A lot of business owners I speak to are extremely keen on improving their SEO performance so they can significantly reduce, or completely eliminate, the amount they’re spending on paid advertising. After all, if they can rank highly for the keywords that are costing several pounds per click on AdWords, then it surely doesn’t make sense to bid on that term as well does it?
I’m always very interested in trying to understand why a client is so keen to stop spending money on paid advertising. The most common reason is that the click costs have risen so much they’ve been completely priced out of the game. Fair enough, it’s a competitive platform with more and more people competing for the profitable terms, so the price is bound to rise. But this is a challenge to be overcome, not a nail in the coffin.
In most industries there will be businesses tackling this challenge head on and they’re the ones that seem to stick around no matter what. They’re always up there commanding the top positions and leaving you scratching your head, wondering how/why they’re paying so much per click.
They’re up there because they have a firm understanding of the lifetime value of a customer and they’ve got good tracking in place.
An ecommerce store promoting kids clothes on AdWords could acquire a new customer for £10, but the average basket size on that first visit means the store only breaks even.
On the face of it, this isn’t a great investment and your time would be spent utilising other marketing channels – this is how a lot of businesses would look at this.
What if you did some analysis of first time buyers gained through Google AdWords and found out that the majority came back and ordered again? That would paint a different picture.
Then you also realise you’ve actually gained 2000 new email subscribers and 2% of those have bought as well.
So the initial £10 acquisition cost has resulted in a new customer that comes back multiple times over the course of a year, as well as becoming an email subscriber and a fan of your FB page.
When you look at it like that, it’s a very solid investment. In fact, I’d actually be happy to take a loss on the initial visitor if I knew they’d come back, and so would you.
The trouble is, most businesses focus on the immediate pain of the AdWords costs and don’t have the correct tracking and follow up in place to understand and enjoy the real benefit.
Another example is a window repair guy who fixes broken double glazing units. He started AdWords back in 2010 and keywords were about £0.50 per click so there’s plenty of profit on the initial sale. Fast forward to 2016, the same keywords are now £6.50 per click and on the face of it, his customer acquisition cost has skyrocketed. He decides to stop AdWords and put a big ad in the Yellow Pages instead.
I can completely understand that coming to terms with paying an extra £6 per click for a keyword that was costing £0.50 just 6 years ago is really tough. Really tough! But the market determines the price so if it’s £6.50 per click and people are paying it, it’s because it’s worth it.
How could it be worth it for our window repair man? We need to look at the bigger picture. What if:
- 1 out of every 5 new customers refer you to a friend (this should also be encouraged)
- 1 out of every 30 new customers come back for a windows and doors quote.
- 1 out of every 50 new customers come back for a conservatory quote
- They all join your mailing list and social media
Most businesses in a similar position to this window repair guy wouldn’t have a clue if a new lead is actually a customer who originally found them through AdWords. And if they do remember the customer and know they came from AdWords originally, they think they got lucky with the repeat business. There’s something of a reluctance to give AdWords credit where it’s due.
Why is this important for SEO?
Firstly, this is important full stop. If you’re looking to acquire new business through a website and you’re actively marketing your website online, you absolutely must understand the true and full LTV of your customer.
SEO campaigns cost money, just like Google AdWords campaigns. SEO can be a time consuming, long term marketing channel that, like Google AdWords, will throw up many challenges on the way.
Again, many businesses might try and evaluate an SEO campaign after 6 months by looking at total cost against the immediate impact on traffic. Traffic has gone up by 500 visits per week, but the additional 7,8,9,10 sales don’t cover the costs, so we’re stopping.
Look at the bigger picture – the LTV and the overall benefit those extra 500 visitors are having on other areas of the business. How many come back and order again? What are your up sells?
If you’re trying to replace PPC with SEO because click costs are rising and PPC isn’t profitable anymore, make sure you understand the bigger picture. If you want to work with me, we’ll need to do this together before beginning a campaign.