Running paid ads is the quickest way to scale your business and maximize your ROI. When Google Ads first launched around 2002, originally as Google Adwords, it was pretty easy (and affordable) to get clicks on Google, kind of like Facebook Advertising today.
Since then, Google’s popularity has surged, resulting in the cost for advertising on Google increasing - but it’s still proven to be one of the most effective ways to generate leads.
Google Ads are triggered by a search query, so the leads tend to be higher quality because they are only shown to people that are searching for the services that you offer. However, this can become expensive, as each lead from keywords related to high-end products or services can easily cost well into the three-figure range. With prices like these, is Google Ads worth it for small businesses?
Are Google Ads Cost Effective?
When considering running Google Ads, people are often taken aback because they will be charged every single time someone clicks on their ad. While this is an understandable concern, it is imperative to keep in mind when it comes to AdWords, the cost per click (CPC) does not determine the effectiveness or profitability of a campaign.
It is also important to keep in mind that if your campaign is well optimized you will be charged at a rate low enough to make whatever you paid for clicks back in addition to a relatively healthy profit. It’s been proven that pay-per-click (PPC) advertising is the quickest and most efficient way to generate new business.
It is also important to keep in mind that your ads are only being shown to people that searched for something related to your business or industry, and in doing that they have taken the first step in self identifying as a lead.
How Much Do Google Ads Cost?
The cost of Google Ads can dramatically vary based on your industry and location. There are e- commerce businesses with a CPC of about $0.60, but other industries, such as lawyers or other professional services, can be much more expensive like and can get as high as $100 per click.
For businesses on the higher end it is important not to view the CPC as a deterrent because that one factor on its own doesn’t solely determine the effectiveness or profitability of a campaign.
Is It Worth It?
It is important to remember that the purpose of Google Ads is to generate Return On Investment - meaning that you have to invest in order to generate a return. If the cost of your keywords seem a bit steep think about your customer value. How valuable is a customer that seeks your business? Depending on your business, your customer value can be a few thousand dollars or $300,000. Shocking right?
Using $300,000 for this example, does it really matter if you dish out $40, $150 or $400 dollars for 300 or 400 clicks if the value of your customer is $300,000? Probably not. Let’s say that the value of your customer isn’t six figures - if your average customer value is about $150 and you spend $15 on a few clicks to generate that customer, was it worth it? Typically, your CPC will be priced fairly according to your industry - and with consistent campaign optimization, can often get reduced over time.
Your CPC is not the primary determinant on if your program is profitable or not, here are a few ways to maintain a relatively lower CPC:
- Focus on bidding on long-tailed keywords: These tend to attract searchers that are further down the funnel and are more likely ready to convert. They also are cheaper than the shorter keywords. For example, think more intent based keywords like “Marketing Agency That Does SEO” opposed to just “SEO.”
- Stay away from broad match keywords: These appear to be cheap, but the traffic they bring in is less likely to be relevant and those cheap clicks add up! Modified broad match keywords perform well if monitored closely, but running a campaign with regular broad match keywords is opening up the gates to all traffic and is guaranteed to exhaust your budget while (at best) very minimal return on your investment.
- Review your Search Terms report frequently: Make sure that your keywords are as close to the searcher's query as possible - this will help with your Quality Score and will result in a lower CPC. It will also allow you another opportunity to review your search traffic and block your ad from showing up in irrelevant keywords or search phrases, decreasing irrelevant clicks and wasted costs.
- Put your keywords are included in your headline, ad copy, and on your landing page: This shows Google that your keywords and ads are relevant. This will also help increase your Quality Score, lower your CPC, and will also help improve your ad placement. Those are three pretty great benefits that do not require too much time or effort on your part.
- Review your search keywords report frequently: Pause any keywords that are spending money but aren't generating conversions for you. If you have a $10 keyword that has gotten ten clicks but no conversions, and a $30 keyword that has gotten 4 clicks and 3 conversions - the $30 keyword is more expensive but also the most profitable. Pause any keywords (regardless of cost) that aren’t generating conversions for you and focus on the keywords that are generating leads.
Those are a few tips on how to maintain a lower CPC, but be mindful that the term “lower” is relative to your industry. The amount of your CPC should not be what determines if you pull the plug or not.
The last thing that we want you to consider is the lifetime value of your customer. We work with a wide variety of local businesses, including home service providers, professional service providers, accountants, lawyers, CPAs, and doctors. The CPC that makes sense for your ad campaign will depend on the average value of the customers you are targeting.
Let’s look at a pool service company for example
Pool service in this market is between $80 - $90 a month which works out to an annual payment or an annual amount of about $1,000. If we're buying clicks for $8 - $12, we might spend $80 before we get a customer. Even if it takes two or three months to get that first customer, it still would be worth it because we have a cost of acquisition to get that new customer. In this example, if you spent $200 or $300 to acquire that customer and they stay for two years, their lifetime value could still be anywhere from $1300 to $1600. It simply takes some time to see a full return on your investment.
At first, the thought of PPC advertising may seem a bit intimidating depending on the cost of your click, but the leads you generate and your return on investment should be your primary focus.