We have all used PPC advertising methods to get our product/service in front of the customers who are looking for it. This was an expensive but great way as it means that only qualified customers who are looking for our offerings were seeing our products and ads. If you find that diminishing rate of return on PPC investment is impacting your business then keep reading for some additional insight into how to overcome this challenge.
Unfortunately this is not a strategy that can be scaled at volume with the same ROI. If this were the case then the only times that you would see any marketing is when they could justify the Adwords spend as this would be sufficient to run generate enough leads for the business.
Gone are the days where you could increase spending and receive a proportional increase in leads while maintaining the same cost per lead. In markets and industries where this is the case you should be very happy as they are few and far between and this generally indicated that there is not a significant amount of competition and that you should be in a growth period.
The below graph shows this and how your spend will increase exponentially beyond a certain point. The first x indicates the initial point of diminishing return and the second x represents a significant increase in overall spending despite being under the target CPA.
As you can see:
10 x $50 = $500 (PPC Cost)
11 x $60 = $660 (PPC Cost)
This clearly shows that the one additional lead that was generated cost an additional $160 which is considerably more than the $50 lead cost that was previously associate with campaign.
Looking below you can see examples of what this means for your bottom line and the overall number of leads that can be associated with PPC.
Focus on the wrong keywords which do not necessarily yield good results simply for lead volume can lead to massive cost impacts. This can have a significant adverse affect on the account and can mean that there is a high amount of wasted resources in terms of campaign budget.
Cost Per Conversion
As you can see above there is a diminishing rate of return on CPA cost. As the CPA volume demands increase the costs associated with each CPA does also at a disproportionate level with costs increasing exponentially.
The key to a successful PPC campaign is finding the keywords that yield returns to justify the costs. Keywords with high ticket margins in the service industry are crucial to developing a good PPC campaign and successful strategy. Imagine your a tax consultant paying $40 per click for consumer tax returns worth $79 is simply not profitable once you consider the costs of wages, overheads like building rental, or insurances. In the same token paying $40 per click which could get you a conversion of a huge small, medium or large business which will bring in recurring and long term work could be very profitable. It is this knowledge that will enable your business to drive more qualified leads with a better ROI.
This can be the difference between a small and massive PPC spend and determine how profitable the business will be in the long term today. If you need help with your PPC campaigns talk to us today.