I recently had a conversation with a retailer about expanding some AdWords campaigns consisting of only branded keywords into larger campaigns encompassing unbranded keywords. They were confident that AdWords would be a profitable channel based on the fact that they were in a retail category with high margins. This is logical on the surface, but if all your competitors have the same economics, it doesn’t matter how good your margins are. What matters most for AdWords is how good your margins are in relation to your competition.
I work with a couple advertisers who have taken a product, differentiated it, and priced it at a premium. As a result, they can pay $150 for a phone call whereas their competitors need to sell their product for under $100. Everyone knows the Apple example, and high margins relative to your competitors pay especially large dividends with AdWords. When I began using AdWords in 2002, the auction was barren. There was a glut of traffic at rock-bottom CPCs. Today, competition is cutthroat in many verticals. I work with one retailer who has a payback period of more than 400 days on the initial customer acquisition via AdWords. They have an incredible customer retention strategy that boosts the lifetime value for an AdWords customer above that of their competitors. Consequently, they are happy to bid very aggressively, garner maximum impressions share, and dominate the SERP for their keyword set. They know they will more than recoup their acquisition cost in the long run. They can afford to have patience.
Think of ways you can increase the lifetime value of your customer. What is your content marketing strategy like? 96% of customers aren’t ready to purchase the first time they visit your site. Building your opt-in email list remains one of the most essential marketing activities, but think beyond newsletters to do so. What sort of problems can you solve for your customers? Look at Google Webmaster Tools and Google Analytics Site Search to see what brought visitors to your site. You just might find some ideas for content that your visitors will find really valuable. Do you have a solid drip marketing campaign for current customers? The old cliché of your existing customer being your best new customer still rings true. Are there additional products or services that your client base could benefit from? If you are selling a complex B2B product, would your customers hire you to eliminate the headache of implementation? Do you ship an oversize product? Would customers pay extra to have it unpacked and assembled in a room of their choice instead of having it left in the garage?
All this translates into higher lifetime value, higher revenue per session and greater headroom in the AdWords auction. Many AdWords businesses operate on the margin. Increasing your lifetime value can allow your ad to cross the chasm to the first page the SERP or to the top of the page where CTR is on average 3X CTR on the right rail. Good luck!