Pay Per Click for Targeted Results
Jerry Kenefake, Founder and President, Mypromostore.com
In 2000, I changed my business from a primarily regional company to an online merchandising and sales company. I needed a new marketing strategy to support that change.
Mypromostore.com is a one-stop shop for almost any promotional product you can imagine. Many of the items we sell are commodity-like, and sales are driven by price. Growth is difficult to achieve on sales of those items alone. A high level of personal attention and value-added services have set us apart from most of our competitors, however, and helped us win in the price wars. But our real goal has been to leverage the enormous customer base available through the Internet: identifying niche prospects within that universe who are seeking higher-margin products, driving them to our site, and converting them into customers.
Enter the world of sponsored links and pay-per-click advertising.
In our industry, if we can't advertise it, we can't sell it. Pay-per-click advertising is proving to be a highly cost-effective way to reach our niche. Internet sales were up 325 percent in one year, and our average order size doubled.
Most of our target customers are small-to-medium-size companies with formal or informal marketing budgets. They are not as concerned with price as with delivery times and the quality and appearance of products. Many don't want sales calls at their office. If they need something for a trade show twice a year, they want to handle it online and with a phone call—not with a pesky salesperson banging on the door. For us, spending advertising dollars on sponsored links is a much more appealing way to reach that market. And, it's much more effective than "dialing for dollars" or trying to get an appointment with the right decision maker.
The other tough part is we don't really know whom to target. We can reach out to a marketing person, but it may be the vice president of sales, the president's assistant, or a spouse purchasing the items. Pay-per-click works especially well because it helps us identify the customer—regardless of job title—who will buy our higher-margin products, such as computer bags and leather portfolios. But, as with any advertising or promotion, the margins in pay-to-click must make sense. The cost of getting the customer to your site can easily eat up your profit.
For us the cost of acquiring a new customer varies by product category. But we do use a rough formula to determine how much money to spend on advertising to get the customer. As a general rule, we want to spend no more than 10 percent (or one dollar on a $10 item) for advertising. Looking at it another way, we know that on a $10 item with 40 percent gross margin we don't want to spend $4 on advertising.
With sponsored links, we have 6,000 key phrases for which we advertise, and all are bid independently. Using tracking software on a keyword or phrase basis, we can know who came to the site and who came via which keyword, such as "imprinted coffee mugs." We also know how many pages they visited and which visits generated what kind of response: phone calls, e-mails, or orders. We also know who just browsed. As such, our online advertising has turned into a great lead-generation tool. Every day our customer list grows as people contact us for product information. If we can get someone in our niche to contact us personally—by phone, e-mail, or sample requests—we can convert 25 percent of those inquiries into sales.
Conversely, we can also track whether a key phrase is not attracting visitors, or attracting visitors who don't buy. Over time, the cream rises to the top. Initial analysis allows you to invest dollars in areas yielding the best results.
Additional analysis can determine why a particular area is not doing well. Is the price out of kilter? Are the graphics inferior? Typically, you can zero in on the problem, determine what's wrong and fix it, or cut spending on low-producing keywords and phrases. You also can look at average sales by category in relation to advertising dollars to see what's worked better, perhaps adding more of a particular product or different types of similar products.
For the best results, we've also discovered the importance of making our pay-per-click advertising key words and phrases as accurate as possible: they must deliver on the promise that attracts the customers we want. We might only have one opportunity to persuade a prospect to make a purchase. Consequently, we keep our site attractive and user friendly, our products current, and our prices competitive. Especially important is that for every dollar we get through pay-per-click we'll get another fifty cents the following year. That's half again as much revenue through repeat business that we don't have to pay for. That's how the business is really going to grow.