worth around $18,000/year in fees, and you’ll will keep them for an average of 5 years (maybe they’re acquired or have some type of exit).
Let’s be conservative and assume that half the leads are garbage. Wrong fit, they’re looking for something different, they can’t afford you, etc. So we’re down to 11 actual leads that are worth having a conversation with.
Of those 11, let’s be conservative again and assume your closing rate is 3/11. That means of the 11 leads that searched online, clicked on your ad, came to your site, read about you and inquired about your services by calling or emailing, 3 are now paying you.
3 new clients a quarter x $18,000 a year in fees = $54,000/year in revenue. Multiply that by your average 5 years retention, and you have $270,000 in Billings. Assuming a 15% profit margin, that’s $40,500 in profit.
In summary, you spent $2,407.59 in hard ad costs over 90 days to generate $270,000 in potential revenue in the next 5 years, and $40,500 in profit. If you’re cynical about the numbers – or the entire calculation – let’s pretend you’re not great at closing, and only close 2 clients a quarter from your 11 qualified leads. Over the course of the year, that’s 8 new clients, totaling 144,000 in annual revenue, and you paid Google Ads $9,630.36 to get that business. Yes, you still need an agency to do all the work, build the landing pages, write the ad copy, track conversions, adjust campaign metrics on a regular basis to ensure success, etc. But even if you add that in, there is money to be made, if you just follow the math.
We’ll help you run the numbers
Search volume, Cost Per Click, and Annual/Lifetime Customer Value will obviously differ based on your industry, region, and goals. But the numbers are all publicly available from Google, and using tools like SEM Rush, SearchEngineLand, Optmyzr, and more. Contact us to help run the numbers for your company, and we’ll let the results tell us all if there’s a clear opportunity to use paid search to grow your business.
