PPC Costs: Budgets, Management & Mistakes
Paid advertising is the fastest way to generate leads. Period. The issue is that it doesn’t happen by itself, and it doesn’t happen for free.
This is not a “How To” type of article, it just explains in simple terms why PPC varies in costs the way it does. I’m not trying to scare you from doing PPC, I’m trying to scare you from doing it wrong and spending more money than you need to.
The advantage of paid advertising is that you can turn it on and off like a faucet, and you only pay for actual traffic to your website or landing page. You can also target very precise geographic areas and dictate what keywords you want to be found for. The disadvantage is when you stop, the leads dry up. The formula is simple; if you make more money than you spend…keep the faucet open.
So How Much does PPC Cost?
If you do it right, it’s an investment. If you don’t…then it’s a cost. In either case the monetary value of running a Pay-Per-Click adverting campaign comes in 3 flavors:
- Cost of your Budget
- Cost of management
- Cost of doing it wrong
Cost of your Budget:
This is typically your single biggest expense. It’s also the single biggest variable. The biggest misconception our clients have is the assumption that there is a pre-determined price for every keyword or every click. This is absolutely not the case. PPC is what we call “a real-time market bid”. It is essentially a blind auction. The more you bid, the better and more frequent your placement on the search results.
There are some variables associated with your “Quality Score”, but essentially the more you are willing to bid on a particular keyword, the higher you will rank for that keyword. If your maximum bid is $2.00 and a competitor bids more, they will probably rank higher on the search engines than you for any keyword that you are both bidding on.
The competitive nature of your keywords is also a factor. Just like a real auction, the more people bidding on an item, the higher it is likely to sell for. Some keywords just cost more than others because the ROI for that keyword is higher and thus your competitors are likely to pay more to rank higher because the payoff is so good. That would drive up the price as it would in any auction, but as is the case in any real market situation, it will typically level out at what it is actually worth.
For example, the keyword phrase “car accident lawyer” is likely to cost more than the keyword “back pain treatments” simple because lawyers have more to gain by taking on a new personal injury client than a chiropractor has to gain by taking on a new patient with back issues. Over time lawyers in any particular area will bid up the price on the car accident keyword higher than chiropractors are likely to simply because the payoff is bigger, and they are willing to bid more for the advantage of ranking higher.
A common mistake is bidding outside of your geographic target area. If you’re a chiropractor for example, no one is going to drive more than 5-10 miles to come to your office. They will just look for a chiropractor closer to them. If you run a PPC campaign outside of you area, you will spend money on people who will click on you, but not come to your office once they see it isn’t in their area.
Cost of Management:
Do it Yourself: On the surface the process sounds easy. You choose your keywords, plug in a budget and let it rip. Google, Yahoo and Bing have no problem with that because they are going to take your money whether you get results or not.
Managing a paid advertising campaign is a learnable skill, but it takes time and some dedication to do it right. You will need the time to do keyword research, budget analysis, copywriting for your ads, keyword mapping for your ad-groups, determine negative keywords (keywords to exclude), campaign set-up and ongoing bid management to make sure you aren’t over or under spending.
The management cost associated with doing it yourself is the learning curve, ongoing maintenance and absorbing potential costly mistakes by doing it wrong.
Hiring a Professional: Let’s assume that your professional is competent and experienced. Naturally that isn’t always the case, but let’s go on that premise.
An advantage of hiring a professional (aside from knowledge and experience), is that they may have access to some sophisticated bid-management and reporting tools that wouldn’t make sense for you to purchase for yourself and then learn how to use. Tools like Acquisio, Kenshoo and Marin are agency level platforms typically out of reach for the average consumer. Obviously you will want to consider the value of your time as well.
If you want any hints on how to hire a professional, you are welcome to download our free eBook, “The Digital Marketing Smell Test” How to Hire an Agency that Doesn’t Stink.
Typical Costs: Fees usually consist of some sort of a set-up fee and monthly management fees. It’s a very common practice for the monthly management fees to be tied into the budget being managed. For example, 15% or more of the budget is not uncommon.
Another model is the flat fee. For example, $499 set-up fee and $150/month for smaller less complex campaigns.
We use both models depending on the nature of the campaign. We also use a third model where we absorb the cost of the campaign management into our monthly retainers when we are managing our client’s entire web presence under our PartnerPlus program.
Cost of Doing it Wrong
The nature of PPC is that you only pay whenever someone clicks on your ad and goes to your website or landing page. Every click is an opportunity or a liability. You WILL get clicks to your website, but improper set-up and management may result in a lot of clicks that don’t turn into qualified leads. Failure to do proper keyword research, bidding too much or too little, and improper geographic targeting can all result in wasted dollars.
Not designing a good landing page will also result in sub-par performance. If you do all the technical things right and send perfectly good traffic to a poorly conceived destination page with no continuity to the keywords and no call-to-action, you are still doing it wrong.
Finally, you need to determine if you should be doing PPC at all. Paid search can be miraculous for the right types of industries, but not so much for low margin products and services. Here is a short article about 5 businesses that are Rockin’ PPC. If you can identify with any of these types of businesses, you SHOULD be investigating PPC as a possible strategy. If you have any doubt, contact me and I’ll walk you through it.