I recently had the opportunity to speak to two founders of venture-backed start up businesses about their business story and how they went from a napkin idea to a full-fledged product. Since both companies are in the development phases, they have yet to start marketing their respective products. Therefore, one of the big questions we got stuck on was – how do you market a product that people may not be shopping for yet? As we discussed this topic, I was happy to hear that one solution involved using pay-per-click as a means to expose their product to the public.
This blog post will talk about benefits I have identified when working with PPC as well as an example of how one small business used Google Adwords to market their new product. This “small business” is now ranked #104 on the Fortune 500 list.
ShareFile.com : From small business to INC 500
Last year, I participated in a challenge called “Duke Start-up Challenge” which is an annual competition sponsored by Duke’s MBA program that allows its participants to present executive summaries, business plans and elevator pitches to a panel of successful entrepreneurs. During the introduction of the panelists, they told us their story about their business. One of the stories was told by Jesse Lipson who is the founder and president of ShareFile.com. Jesse’s story of creating a product from scratch was an amazing one to begin with. However, what really amazed me was his ability to market the product through Google Adwords.
Two things to note here :
- Jesse had allocated a budget for marketing the completed product.
- Jesse relied on Google Adwords to initially market the product.
I was floored by the amount that Jesse had spent on initially marketing his product. After his speech, I approached him and curiously asked him how much he is spending on Google Adwords for the current state of his business? His response, they had ramped up the Google Adwords spend since its initial success when first promoting Sharefile.com.
The beauty of pay-per-click is not only do you get to see return on investment quickly, but you also get to see if the increase in advertising spend suffers from diminishing marginal returns.
If you are unfamiliar with diminishing marginal returns, what it means in this situation is:
- Owner Bob spends $100 on advertising and brings in $1,000 in profit.
- Bob then thinks to himself, “Let me spend $1,000 on advertising and bring in $10,000 in profit.”
- Bob invests $1,000 on advertising and only brings in $5,000 in profit.
- Instead of getting $10 for every advertising dollar, he is now getting $5 dollars.
This is an example of diminishing marginal return where you have increased advertising spend but reduced the rate of return per advertising dollar.
However, in some cases with pay-per-click Bob could have brought in $15,000 in profit when investing $1,000 into advertising. Meaning, the additional advertisement exposure increased the ROI per advertising dollar by $5 dollars! Instead of making only $10 per advertising dollar, he is making $15.
Benefits of Google Adwords as a PPC tool : Quick Analytics Integration & Measured Success!
The beauty of Google Adwords as a pay-per-click medium is that it integrates with Google Analytics quickly and easily. For any site that is signed up with us to do internet marketing and ppc management we install Google Analytics onto their website as the absolute first step.
Unlike most offline marketing channels we have the ability to leverage a tool like Google Analytics to quickly collect data on our online marketing efforts.
Google Adwords and Google Analytics allow us to see how well our pay-per-click click campaigns are currently doing with only a day of delay (if that). When running an Adwords campaign we are able to see how many people came across our advertisement, engaged with our advertisement and even how many people from that advertisement have entered into our lead generation process. All this beautiful data with a relatively low margin of error. Not only are we able to see these different metrics (and much more), but we are able to see the results as they come in which allows us to quickly adapt our online marketing strategy.
Benefits of PPC: A/B Testing!
My last point for this blog post about PPC for small businesses is that PPC allows for simple A/B Testing. As we saw in the paragraph above, we are able to constantly measure the success of our advertisements daily if not hourly (based on how much traffic you are paying for which is directly based off of your advertising budget).
For clients with a higher advertising budget, we are able to compare keywords we are bidding on side-by-side. For instance, we can see that advertisement A versus advertisement B (both advertisements pertain to the same product) have a conversion rate of 5% versus 0.5% respectively. Let us just assume that we have taken chance out of this equation and have a large enough sample set to make the conclusion that advertisement A is a better ad to bet on than advertisement B.
From there, we can immediately throttle spend on advertisement B and divert the funds to the advertisement that converted at a higher rate. The above scenario can also be applied to the keywords you are bidding on, the landing page you are bringing individuals to, what time you are showing the advertisements and much more.
Google Adwords also has a built-in feature that applies statistics to the advertisement engagement metrics for any given advertisement set and automatically decides which ad variation it should show more often based off of the advertisements past performance.
Please feel free to comment with any questions and I will answer as soon as possible. A question for the business owners out there, when creating your business – did you allocate a budget for marketing? If so, did you invest any of it for the online medium and was it successful?